Security Contractors and U.S. Defense: Lessons Learned from Iraq and Afghanistan

The U.S. Defense Department and State Department, as well as other U.S. agencies and other countries, have used contractors in Iraq and Afghanistan both for logistics work, which accounts for the vast majority of contractors, as well as for much more publicized, but numerically far smaller, security roles. As a result, even if much of the most useful information is closely held by governments and companies and thus not available to the public, we now have a rich source of information on contractors that allows us to draw some tentative lessons and conclusions as to their impact and proper role.

Before going further, however, it is important to note that while some of the following points have implications for the use of PMSCs around the world, it would be wrong to assume they can be applied globally. It is a simple fact that the United States has privatized and outsourced former military and associated national security functions to a degree unmatched by any other country. Thus, the lessons described here should be viewed through a U.S.-centered lens.

A look through that lens reveals that contractors are fully integrated into U.S. national security and other government functions. To paraphrase a popular commercial about the American Express credit card, the United States cannot go to war without them.

The most important reason the United States relies on PMSCs is because of market forces, if not for the reason commonly offered. Although it is frequently argued that PMSCs are more efficient or cost effective than using regular military forces, there simply isn't enough empirical evidence to make that case. Rather, the U.S. government's huge and growing reliance on private contractors is an attempt to fix a mismatch between goals and resources: The U.S. government has assumed the role of guarantor of global stability at a time when the American public is unwilling to provide the resources necessary to support this strategy. Private contractors fill the gap between geopolitical goals and political means. The low visibility and presumed low cost of private contractors appeal to those who favor a global U.S. military presence but fear that such a strategy cannot command public support. Furthermore, by using contractors, the United States can also shift responsibility and blame for its actions when convenient or necessary.  

The logic of the U.S. use of PMSCs becomes obvious once people understand that contracting is not only a part of war, but also a part of maintaining a hegemonic global military presence. Putting aside any other relevant arguments, the U.S. uses PMSCs because it is unwilling to abandon or rethink policies, strategies and goals for which it cannot summon public support. Any discussion about the use of contractors must begin with that basic truth.

Turning to more-specific arguments, PMSC advocates often claim that the private sector is more cost-effective than the public sector. With respect to the market in private military services, however, there is reason to believe that outsourcing increases the cost of military functions. There are two major reasons for this. First, a transparent and competitive market is necessary if clients are to pick and choose among different suppliers. Second, for a market to be efficient, contracts must be subject to transparent bidding procedures; competing offers must be systematically compared; and the performance of suppliers on the contract terms has to be closely monitored -- and, if necessary, sanctioned. None of these characteristics seems to apply to current contracting procedures, however. In truth, the market for private security services is only partially competitive, and in some cases -- in certain areas of logistics, for example -- quasi-monopolistic. The defenders of the virtues of privatization and outsourcing with respect to the military generally forget one thing: The Pentagon is as far removed from a free market as one can possibly get.

Furthermore, the environment surrounding military operations is not conducive to cost-savings and efficiency. Warfare is usually characterized by secrecy, heavy time constraints and the imperative of victory. The lack of time often rules out complex bidding procedures, while the lack of transparency makes it difficult to assess contract performance. Military commanders, who must prepare for worst-case scenarios, often keep one or more backups at hand, reflecting the military's emphasis on accomplishing the mission, not saving money. To the extent that outsourcing has been driven by cost and efficiency considerations, the cost reductions have at times been assumed and the statistics measuring savings based on hypothetical projections.

It is, in fact, quite difficult to compare the relative cost of private versus public security services. Economists disagree on how to solve this problem, at least in part because they use different variables. For example, when measuring the savings from the use of privately contracted retired special operations forces personnel rather than active duty forces, how do you factor in the hundreds of thousands of tax dollars used to train these ex-soldiers? It can be even more difficult to attach a dollar value to in-house military services, since military establishments often have a monopoly on service delivery and information regarding cost, making it difficult to obtain accurate comparative information.

Furthermore, what little cost-to-benefit analysis there has been to date has focused on narrow economic cost comparisons, while generally avoiding equally important political factors and trade-offs. As Tyler Cowen wrote, "Excessive use of private contractors erodes checks and balances and ... substitutes market transactions, controlled by the executive branch, for traditional political mechanisms of accountability. When it comes to Iraq, we've yet to see the evidence of a large practical gain in return; instead, use of contractors may have helped to make an ill-advised venture possible."

A second, related point is the issue of transparency with regard to PMSC activities. In general, PMSCs vocally support transparency and willingly comply with all relevant government requirements regarding disclosure. But for the average citizen, getting detailed information about PMSC contracts is enormously difficult. While companies frequently, if not routinely, use the "confidential business information" claim as a dodge, there have been cases when their client, the taxpayer-supported U.S. federal government, has blocked the release of information, even when the company was willing to release it, simply because the government didn't want that information made public.

Because many PMSCs sell their services through the Foreign Military Sales program, they should be regulated through the U.S. export control regime, under the jurisdiction of the Arms Export Control Act (AECA). The AECA stipulates that the names of the client countries and the types of defense articles or services involved "shall not be withheld from public disclosure unless the President determines that the release of such information would be contrary to the national interest." But the State Department interpreted this narrowly, and in May 2002 the Justice Department issued new guidelines that allow companies to challenge the release of information to the public under the Freedom of Information Act.
 
This lack of transparency and oversight makes it virtually impossible for the public to assess the practice of private military contracting. A regulatory framework that guaranteed adequate executive supervision and congressional oversight would be an improvement. But the level of review and inquiry that either branch gives to licensing decisions under the AECA is unclear.

As law professor Laura Dickinson wrote in her book, "Outsourcing War and Peace: Preserving Public Values in a World of Privatized Foreign Affairs":

One lesson from the above two points is that the way to better ensure that the use of contractors produces real cost savings and greater efficiency -- and to make it more likely that the use of contractors will not be counterproductive -- is to adopt a much more public decision-making process -- one in which Congress plays a far larger and more active role and which is coupled with robust oversight and accounting for both expenditures and performance. This means closer regulation, mandatory audit trails, regular reporting and greater public access to nonsensitive records. It will also require a much more coherent body of laws and regulations than we now have.

Third, in terms of command-and-control issues, while the U.S. military and PMSCs have greatly improved their ability to coordinate with each other since the United States invaded Iraq in 2003, significant problems remain.

To begin with, the use of contractors raises issues of operational effectiveness, because U.S. military commanders cannot be certain that the privately contracted personnel used for certain missions have received the necessary training. In June 2010, T.X. Hammes, a retired U.S. Marine Corps colonel and senior research fellow at the National Defense University's Institute for National Strategic Studies, testified at a hearing held by the House Oversight and Government Reform Subcommittee on National Security and Foreign Affairs. As demonstrated by his opening statement, which details the benefits of their use, Hammes is not an opponent of PMSCs. But he went on to note in his written testimony:

The use of PMSCs also raises issues of operational command and control. U.S. military commanders do not have direct control over private contractors and can only utilize PMSCs in accordance with previously signed contracts. As a result, it is not hard to see how, at the very least, PMSCs represent a vulnerability to effective combat operations, which depend on effective logistics, a role that accounts for the bulk of private contractors operating in war zones.

There is a reason why PMSCs remain outside the military chain of command. As one British PMSC explained in its report to the U.S. Government Accountability Office (GAO), "[We] would not allow employees to be under the command of the military . . . [since] the military may ask them to take on a role that would be outside their normal business practices and might make their insurance invalid for example."

Nevertheless, as Hammes noted in a paper released last October, the result is to "fragment the chain of command.... While both contractors and the government have worked hard to resolve coordination issues, the fact remains that contractors are not under military command. Complicating any attempt to create unity of effort is the fact that contractors are in direct competition with each other and treat a significant portion of the information concerning their operations as proprietary information, which they will not share with the government or their competitors."

The diagnosis is hardly a recent discovery. Already in August 2005, then-Army Chief of Staff Gen. Peter Schoomaker said that the use of private security firms in places like Iraq raised key issues of command and control. "I can see where, on the battlefield, there would be issues that could be problematic in terms of the rules of engagement, what kind of controls were placed on people that are roaming the battlefield," he said.

Fourth, in terms of accountability of and control over PMSCs, there is wide agreement that the U.S. military has far too few contracting officers, in general, and the few it has lack significant experience.

Concerns over accountability and regulation of PMCs must be addressed by better -- which does not necessarily mean more -- regulations. Although several new laws and regulations have been passed in recent years, such rules as do exist are often ambiguous. More to the point, the rules differ from those governing the U.S. military forces that PMSC personnel work to support. The chaos and confusion of a battlefield is unsympathetic to any confusion over rules. As noted above, where U.S. military forces are deployed, the military commander needs to have undivided command authority over those military and support forces that are part of his or her area of responsibility. One possible way to achieve that is to give Judge Advocate General's Corps officers more authority to set policy and training standards for contractors.

Complicating recent efforts to plug loopholes in accountability is the fact that some of the laws that have been passed to that effect are vaguely written. For example, in 2007, Congress amended the Military Extraterritorial Jurisdiction Act (MEJA) to apply to civilian employees and contractors of any federal agency or any provisional authority to the extent that such employment relates to supporting the mission of the Department of Defense overseas. This was supposed to solve the problem resulting from the fact that the original MEJA applied only to offenses committed outside the United States by persons employed by or accompanying the armed forces, thus excluding PMSC personnel who worked for the State Department. But the phrasing of the amendment is problematic, leaving undefined how broadly "supporting" and "mission" should be interpreted.

Perhaps most important, the day-to-day monitoring and oversight of PMSC performance have been abysmal. Any lingering doubts about the state of contractor management were dispelled by a November 2007 report by the independent Commission on Army Acquisition and Program Management in Expeditionary Operations. The report, known as the Gansler report after its chairman Jacques Gansler, identified significant failures in the Army's contracting and contract management. Subsequent reports by the special inspectors general for Iraq and Afghanistan reconstruction and the Commission on Wartime Contracting in Iraq and Afghanistan have only confirmed that conclusion.

If every dark cloud has a silver lining, the Iraq War has had the beneficial effect of motivating the United States and other governments to concentrate on the proper utilization and oversight of contractors. For example, since the release of the Gansler report, the Pentagon has taken steps to better prepare its forces to work with contractors. The State Department has also sought to improve its use of private security contractors. These measures include implementing the Gansler Commission's recommendations; expanding the jurisdiction of the special inspector general for Iraq reconstruction; requiring coordination between the Pentagon, State Department and the U.S. Agency for International Development on matters relating to contracting in Iraq and Afghanistan; and requiring the comptroller general to both review all contracts in Iraq and Afghanistan and report to Congress annually. Of course this is a continuing process, and there is still room for improvement.

In terms of improving the contracting status quo, it has long been obvious that the U.S. government should reverse the staff reductions of the 1990s among auditors and regulators. The number of military members who are well-qualified in contracting regulations must be increased. If the U.S. military is going to continue to rely so heavily on PMSCs, having personnel who are highly qualified in contract management is vital.

Better planning is also crucial. If the government is going to rely on PMSCs, it must bring them into the planning process. Military staffs should establish planning cells to determine exactly what is being contracted and to establish the proper command authority not just before contractors arrive in the field, but before contracts are written.

The government also needs to take steps to better enforce existing laws. The best way to accomplish this is to target PMSCs' bottom lines. If a for-profit company were to lose money as a result of its employees' behavior, it would have more incentive to ensure that its employees perform according to legal standards and contractual obligations.

And as PMSCs are not directly responsible under international law for wrongful acts of their employees, establishing international norms by which any wrongful act or omissions by PMSCs would be attributed to the organizations under whose authority and overall control they operate should be considered. This would be similar to the level of control that national militaries have exercised over troops deployed on multilateral peacekeeping missions, where it is accepted that responsibility for soldiers' acts can be attributed to their national governing institution.

PMSCs existed long before the United States invaded Afghanistan and Iraq, and they will be around long after the United States withdraws from those countries. Nevertheless, given the U.S. government's heavy reliance on contractors, problems are likely to persist. The current wisdom regarding PMSCs reflects a doctrine of necessity: We can't do what we do without them, so therefore we have to have them. But such thinking is a tautology, not a strategy. As previously noted, it is not always true that the use of PMCs is cheaper or more efficient. And the mere fact that PMSC activities are legal does not necessarily translate into the legitimacy that people accord regular military forces.

The use of PMSCs by the U.S. government is an inevitable outgrowth, however, of U.S. foreign policy. Contracting is part of maintaining a global military hegemonic presence. Putting aside all other arguments, if a nation's government can't summon public support for its policies and goals, it probably should revisit those goals.