Private security guards employed by the company, now known as Xe, are slated to continue ground operations in parts of Iraq long into the summer, far longer than had previously been acknowledged, government officials told The Associated Press.
In addition, helicopters working for Xe's aviation wing, Presidential Airways, will provide air security for U.S. diplomatic convoys into September, almost two years after the Iraqi government first said it wanted the firm out.
The Washington Times first reported that Blackwater, or Xe, signed a $22.2 million deal in February with the State Department to keep the company working there through most of the summer.
The company's continued presence raises fresh questions about the strength of Iraq's sovereignty even as the Obama administration urges the budding government to take more responsibility for the nation's future.
Iraqis had long complained about incidents caused by Blackwater's operations. Then a shooting by Blackwater guards in Baghdad's Nisoor Square in September, 2007 left 17 civilians dead, further strained relations between Baghdad and Washington and led U.S. prosecutors to bring charges against the Blackwater contractors involved.
That deadly incident was the end, Iraqi leaders said. Blackwater had to get out.
But State Department officials acknowledge the company is still there.
The company declined to comment about a timetable for leaving. "We follow the direction of our U.S. government client," Xe spokeswoman Anne Tyrrell said. Last February, Blackwater- pronounced ZEE - in a bid to leave its controversial reputation behind.
Defense analyst Loren Thompson of the Lexington Institute said Iraq's ability to enforce bans on companies like Blackwater may provide an early measurement of the strength of its internal sovereignty. As the Iraqi leaders gain more control, he said, the final exit for Blackwater will be inevitable.
"But let's face it, they're not entirely their own masters yet," he said.
In Baghdad, an Iraqi security official, speaking on condition of anonymity because he was not authorized to talk to the media, said that while Xe will not be allowed to work in Iraq, the company needs "some time" to fully shut down its operations there. The official did not give further details on the timetable.
The State Department's continued reliance on Blackwater also underscores the difficulties facing the U.S. government in finding other options to protect its diplomats in dangerous areas.
Department officials said this month that Blackwater guards would stop protecting U.S. diplomats on the ground in Baghdad on May 7, when the company's contract for that specific job expires and a new security provider, Triple Canopy, takes over.
But in its statement following the Iraqi government's decision to prohibit Blackwater from operating there, State did not reveal that the firm has two other contracts - known as "task orders" - that do not expire until August and September respectively.
Blackwater guards will remain on the ground protecting American diplomats in al Hillah, Najaf and Karbala, all south of Baghdad, until Aug. 4, according to the department.
And Presidential Airways - which operates some two dozen helicopters - will continue to fly until Sept. 3, it said.
After the Nisoor Square deaths, Iraqi officials ruled that Blackwater would be barred from operating in the country. Despite the ban, the State Department renewed Blackwater's contract seven months later, in April, 2008.
It wasn't until January of this year, when Iraqi authorities denied the company an operating license, that the Obama administration said it would not renew the company's existing task orders.
On Jan. 30, the department said it had informed Blackwater in writing that it "did not plan to renew the company's existing task orders for protective security detail in Iraq."
On Feb. 2, though, the department signed a revised task order for Presidential Airways that allowed the Blackwater-owned airline to operate through Sept. 3, according to a federal public procurement database.
Department officials deny any impropriety in the move because the change in the task order was a revision of an old contract. Karl Duckworth, a State spokesman, said the Iraqi government did not tell U.S. officials until March 19 that it would bar Presidential Airways' flights.
"Based on the government of Iraq's decision, the department notified Xe in writing that it did not plan to renew the company's task order for aviation services in Iraq," Duckworth said.
Duckworth said that State would "re-compete the aviation task order," allowing Xe and Virginia-based DynCorp and Triple Canopy to bid for the air security contract.
Xe is technically allowed to rebid under federal law because it holds the existing task order. But State would not grant the company a contract because it lacks an operating license in Iraq, officials said.
The State Department has not yet selected a successor to Blackwater for ground protection in al Hillah. But both Triple Canopy and DynCorp have the capability to do the job.
Some of the same security personnel who worked for Blackwater might simply transfer to the new companies operating there, industry experts say.
"As Triple Canopy's work expands, the logical place to start looking and interviewing and evaluating employees will be those who are already there, those who have some skills and are already employed by Blackwater," said Alan Chvotkin, a senior vice president and counsel for the trade group Professional Services Council.
Xe, DynCorp and Triple Canopy are all members of the council.
Chvotkin added that in view of the controversies over Blackwater's role, "Triple Canopy and other security companies are making an independent assessment of any individual before deciding whether to hire them."
The Iraqi official also said that some former Blackwater officials could remain in Iraq, depending on their experience.
The transition from Blackwater to a new air security firm may be even more complicated. Chvotkin said it will not be easy to find a firm with Blackwater's air resources. Blackwater should not be ruled out as an option, he said.
"Since the nature of the work is so very different, there may actually be authority for them to operate the air services contract even though they don't have a license for private security," Chvotkin said.
Blackwater has been shifting its focus to other lines of business, including international training and air support in places like Afghanistan and Africa.