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”:
