Outsourcing War

Peter W. Singer
Peter W. Singer Former Brookings Expert, Strategist and Senior Fellow - New America

March 1, 2005

Understanding the Private Military Industry

The tales of war, profit, honor, and greed that emerge from the private military industry often read like something out of a Hollywood screenplay. They range from action-packed stories of guns-for-hire fighting off swarms of insurgents in Iraq to the sad account of a private military air crew languishing in captivity in Colombia, abandoned by their corporate bosses in the United States. A recent African “rent-a-coup” scandal involved the son of a former British prime minister, and accusations of war profiteering have reached into the halls of the White House itself.

Incredible as these stories often sound, the private military industry is no fiction. Private companies are becoming significant players in conflicts around the world, supplying not merely the goods but also the services of war. Although recent well-publicized incidents from Abu Ghraib to Zimbabwe have shone unaccustomed light onto this new force in warfare, private military firms (PMFs) remain a poorly understood—and often unacknowledged—phenomenon. Mystery, myth, and conspiracy theory surround them, leaving policymakers and the public in positions of dangerous ignorance. Many key questions remain unanswered, including, What is this industry and where did it come from? What is its role in the United States’ largest current overseas venture, Iraq? What are the broader implications of that role? And how should policymakers respond? Only by developing a better understanding of this burgeoning industry can governments hope to get a proper hold on this newly powerful force in foreign policy. If they fail, the consequences for policy and democracy could be deeply destructive.

Private Sector and Public Interest

PMFs are businesses that provide governments with professional services intricately linked to warfare; they represent, in other words, the corporate evolution of the age-old profession of mercenaries. Unlike the individual dogs of war of the past, however, PMFs are corporate bodies that offer a wide range of services, from tactical combat operations and strategic planning to logistical support and technical assistance.

The modern private military industry emerged at the start of the 1990s, driven by three dynamics: the end of the Cold War, transformations in the nature of warfare that blurred the lines between soldiers and civilians, and a general trend toward privatization and outsourcing of government functions around the world. These three forces fed into each other. When the face-off between the United States and the Soviet Union ended, professional armies around the world were downsized. At the same time, increasing global instability created a demand for more troops. Warfare in the developing world also became messier—more chaotic and less professional—involving forces ranging from warlords to child soldiers, while Western powers became more reluctant to intervene. Meanwhile, advanced militaries grew increasingly reliant on off-the-shelf commercial technology, often maintained and operated by private firms. And finally, many governments succumbed to an ideological trend toward the privatization of many of their functions; a whole raft of former state responsibilities—including education, policing, and the operation of prisons—were turned over to the marketplace.

The PMFs that arose as a result are not all alike, nor do they all offer the exact same services. The industry is divided into three basic sectors: military provider firms (also known as “private security firms”), which offer tactical military assistance, including actual combat services, to clients; military consulting firms, which employ retired officers to provide strategic advice and military training; and military support firms, which provide logistics, intelligence, and maintenance services to armed forces, allowing the latter’s soldiers to concentrate on combat and reducing their government’s need to recruit more troops or call up more reserves.

Although the world’s most dominant military has become increasingly reliant on PMFs (the Pentagon has entered into more than 3,000 such contracts over the last decade), the industry and its clientele are not just American. Private military companies have operated in more than 50 nations, on every continent but Antarctica. For example, European militaries, which lack the means to transport and support their forces overseas, are now greatly dependent on PMFs for such functions. To get to Afghanistan, European troops relied on a Ukrainian firm that, under a contract worth more than $100 million, ferried them there in former Soviet jets. And the British military, following in the Pentagon’s footsteps, has begun to contract out its logistics to Halliburton.

Nowhere has the role of PMFs been more integral—and more controversial—than in Iraq. Not only is Iraq now the site of the single largest U.S. military commitment in more than a decade; it is also the marketplace for the largest deployment of PMFs and personnel ever. More than 60 firms currently employ more than 20,000 private personnel there to carry out military functions (these figures do not include the thousands more that provide nonmilitary reconstruction and oil services)—roughly the same number as are provided by all of the United States’ coalition partners combined. President George W. Bush’s “coalition of the willing” might thus be more aptly described as the “coalition of the billing.”

These large numbers have incurred large risks. Private military contractors have suffered an estimated 175 deaths and 900 wounded so far in Iraq (precise numbers are unavailable because the Pentagon does not track nonmilitary casualties)—more than any single U.S. Army division and more than the rest of the coalition combined.

More important than the raw numbers is the wide scope of critical jobs that contractors are now carrying out, far more extensive in Iraq than in past wars. In addition to war-gaming and field training U.S. troops before the invasion, private military personnel handled logistics and support during the war’s buildup. The massive U.S. complex at Camp Doha in Kuwait, which served as the launch pad for the invasion, was not only built by a PMF but also operated and guarded by one. During the invasion, contractors maintained and loaded many of the most sophisticated U.S. weapons systems, such as B-2 stealth bombers and Apache helicopters. They even helped operate combat systems such as the Army’s Patriot missile batteries and the Navy’s Aegis missile-defense system.

PMFs—ranging from well-established companies such as Vinnell and mpri to startups such as the South African firm Erinys International—have played an even greater role in the postinvasion occupation and counterinsurgency effort. Halliburton’s Kellogg, Brown & Root division, the largest corporate PMF in Iraq, currently provides supplies for troops and maintenance for equipment under a contract thought to be worth as much as $13 billion. (This figure, in current dollars, is roughly two and a half times what the United States paid to fight the entire 1991 Persian Gulf War, and roughly the same as what it spent to fight the American Revolution, the War of 1812, the Mexican-American War, and the Spanish-American War combined.) Other PMFs are helping to train local forces, including the new Iraqi army and national police, and are playing a range of tactical military roles.

An estimated 6,000 non-Iraqi private contractors currently carry out armed tactical functions in the country. These individuals are sometimes described as “security guards,” but they are a far cry from the rent-a-cops who troll the food courts of U.S. shopping malls. In Iraq, their jobs include protecting important installations, such as corporate enclaves, U.S. facilities, and the Green Zone in Baghdad; guarding key individuals (Ambassador Paul Bremer, the head of the Coalition Provisional Authority, was protected by a Blackwater team that even had its own armed helicopters); and escorting convoys, a particularly dangerous task thanks to the frequency of roadside ambushes and bombings by the insurgents.

PMFs, in other words, have been essential to the U.S. effort in Iraq, helping Washington make up for its troop shortage and doing jobs that U.S. forces would prefer not to. But they have also been involved in some of the most controversial aspects of the war, including alleged corporate profiteering and abuse of Iraqi prisoners.

Five Obstructions

The mixed record of PMFs in Iraq points to some of the underlying problems and questions related to the industry’s increasing role in U.S. policy. Five broad policy dilemmas are raised by the increasing privatization of the military.

The first involves the question of profit in a military context. To put it bluntly, the incentives of a private company do not always align with its clients’ interests—or the public good. In an ideal world, this problem could be kept in check through proper management and oversight; in reality, such scrutiny is often absent. As a result, war-profiteering allegations have been thrown at several firms. For example, Halliburton—Vice President Dick Cheney’s previous employer—has been accused of a number of abuses in Iraq, ranging from overcharging for gasoline to billing for services not rendered; the disputed charges now total $1.8 billion. And Custer Battles, a startup military provider firm that was featured on the front page of the Wall Street Journal in August 2004 has since been accused of running a fraudulent scheme of subsidiaries and false charges.

Still more worrisome from a policy standpoint is the question of lost control. Even when contractors do military jobs, they remain private businesses and thus fall outside the military chain of command and justice systems. Unlike military units, PMFs retain a choice over which contracts they will take and can abandon or suspend operations for any reason, including if they become too dangerous or unprofitable; their employees, unlike soldiers, can always choose to walk off the job. Such freedom can leave the military in the lurch, as has occurred several times already in Iraq: during periods of intense violence, numerous private firms delayed, suspended, or ended their operations, placing great stress on U.S. troops. On other occasions, PMF employees endured even greater risks and dangers than their military equivalents. But military operations do not have room for such mixed results.

The second general challenge with PMFs stems from the unregulated nature of what has become a global industry. There are insufficient controls over who can work for these firms and for whom these firms can work. The recruiting, screening, and hiring of individuals for public military roles is left in private hands. In Iraq, this problem was magnified by the gold-rush effect: many firms entering the market were either entirely new to the business or had rapidly expanded. To be fair, many PMF employees are extremely well qualified. A great number of retired U.S. special forces operatives have served with PMFs in Iraq, as have former members of the United Kingdom’s elite sas (Special Air Service). But the rush for profits has led some corporations to cut corners in their screening procedures. For example, U.S. Army investigators of the Abu Ghraib prisoner-abuse scandal found that “approximately 35 percent of the contract interrogators [hired by the firm caci] lacked formal military training as interrogators.” In other cases, investigations of contractors serving in Iraq revealed the hiring of a former British Army soldier who had been jailed for working with Irish terrorists and a former South African soldier who had admitted to firebombing the houses of more than 60 political activists during the apartheid era.

Similar problems can occur with PMFs’ clientele. Although military contractors have worked for democratic governments, the UN, and even humanitarian and environmental organizations, they have also been employed by dictatorships, rebel groups, drug cartels, and, prior to September 11, 2001, at least two al Qaeda-linked jihadi groups. A recent episode in Equatorial Guinea illustrates the problems that PMFs can run into in the absence of external guidance or rules. In March 2004, Logo Logistics, a British-South African PMF, was accused of plotting to overthrow the government in Malabo; a planeload of employees was arrested in Zimbabwe, and several alleged funders in the British aristocracy (including Sir Mark Thatcher, the son of Margaret Thatcher) were soon implicated in the scandal. The plotters have been accused of trying to topple Equatorial Guinea’s government for profit motives. But their would-be victim, President Teodoro Obiang Nguema Mbasogo, is a corrupt dictator who took power by killing his uncle and runs one of the most despicable regimes on the continent–hardly a sympathetic victim.

The third concern raised by PMFs is, ironically, precisely the feature that makes them so popular with governments today: they can accomplish public ends through private means. In other words, they allow governments to carry out actions that would not otherwise be possible, such as those that would not gain legislative or public approval. Sometimes, such freedom is beneficial: it can allow countries to fill unrecognized or unpopular strategic needs. But it also disconnects the public from its foreign policy, removing certain activities from popular oversight.

The increased use of private contractors by the U.S. government in Colombia is one illustration of this trend: by hiring PMFs, the Bush administration has circumvented congressional limits on the size and scope of the U.S. military’s involvement in Colombia’s civil war. The use of PMFs in Iraq is another example: by privatizing parts of the U.S. mission, the Bush administration has dramatically lowered the political price for its Iraq policies. Were it not for the more than 20,000 contractors currently operating in the country, the U.S. government would have to either deploy more of its own troops there (which would mean either expanding the regular force or calling up more National Guard members and reservists) or persuade other countries to increase their commitments—either of which would require painful political compromises. By outsourcing parts of the job instead, the Bush administration has avoided such unappealing alternatives and has also been able to shield the full costs from scrutiny: contractor casualties and kidnappings are not listed on public rolls and are rarely mentioned by the media. PMF contracts are also not subject to Freedom of Information Act requests. This reduction in transparency raises deep concerns about the long-term health of American democracy. As the legal scholar Arthur S. Miller once wrote, “democratic government is responsible government—which means accountable government—and the essential problem in contracting out is that responsibility and accountability are greatly diminished.”

PMFs also create legal dilemmas, the fourth sort of policy challenge they raise. On both the personal and the corporate level, there is a striking absence of regulation, oversight, and enforcement. Although private military firms and their employees are now integral parts of many military operations, they tend to fall through the cracks of current legal codes, which sharply distinguish civilians from soldiers. Contractors are not quite civilians, given that they often carry and use weapons, interrogate prisoners, load bombs, and fulfill other critical military roles. Yet they are not quite soldiers, either. One military law analyst noted, “Legally speaking, [military contractors] fall into the same grey area as the unlawful combatants detained at Guantánamo Bay.”

This lack of clarity means that when contractors are captured, their adversaries get to define their status. The results of this uncertainty can be dire–as they have been for three American employees of California Microwave Systems whose plane crashed in rebel-held territory in Colombia in 2003. The three have been held prisoner ever since, afforded none of the protections of the Geneva Conventions. Meanwhile, their corporate bosses and U.S. government clients seem to have washed their hands of the matter.

Such difficulties also play out when contractors commit misdeeds. It is often unclear how, when, where, and which authorities are responsible for investigating, prosecuting, and punishing such crimes. Unlike soldiers, who are accountable under their nation’s military code of justice wherever they are located, contractors have a murky legal status, undefined by international law (they do not fit the formal definition of mercenaries). Normally, a civilian’s crimes fall under the jurisdiction of the country where they are committed. But PMFs typically operate in failed states; indeed, the absence of local authority usually explains their presence in the first place. Prosecuting their crimes locally can thus be difficult.

Iraq, for example, still has no well-established courts, and during the formal U.S. occupation, regulations explicitly exempted contractors from local jurisdiction. Yet it is often just as difficult to prosecute contractors in their home country, since few legal systems cover crimes committed outside their territory. Some states do assert extraterritorial jurisdiction over their nationals, but they do so only for certain crimes and often lack the means to enforce their laws abroad. As a result of these gaps, not one private military contractor has been prosecuted or punished for a crime in Iraq (unlike the dozens of U.S. soldiers who have), despite the fact that more than 20,000 contractors have now spent almost two years there. Either every one of them happens to be a model citizen, or there are serious shortcomings in the legal system that governs them.

The failure to properly control the behavior of PMFs took on great consequence in the Abu Ghraib prisoner-abuse case. According to reports, all of the translators and up to half of the interrogators involved were private contractors working for two firms, Titan and caci. The U.S. Army found that contractors were involved in 36 percent of the proven incidents and identified 6 employees as individually culpable. More than a year after the incidents, however, not one of these individuals has been indicted, prosecuted, or punished, even though the U.S. Army has found the time to try the enlisted soldiers involved. Nor has there been any attempt to assess corporate responsibility for the misdeeds. Indeed, the only formal inquiry into PMF wrongdoing on the corporate level was conducted by caci itself. Caci investigated caci and, unsurprisingly, found that caci had done no wrong.

In the absence of legislation, some parties have already turned to litigation to address problems with PMFs—hardly the best forum for resolving issues related to human rights and the military. For example, some former Abu Ghraib prisoners have already tried to sue in U.S. courts the private firms involved with the prison. And the families of the four Blackwater employees murdered by insurgents in Fallujah have sued the company in a North Carolina court, claiming that the deceased had been sent into danger with a smaller unit than mandated in their contracts and with weapons, vehicles, and preparation that were not up to the standards promised.

The final dilemma raised by the extensive use of private contractors involves the future of the military itself. The armed services have long seen themselves as engaged in a unique profession, set apart from the rest of civilian society, which they are entrusted with securing. The introduction of PMFs, and their recruiting from within the military itself, challenges that uniqueness; the military’s professional identity and monopoly on certain activities is being encroached on by the regular civilian marketplace.

Most soldiers thus have a deeply ambivalent attitude toward PMFs. On the one hand, they are grateful to have someone help them bear their burden, which, thanks to military overstretch in Iraq, feels particularly onerous at the moment. Even though the job of the U.S. armed services has grown, the force has shrunk by 35 percent since its Cold War high; the British military, meanwhile, is at its smallest since the Napoleonic wars. PMFs help fill the gap as well as offer retired soldiers the potential for a second career in a field they know and love.

Some in the military worry, on the other hand, that the PMF boom could endanger the health of their profession and resent the way these firms exploit skills learned at public expense for private profit. They also fear that the expanding PMF marketplace will hurt the military’s ability to retain talented soldiers. Contractors in the PMF industry can make anywhere from two to ten times what they make in the regular military; in Iraq, former special forces troops can earn as much as $1,000 a day.

Certain service members, such as pilots, have always had the option of seeking work in the civilian marketplace. But the PMF industry marks a significant change, since it keeps its employees within the military, and thus the public, sphere. More important, PMFs compete directly with the government. Not only do they draw their employees from the military, they do so to play military roles, thus shrinking the military’s purview. PMFs use public funds to offer soldiers higher pay, and then charge the government at an even higher rate, all for services provided by the human capital that the military itself originally helped build. The overall process may be brilliant from a business standpoint, but it is self-defeating from the military’s perspective.

This issue has become especially pointed for special forces units, which have the most skills and are thus the most marketable. Elite force commanders in Australia, New Zealand, the United Kingdom, and the United States have all expressed deep concern over the poaching of their numbers by PMFs. One U.S. special forces officer described the issue of retention among his most experienced troops as being “at a tipping point.” So far, the U.S. government has failed to respond adequately to this challenge. Some militaries now allow their soldiers to take a year’s leave of absence, in the hope that they will make their money quickly and then return, rather than be lost to the service forever. But Washington has failed to take even this step; it has only created a special working group to explore the issue.

Caveat Emptor and—and Renter

As all of these problems suggest, governments that use PMFs must learn to recognize their responsibilities as regulators—and as smart clients. Their failure to do so thus far has distorted the free market and caused a major shift in the military-industrial complex. Without change, the status quo will result in bad policy and bad business.

To improve matters, it is first essential to lift the veil of secrecy that surrounds the private military industry. There must be far more openness about and public oversight of the basic numbers involved. Too little is known about the actual dollars spent on PMFs; the Pentagon does not even track the number of contractors working for it in Iraq, much less their casualties.

To start changing matters, clients—namely, governments that hire PMFs—must exercise their rights and undertake a comprehensive survey to discern the full scope of what they have outsourced and what have been the results. Washington should also require that, like most other government documents, all current and future contracts involving nonclassified activities be made available to the public on request. Each contract should also include “contractor visibility” measures that list the number of employees involved and what they are to be paid, thus limiting the possibility of financial abuse.

The U.S. military must also take a step back and reconsider, from a national security perspective, just what roles and functions should be kept in government hands. Outsourcing can be greatly beneficial, but only to the point where it begins to challenge core functions. According to the old military doctrine on contracting, if a function was “mission-critical” or “emergency-essential”—that is, if it could affect the very success or failure of an operation—it was kept within the military itself. The rule also held that civilians were to be armed only under extraordinary circumstances and then only for self-protection. The United States should either return to these standards or create new ones; the present ad-hoc process is yielding poor results.

A third lesson is self-evident but has often been ignored: privatize something only if it will save money or raise quality. If it will not, then do not. Unfortunately, the Pentagon’s current, supposedly business-minded leadership seems to have forgotten Economics 101. All too often, it outsources first and never bothers to ask questions later. That something is done privately does not necessarily make it better, quicker, or cheaper. Rather, it is through leveraging free-market mechanisms that one potentially gets better private results. Success is likely only if a contract is competed for on the open market, if the winning firm can specialize on the job and build in redundancies, if the client is able to provide oversight and management to guard its own interests, and if the contractor is properly motivated by the fear of being fired. Forget these simple rules, as the U.S. government often does, and the result is not the best of privatization but the worst of monopolization.

Tapping simple business expertise would help the government become a better client. A staggering 40 percent of Defense Department contracts are currently awarded on a noncompetitive basis, adding up to $300 billion in contracts over the last five years. In the case of caci, the firm linked to abuses at Abu Ghraib, Army investigators subsequently reported not only that a caci employee may have helped write the work order, but also that the Abu Ghraib interrogators had been hired by simply amending an existing contract from 1998–for computer services overseen by the Department of the Interior.

When hiring contractors, the Defense Department must learn to better guard its own and the public’s interest. Doing so will require having sufficient eyes and ears to oversee and manage contracts. So far, the military woefully lacks this capacity. The U.S. government has only twice as many personnel overseeing contractors in Iraq, for example, as it had during the 1990s for its Balkans contracts—even though there are now 15 times more contracts and the context is much more challenging.

The government should also change the nature of the contracts it signs. Too often, the “cost plus” arrangement has become the default form for all contracts. But this setup, in effect, gives companies more profit if they spend more. When combined with inadequate oversight, it creates a system ripe for inefficiency and abuse. In addition to insisting on more stringent terms, the government should start to use the power of market sanctions to shape more positive results. These days, the opposite seems to happen far more often: Halliburton and caci were both granted massive contract extensions for work in Iraq, despite being in the midst of government investigations.

Finally, more must be done to ensure legal accountability. To pay contractors more than soldiers is one thing; to also give them a legal free pass (as happened with Abu Ghraib) is unconscionable. Loopholes must be filled and new laws developed to address the legal and jurisdictional dilemmas PMFs raise. Laws should be written to establish who can work for these companies, who the firms can work for, and who will investigate, prosecute, and punish any wrongdoing by contractors. Because this is a transnational industry, the solution will require international involvement. Proposals to update the international antimercenary laws and to create a UN body to sanction and regulate PMFs have already been made. But any such international effort will take years. In the meantime, every state that has any involvement with the private military industry, as a client or a home base, should update its laws. One hopes that countries will coordinate their efforts and involve regional bodies to maximize coverage. The United Kingdom, for example, could coordinate its present efforts with the rest of the European Union, and the United States should do the same with its allies.

The forces that drove the growth of the private military industry seem set in place. Much like the Internet boom, the PMF bubble may burst if the current spate of work in Iraq ever ends, but the industry itself is unlikely to disappear anytime soon. Governments must therefore act to meet this reality. Using private solutions for public military ends is not necessarily a bad thing. But the stakes in warfare are far higher than in the corporate realm: in this most essential public sphere, national security and people’s lives are constantly put at risk. War, as the old proverb has it, is certainly far too important to be left to the generals. The same holds true for the CEOs.