US Defence Secretary Robert Gates is to review allegations of misconduct in Afghanistan by the security company which was known as Blackwater and which has now changed its name to Xe.
The review comes a day after a leading Democratic Senator, Karl Levin, expressed concern over the company's conduct in Afghanistan.
Senator Levin cited what he called evidence of misconduct in a previous subcontract awarded to a Blackwater affiliate to conduct weapons training for the Afghan national army.
He said the Pentagon should consider barring the company from applying for a contract to train Afghan police.
'He is looking into it and he takes it seriously,' Pentagon press secretary Geoff Morrell said of Mr Gates. 'He shares (Levin's) concerns,' Mr Morrell told reporters.
But Mr Morrell said the Pentagon could not bar the company from applying for the $1bn police training contract.
'You can't willy-nilly choose not to do business with a company. ... There are strict criteria for pursuing debarment. They are afforded due process. They are afforded legal standards,' Mr Morrell said.
'Like it or not, Blackwater has technical expertise that very few companies do have. And they have a willingness to work in places that very few companies are willing to work. So they provide a much-needed service and the ability to do it well.'
In a letter to Gates last month and released publicly on Thursday, Mr Levin said Blackwater may have used a front company for the contract, made false official statements and misled US Defence Department officials in its proposal documents.
There was also evidence Blackwater may have misappropriated government weapons, carried weapons without authorisation and hired unqualified personnel with backgrounds that included assault and battery, as well as drug and alcohol abuse, Mr Levin said.
A spokesman for company said it welcomed the review.
