However, this does not mean that all the reasons given for the use of such contractors are credible . Consider the main selling point that all such PMCs use when bidding for contracts. They all claim that using the private sector is more cost‐effective than using their public sector counterparts.
At first glance it sounds reasonable. After all, private contracting companies don’t have to maintain standing forces, pay pensions, or provide benefits, to name just a few things that the public sector must do.
Typical is this statement by Doug Brooks, founder and president of the International Peace Operations Association trade association: “Contractors are cost effective. While the popular perception is of huge salaries for cushy jobs, the reality is that contractors live alongside military personnel and generally cost the government far less in the long run.”
In the interest of full disclosure I have known Doug Brooks since he was a grad student at the University of Pittsburgh. In all those years I have repeatedly asked him to point me to a single empirical, peer reviewed, methodologically sound, academic study confirming that private military or private sector contractors are more cost effective than their public sector counterparts. He has yet to do so.
This is a popular notion once adhered to only by diehard‐free market advocates who believe that government is fundamentally inefficient and unproductive.
It also reflects the cumulative effect of military force reductions and the fashionable notion of “core competency,” i.e., that one should focus only on what one does best and pay someone else to do the rest. In the Pentagon’s case, the core competency is war‐fighting.
But whether it’s true that contractors are cost effective is at best an open question, the answer to which depends, in part, on what you mean by cost.
While outsourcing can be effective, doing things in‐house is often easier and quicker. You avoid the expense and hassle of haggling, and retain operational reliability and control, which is especially important to the military.
Then there is the fact that outsourcing works best when there’s genuine competition among suppliers. But while there may be hundreds of private security contractors in Iraq, not all of them are created equal. For really big contracts, like the U.S. State Department’s Worldwide Personal Protective Services Contract, shared by Blackwater, DynCorp and Triple Canopy, there are not that many alternatives. That is one reason the State Department was reluctant to fire Blackwater after the September 2007 shootings in Baghdad by Blackwater contractors.
In fact, despite all the claims of its advocated the free market ideology has hardly been confirmed by the evidence.
The market for private security services is only partially competitive, and in some cases (for example in certain areas of logistics) quasi‐monopolistic. The champions of the virtues of privatization and outsourcing with respect to the military generally forget one thing: the Pentagon is as far away from a free market as one can possibly get.
While the free market is undoubtedly a good thing it is no insult to Adam Smith’s invisible hand to note that the market for military services is the closest thing to collectivism since the demise of the Soviet Union.
In fact, as P.J. O’Rourke notes in his book on Adam Smith’s Wealth of Nations: