Commentary

Contractors and Obama

In the wake of Barack Obama’s election victory many American private military and security contractors are wondering what their future will be under President Obama. It is probably better than they imagine.

Recall that at the beginning of the year inveterate PSC critic Jeremy Scahill blasted Obama for being too sympathetic toward contractors. He reported that a senior foreign policy adviser of Obama’s said that if elected, Obama would not “rule out” using private security companies like Blackwater Worldwide in Iraq. The adviser also said Obama does not plan to sign on to legislation that seeks to ban the use of these forces in U.S. war zones by January 2009, when a new president will be sworn in.

Instead Obama’s campaign said he will focus on bringing accountability to these forces while increasing funding for the State Department’s Bureau of Diplomatic Security, the agency that employs Blackwater and other private security contractors.

After Obama takes office, his advisers will find that as an issue accountability just keeps marching on. For example, just consider some of the provisions in the Fiscal Year 2009 Defense Authorization Act. There are several sections that focus on private contractors.

Section 321 calls for the Office of Federal Procurement Policy to establish a single consistent definition of the “inherently governmental” function that could be applied across federal agencies.

Now creating a common definition is not an easy task. Federal departments and agencies, by law, annually do an inventory of their workforces to try to determine exactly that, in order to determine what can be outsourced.

Still, the end result should be that positions that are critical, inherently governmental functions should not be outsourced. Thus, situations in which interrogators from a firm like CACI operate at a place like Abu Ghraib should become a historical memory. In fact, just to make it clear that it is still on Congress’ mind, Section 1057 states that “the interrogation of enemy prisoners of war, civilian internees, retained persons, other detainees, terrorists, and criminals when captured, transferred, confined, or detained during or in the aftermath of hostilities is an inherently governmental function and cannot appropriately be transferred to private sector contractors.”

Another provision, Section 832, states that private security functions ordinarily should be performed by members of the Armed Forces; the relevant combatant command commander should determine whether the performance by a private security contractor is appropriate; and the Defense Department should have appropriate numbers of trained personnel to perform private security functions. Admittedly this provision is a sense of Congress, and not an actual requirement, but nevertheless could prove unsettling for the likes of Triple Canopy, DynCorp, Blackwater and a host of other firms.

Section 841 requires the Office of the Federal Procurement Policy Administrator to review the Federal Acquisition Regulations to identify contracting methods, types and services that raise heightened concerns for potential personal and organizational conflicts of interest. This would be a useful provision, considering that most of the ethics safeguards that exist such as laudable but unenforceable codes of conducts promulgated by the trade association are oriented more toward ensuring operators in the field act properly, and not to prevent company officials from using their personal contacts to help win a contract.

Section 843 requires the Pentagon to adopt an acquisition strategy for insurance required by the Defense Base Act, which minimizes the cost of such insurance to the Department of Defense and to defense contractors subject to it.

This will make for an interesting contrast in approaches between the Defense and State departments. A congressional study found that, in regard to the DBA requirement to obtain insurance, three agencies — the State Department, USAID and the Corps of Engineers — conducted a competition to select an insurance carrier to offer this insurance at low rates to their contractors.

Typically, insurers offering workers compensation pay out as much in claims and expenses as they take in through premiums. The carriers make their real money off investment returns they earn during the interval between when they receive premiums and pay claims and expenses.

This was the experience of the State Department, USAID and the Corps of Engineers. In fact, the company that won these contracts, CNA, actually paid out 8 percent more in claims and expenses than it had received in premiums. But these contracts represent only 10 percent of the insurance market in Iraq and Afghanistan.

Ninety percent of the Defense Base Act market is controlled by the Pentagon, and that experience has been completely different. Under the Pentagon approach, private contractors negotiate with private insurers but bill the taxpayers for the costs. This arrangement has been exceptionally lucrative for the private insurers and the contractors. Over the last five years the four largest private insurers made underwriting profits of nearly 40 percent.

Section 854 requires mechanisms for ensuring that contractors are required to report offenses that are alleged to have been committed by or against contractor personnel to appropriate investigative authorities.

Finally, Section 870 calls for the establishment of a government-wide Contingency Contracting Corps that shall “be available for deployment in responding to an emergency or major disaster, or a contingency operation, both within or outside the continental United States.”

This is overdue and desperately needed, as monitoring of military contracting has long been a scandal. The 2007 independent Commission on Army Acquisition and Program Management in Expeditionary Operations found significant failures in the Army’s contracting and contract management.

Among other things, it found contracting personnel received no on-the-job training until after they had been shipped out to war zones like Iraq and Afghanistan.

The commission suggested improvements to the Army’s contracting personnel, the reorganization of contracting in expeditionary operations and at home, training for contracting activities, and getting external assistance to ensure contracting efficiency. It also recommended that the Pentagon add up to 2,000 military and civilian contract officers, strengthen the Defense Contract Management Agency, overhaul its personnel system and reform its procurement procedures.

U.S. Navy veteran David Isenberg is a military affairs analyst. He is an adjunct scholar with the Cato Institute and the author of a forthcoming book, Shadow Force: Private Security Contractors in Iraq