Article

Outsourcing the War

Peter W. Singer

View part one of this article, “Warriors for Hire in Iraq.”

The killing of four American military contractors in
Fallujah last week not only touched off a growing wave of violence but also
raised concern about just how much of the mission has been outsourced to
private firms. Private military contractors in Iraq are present in
unprecedented numbers, more than 15,000, and they engage in a range of
mission-critical activities—often armed combat—contrary to the U.S.
military’s own doctrine of how civilians should be employed in the field.
Everything from handling military logistics and training the local army, to
protecting key installations and escorting convoys has been turned over to a
literal small army’s worth of private troops.

This expansion arose not out of a well-planned strategy, but
from a process that can at best be described as ad hoc. The public and Congress
remain largely unaware, and the senior military leadership is in denial about
the size and scope of such firms, but many in the military’s junior and field
ranks have begun to ask questions about what such outsourcing will mean in the
long term. Papers within the professional war college system have asked: How
does such outsourcing so many of its core tasks affect the health of the
military institution? Does dependence on the marketplace bring new
vulnerabilities in war zones? What is the exact legal status of the contracting
firms and their employees, not just within outdated international law, but also
within U.S. military regulations that consider contractors to be
“civilians accompanying the force,” not integral to its very
operations? Is the military even equipped to be a business-savvy client and an
efficient regulator?

Iraq is the largest private military market in modern
history and also a testing ground for just how far the outsourcing trend will
play out for the U.S. military. While vast areas within the operation have been
turned over to private firms, helping to minimize the political costs of the
war, the killings in Fallujah illustrate that outsourcing is never without
cost. Indeed, the tragic deaths have raised two more key issues that continue
to trouble the broader military-contractor relationship in Iraq: 1) private
military firms, or PMFs, are integral to, but not within, the military
operation, and 2) there are no universally established standards or even
operating procedures, leaving too much to market discretion. In an era when
“jointness” (the ability of the armed services to work with and
depend on each other) is the dominant buzzword for transforming the Pentagon,
the U.S. military is ignoring a critical disconnect.

Although PMFs take on the full range of military roles
within Iraq, at the end of the day they are not part of the force. As Nigel
Churton, chief executive officer of Control Risks, a firm that has about 500 personnel
in Iraq, notes, “I think the key points one has to start from [are] we’re
not now military. We cannot pretend that we have the ability to respond like a
military force can.”

The consequence is that PMFs are independent entities,
responsible for their own operations, safety and security. They do not receive
full or timely access to the military and CIA’s complete intelligence picture,
do not have full access to the military’s communications net, and, when out in
the field on their own, do not have access to the same weapons, established
systems of rapid reaction and response, or protection.

The lack of formally shared information on current threats
and ongoing or planned operations is a crucial missing link. Military officers
question why or how exactly the military should share confidential information
with entities that not only lie outside their chain of command but also often
hire local Iraqi and third-party nationals. But, according to one firm
executive, the lack of information means that contractors are “flying
blind, often guessing about places that they shouldn’t go.” For example,
before the Fallujah killings, Marines were preparing their own operations in
the vicinity as a follow-up to fighting in the city a week earlier, and the
intelligence was that insurgents in the town were prepped for ambush.

These contradictions carry over to critical differences in
the field. When contractor units are attacked, they must deal with the
situation, in the words of one executive, “completely on their own.”
The difficulty is compounded in Iraq. One of the very few restrictions that the
CPA applies to the firms is an upper threshold on their armaments, limiting
them to small arms. So, while contractors in other war zones wield heavy
weaponry and call in air strikes from contractor-manned jet fighters and attack
helicopters, in Iraq, where they face the greatest risks, they are often
outgunned by local insurgents. For instance, while Fallujah was a city that U.S.
military units were allowed to enter only if accompanied by an up-armored
vehicle equipped with heavy machine guns or more, the contractors were limited
to SUVs armed only with automatic rifles.

The United States has put civilians in a war zone, asked
them to carry out key military tasks, but restricted their ability to
accomplish those tasks, let alone protect themselves. However, loosening the
rules and allowing contractors to bring in heavy weaponry would further call
into question the lack of sufficient U.S. forces on the ground, besides raising
all sorts of legal and political red flags. But not allowing contractors to do
so, particularly when they are singled out for attack because of their greater
vulnerability, is costing lives—and hostages.

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Regardless of the policy, many contractors feel they have to
respond. As Malcolm Nance, the head of one firm in Baghdad, notes, “We are
going to have to get heavy now, although discreetly. Some people already carry
grenades, although I wouldn’t do it because it’s not permitted by the
coalition. But in markets in Baghdad, you can pick them for $1 apiece, and I
suspect a lot of people will be shopping there soon … It’s not just the
coalition armies who are fighting this war now.”

The rights and responsibilities between the military and its
contractors also constitute an uncertain, gray zone. As opposed to what happens
with a U.S. soldier, the military is under no compulsion to launch a full-scale
search when a contractor goes missing. For instance, the U.S. military has
spent 13 years searching for Navy Capt. Scott Speicher, whose plane crashed
during the 1991 Gulf War. But when Kirk von Ackermann, a former Air Force
captain working for Istanbul-based Ultra Services, disappeared outside Tikrit
in November, the response was not a frantic mobilization or house-to-house
hunt. Instead, von Ackerman’s photo was given to local Iraqi police, and little
has been heard of the incident since. Indeed, the difference carries all the
way to when PMFs employees are killed; the firms are responsible for notifying
the families, deciding what level of grief counseling to provide, and shipping
the bodies home. A PMF executive I spoke with grumbled that when one of his
employees was killed in western Iraq, the only support he got from the U.S.
military unit in his sector “was a free body bag.”

The obligations of the military when contractors are under
attack is another area where the disconnect surfaces. One of the most
disturbing aspects of the fighting in Kut was how all three outnumbered
contractor contingents requested coalition military assistance, but received
none. All were forced to “self-evacuate,” to the detriment of their
safety, their missions, and the overall operation. The Hart Group unit, which
had one contractor bleed to death while stranded on the rooftop, made so many
fruitless calls for help that its mobile phone batteries ran out during the
night.

Private contractors complain that in this area they give
more than they get. Scott Custer, a principal with Custer Battles, comments,
“We’ve responded to the military at least half a dozen times, but not once
have they responded to our emergencies. We have our own quick-reaction force
now.” For instance, when an Army helicopter crashed in Fallujah in
November, nearby PMF forces rushed to defend the crash site. By contrast, many
contractors ask whether the Marines would have intervened more rapidly in
Fallujah if the corpses treated in such a barbaric manner had been those of
Marines; instead, the Marines waited six hours only to send in Iraqi security
to retrieve the bodies. (Marine officers respond that to have rushed in would
only have inflamed the situation and that, because of they and the PMFs were
not in communication, they only learned of the mutilations from the media.)

The problems of this PMF-military disconnect also deeply
concern serving military officers. Clarified command and control is essential
for commanders in the field. Military officers say that it is “so
important it is one of the observed [that is, most fundamental] principles of
war.” One officer notes, “Not to be overly dramatic, but the
centrality of having clear command and control in our profession relates to the
obvious and direct impact it has on lives when we engage in combat. Doctrinally,
every written/formal order we produce has a section that deals with command and
control.”

Unity of command may be a fundamental concept, but in Iraq,
it is already lost. Officers must worry about armed forces operating within
their sector of responsibility but outside the bounds of their authority. Many
of these contractors work directly for the CPA, which coordinates and
communicates only on a limited basis with the normal U.S. military chain of
command. Others work for entities other than the CPA, such as construction
firms and media companies. Thus, local military commanders are often unaware of
the daily actions of firms in their zones of responsibility. This disconnect is
not just a simple point of discomfort for officers: “Friendly fire”
incidents have even broken out between contractor and coalition convoys.

Failures of command and control can have great consequences
for the mission. Local populations are generally unable to distinguish between
public and private forces, and as journalist David Wood of the Newhouse News
Service writes, in Iraq, “a single misstep can ignite a spiral of
political violence.” Retired Army Col. Robert Killebrew describes the
predicament as follows: “You want very, very tight control. The issue is
not so much their safety, although we worry about them. The question is: What
does this [private contingents getting into firefights] do to American
legitimacy in the country?”

Military jurists are equally concerned that by ignoring the
well-thought-out doctrine on civilians’ role in warfare, contractors now
operate in a legal no man’s land, beyond established boundaries of military or
international law. If a U.S. soldier is suspected of committing a crime, there
are the military criminal investigations, judge advocate, and court-martial
system set up to investigate, prosecute and punish if appropriate. But
contractors do not fall under this system and thus are generally self-policing
entities. Rumors abound about PMF friendly-fire incidents, drunken firefights,
and accidental discharges of weapons, but there is little that a firm can do
other than fire its employees. Dismissal is even less likely when firm
executives are implicated.

In turn, the worst that the combatant commander can do if a
crime is presented to him is suspend the firm’s contract and expel the
individual employee from the theater, again clearly insufficient punishment for
felony offenses. The 2000 Military Extraterritorial Jurisdiction Act does not
provide legal recourse, because it applies only to U.S. citizens working
directly for the Defense Department on U.S. military installations, not to
those working for other government agencies or private entities, or to other
nationalities. Moreover, military jurists describe the “dearth of
doctrine, policy and procedure” about when and how to apply the act, and
no PMF employee in Iraq—American or foreign—has been held accountable
under it.

Thus regulation is left to the local government, the irony
being of course that the collapse of the local state is usually the very reason
the firm is there in the first place. In Iraq, just as it was unlikely we would
turn contractors suspected of crimes over to Saddam Hussein’s regime during the
war, so it is equally unlikely we would turn them over to the Iraqi interim council.
In turn, it is unlikely the council would have either the interest or capacity
to deal with contractor issues.

The second key dilemma results from the fact that private
military operations are carried out by competing firms operating in a
fluctuating and sometimes unpredictable marketplace. Contractors thus have no
common standard for recruitment, vetting, training, weapons, appearance,
tactics. As one former Special Forces veteran said, “The military really
can’t tell you how to do your job—they can advise you, but they really have
no control over you.”

The result is that, as in any other industry, the companies
diverge in the information they collect, the quality of their personnel and
recruiting, their methods for evaluating risk, and their operational
procedures. Knowledge of the battlefield means not just power but profits. Yet
the firms not only do not have ready access to the military’s intelligence,
getting only a delayed and “sanitized” version from the CPA, but also
do not have any formal procedures or institutionalized incentives for sharing
the local knowledge they have gathered. While there are certainly informal
information transfers among clusters of firms, there is no central repository
of intelligence or systemized threat analysis across the industry. Indeed, such
a system would denude the leading firms of their very competitive advantage.

Many soldiers and analysts express admiration for the
professionalism of and the difficult jobs carried out by firms such as
Blackwater and others. But all realize that not every firm can be the best and
that, at the lower end of the market space, some are barely competent, if that.
This has become a particular concern in what executives term the Iraqi
“gold rush.” The firms in Iraq range from well-established firms with
thousands of years of collective experience in war zones, to start-ups that did
not exist before the war. As Scott Custer of Custer Battles notes, “You’ve
got a whole host of fly-by-night and disreputable companies. They’re terrible. They
get people killed.”

Because of this loose and lethal environment, some of the
best-respected firms in the industry have avoided Iraq altogether. For example,
ICI is a firm with a strong
operating history in some of the world’s worst war zones, including Sierra
Leone and Liberia. In 1998, the State Department named it small contractor of
the year. Its president, Brian Boquist, is a former Green Beret. “In Iraq
it is the Wild West,” Boquist writes. “Almost none of them [the security firms in
Iraq] have any real experience in war zones. We have stayed out of the place
as it disintegrates from an insurgency to a civil war.”

One of the challenges of the booming PMF market in Iraq is
that demand is now outpacing supply, and the once tight-knit community, where
every employee knew and had worked with every other, has been cracked wide
open. David Claridge, head of Janusian, said, “There is a shortage of
quality labor. Hiring people takes time now, whereas before we had a database
of people we could just call up. Now we have to wait for people to come off
other jobs.” Claridge added, in an interview with NPR: “We are aware
as an industry that perhaps some of the people being employed in Iraq—because of the massive demand for labor—some are perhaps not up to the task.
As I say and I reiterate that this is not referring specifically to the
individuals here [those killed in Fallujah], but we have seen a number of
security operatives die during the last seven days, and we have to make sure
that everyone providing services there is professionally trained and up to the
task.”

Firm seek to meet this labor shortage in different ways.
Some continue the practice of hiring only personnel that are personally vetted
and known by the company leaders beforehand. But this comes at the cost of
lower employee rolls and lost revenue opportunities. Others pull in a grab bag
of skill sets and backgrounds as they multiplied their numbers. What it means
to be “Ghurka,” “commando,” or even “Special
Forces” has a looser standard. But now, as Paul Rees, the managing
director of Centurion, noted to Knight Ridder News, the labor market is so
tight that firms are hiring people who don’t know when to fire at attackers and
when not to.

With no planning and a limited staff, as one senior Defense
Department official comments, “the CPA has let all kinds of contracts to
all kinds of people. It’s blindsided us.” At times, not only the lesser
skilled but also some particularly disturbing characters have made it through
the limited vetting, which can involve little more than sending in one’s
résumé. For example, British forces were not pleased to learn that a former
soldier convicted of working with Irish terrorists had been hired by the ArmorGroup firm (which has a
reported 600 personnel in Iraq) and granted clearance to enter U.S. and British
bases in Iraq. (After an Irish newspaper reported the story, the employee was
suspended.) South African political activists have identified a number of the
contractors in Iraq from appearances before the Truth and Reconciliation
Commission, including one who admitted to firebombing more than 60 homes for
the apartheid regime.

Where the billing is done by the day in a madly expanding
market, the labor crunch also affects preparation. Experienced employees
complain that pre-deployment briefing and training, important not only for
honing sometimes rusty skills, but also for building small-unit cohesion in
combat, have been shortened and in some cases even eliminated. It is important
to note that some skills needed in the private military world, such as
evasive-driving tactics, are not regularly taught in the military, so private
contractors cannot exclusively rely on past training. As one PMF executive
says, “Just because you used to be a SEAL doesn’t mean you’ll know how to
handle every problem in a place like Iraq.”

Each firm determines its own standards and procedures, and
there is no formal regulation or even an industry self-regulatory mechanism to
establish them or to police and punish those who fall below standards. While
the best firms will blackball rogue or incapable employees, the industry has
grown so huge and the clients remain so clueless that such tagging offers
minimal recourse. For instance, industry insiders could only shake their heads
when one firm invited CNN “Crossfire” talk-show host Tucker Carlson
to ride along on a mission into Iraq. Not only did the firm’s personnel give
the conservative pundit an AK-47 to wield in the middle of a volatile war zone,
but when they needed gas, Carlson and crew took over an Iraqi gas station by
holding local civilians waiting in line at gunpoint. (One hopes he wasn’t
wearing his trademark bowtie, which would have only added to the local insult.)
Carlson described the incident with proud delight in Esquire magazine,
apparently not understanding the multiple industry sins that had been
committed. Firms also greatly vary in their tactics and operations. For
example, in the role of escort and protection, some firms opt to stay under the
radar of potential adversaries. They purchase local vehicles, grow beards to
blend in, and keep weapons hidden until needed. Others “cowboy up”
and attempt to deter threats through posturing. They are recognizable by their
web gear, Oakley sunglasses, cradled submachine guns, and brand-new black or
white SUVs that can act as magnets for ambush: a mode of operation that is a
huge point of contention in the industry.

Risk evaluation, likewise, differs by firm. In the PMF
realm, risk incorporates battlefield threats as well as investment hazards.
With differing intelligence collection and analysis capabilities (some create
an in-house cell; others don’t), each firm weighs the risks using all sorts of
metrics. The Monday morning quarterbacking of the Fallujah decisions has
already begun, illustrating how various firms evaluate situations. Jonathan Garratt,
the group managing director of Erinys, has publicly noted that he would have
insisted his clients avoid Fallujah altogether. “It’s very dangerous. As a
generalization, Fallujah is out of bounds on our map. We would only go through
there in armored vehicles and a significant security force to defeat all
threats.” Military officers have even suggested that if the decision to go
into a “no go” area like Fallujah without the required up-armored
vehicles and heavy weapons had been made within the military, the officer in
charge “could expect a court-martial hearing.” In response,
Blackwater officials have said that their units may have been tricked into
entering the town by turncoat Iraqi security forces, leaving aside the point
that they didn’t have access to such weapons in the first place.

The blame casting will likely continue, and may even result
in civil suits, but the underlying point holds true that firms evaluate risks
differently. This carries over to their life insurance packages—a complaint
of the Chilean hired unit is that their contracting firm chose a poor one
without their understanding—or the backup support they guarantee—some firms
pay the cost of having a quick-reaction force in place, ready to rush to the
rescue, while others save money by hoping for the best.

Another important difference between the PMFs and the
military is that even individual members of firms can weigh the risks in
deciding their own involvement. In the wake of last week’s killings, many
employees decided it was best to change their job locales, regardless of the
heady pay. As one Halliburton employee departing Iraq commented, after his
truck blew up underneath him in a convoy attack, “It was time to come
home.” Similarly, Michael Cherkasky, the president of Kroll, may have 100
employees on the ground in Iraq, but admits that he has chosen not to go. When
asked why, he replied, “Are you kidding? I will fly into Kuwait. I will
fly into Jordan. I will not fly into Iraq.”

In contrast to military standardization, there is a simple
market reality at play in Iraq: Each firm has its own approach (which each
thinks is the best), but not every firm’s recruiting, information and operating
procedures can be the best, and some are not even optimal. Every industry has
its winners and losers, but the price of establishing those in the private
military world is different than in other marketplaces. This issue is
compounded by the lack of formal weeding-out processes or the establishment of
minimum capabilities, inherent needs in the military environment. One Special
Forces veteran goes further: “How these contractors operate is determined
by the individual companies. There’s no such thing as a ‘best practice.’ It’s a
question of sheer economics—how much is the client willing to pay?”

Within the private military industry itself, the killings in
Fallujah were shocking but not unexpected. As opposed to the first few months
of the war, when contractor attrition was rumored to be as high as 30 percent
(comparing quite poorly to the zero percent of U.S. soldiers that are able to
decide to return home), those now going into Iraq know that it is an active war
zone. Indeed, two contractors working for the Olive Security firm had been
killed outside Mosul just days before the Fallujah incident, the main
difference being that their deaths were not recorded on film. However, the
Fallujah incident, followed so rapidly by the mass violence and the incidents
in Najaf and Kut, caused most of the firms to reexamine their procedures, risk
factors, and reliance on military support that may not be there. Christopher
Bees, a director at ArmorGroup, says, “It’d be fair to say that anyone
involved in the business in Iraq is bound to take a second look at what they
do.”

Disturbed by the upswing in violence and the lack of
military backing and coordination, at least four military contractors
(Halliburton, Triple Canopy, AKE and Control Risks) were reported by
journalists and CPA officials to be reconsidering the extent of their presence
in Iraq, and they suspended key parts of their operations as they waited for
the situation to settle. However, most indicators are that Fallujah killings
won’t collapse the energetic PMF market in Iraq. The pay scale remains so high
that those leaving will likely find ready replacements. In the days after the
killings, I was contacted by two firms looking for advice on how they might
crack the market, including one that had never operated in a war zone before.

So, while the boom for PMFs in Iraq certainly can’t last
forever, it bodes to be lucrative while it does. Duncan Bullivant of Henderson
Risk notes, “I wouldn’t give it more than another year at this level. The
bubble will burst, but there’s an immense drive to cash in while it
lasts.” U.S. plans for the transition to Iraqi sovereignty mean an even
greater use of private contractors, such as a contract worth up to $1 billion
to take over the responsibility for protecting the Green Zone, the
four-square-mile area in central Baghdad where coalition officials live and
work. Who knows, perhaps the PMF bubble may last longer than the dot.com one
did.

The greater challenge looks to be how the broader business
community responds to Fallujah and its aftermath. The cornerstone of the Bush
administration’s plan to turn the corner in Iraq is the transfer to local Iraqi
sovereignty on June 30 and the simultaneous dump of some $18 billion in
reconstruction contracts over the summer. It was hoped that the massive
infusion of aid would draw in outside business and create an upsurge of
employment that would dry out the insurgency.

But, instead, the Fallujah killings and the ensuing outbreak
of fighting in six cities might have sucked the wind out of the corporate
participation necessary to making the plan a reality. Those already on-site
have restricted their movement and activity (“no go” areas have
ballooned), while a number of other firms set to enter the country have
cancelled. The head of the firm Meyer and Associates, which provides protection
for a number of contractors, reports that “right now everything is at a
standstill.” Among the lesser-noticed victims of Fallujah was the Baghdad
Expo, the largest conference planned by the Iraqi-American Chamber of Commerce.
The meeting was to highlight business opportunities in postwar Iraq, with more
than 200 companies scheduled to attend. The day after the killings, it was
postponed.

So while the PMF industry has boomed, the accompanying
investment needed to prop up the Iraqi economy has not (which could indirectly
undercut the PMF industry in the long term). Companies know that the
insurgents’ strategy is to weaken the coalition by targeting them, and thus
many firms are waiting on the sidelines for the situation to stabilize and a
real, functional Iraqi government somehow to come into being. As one potential
investor commented after a U.S. Commerce Department briefing on investment in
Iraq, “The carrot that’s being waved in front of everybody is that we
should get involved on the ground floor. But this is below the ground floor.
There are too many other markets now that are stable.”

This reluctance derives from more than a fear of going into
a war zone; rather, it represents real financial calculations. As the situation
has grown increasingly dangerous, insurance premiums have skyrocketed. Because
the Defense Department had no policy on it beforehand, Bunny Greenhouse, chief
contracting official for the Army Corps of Engineers, relates that for contractors
in Iraq as much as 40 cents of every dollar is spent on insurance. “Why
are we paying 40 percent? That’s unbelievable … Nobody foresaw that we were
going to be in this kind of dilemma.” While Greenhouse is wrong —the
experts on Iraq did predict the current turmoil, just as industry analysts
pointed out the dangers of such poor planning—the insurance problem is yet
another illustration of the costs of an ad hoc approach to doing business in
the realm of war.

In turn, security costs have escalated, which is a boon for
the PMF industry, but not for the broader effort. Many construction firms, such
as Washington Group International, now have to employ two security personnel
for every one worker carrying out the actual contracted task. Just before
Fallujah, Stuart W. Bowen Jr., the inspector general for the CPA, estimated
that at least 10 cents of every reconstruction dollar in Iraq was spent for
security, up from 7 cents in the fall of 2003. If the present spate of violence
continues, industry insiders think it might grow to as much as 20 cents per
dollar. As a point of comparison, security costs for oil operations in war-torn
Colombia average about 6 cents per dollar.

These added costs mean that the reconstruction package
funded by taxpayers may not go as far as hoped (Bowen contended that as much as
$4 billion could be spent on security), perhaps requiring even more funding on
top of the previous budget supplementals. Already, the CPA has had to transfer
$184 million meant for clean-water projects, the kind of aid package that seeks
to bolster local popularity, to cover spiraling security costs for its own
installations. Additionally, these added costs mean that within firms’
investment calculations, the threshold for turning a profit has been raised,
further deterring outside investment. Bowen writes, “The inability to
accurately predict the costs of security, including insurance, raises questions
about the need for more funding—Iraqi, donor, or U.S.—to accomplish the
reconstruction mission … We are in this big gray area about how security
concerns will affect reconstruction timelines.”

In a recent campaign speech, President Bush proclaimed that
“America must never outsource America’s national security.” Once
again, the gap between rhetoric and reality is yawning.

While Bush was trying to make a point about U.S. relations
with the international community, the fact is that the United States has indeed
outsourced major portions of its effort in the war in Iraq. More important, it
has done so in an ad hoc manner, without public awareness or discussion.

The private military industry is such a new phenomenon that
most in Congress remain unaware of it. In turn, the issue is highly susceptible
to partisan rancor, mainly because of the identity and political practi