The Regulation of New Warfare

Over the last several years, a drumbeat has grown louder that the problems emanating from the outsourcing trend in national security finally needs to be faced. Calls for action have been heard everywhere from congressional hearing rooms and the ivory tower of academia to presidential campaign stops and the battlefields of Iraq. The below lays out a series of long overdue action items that might be taken to launch a process of reform on the contracting of private military services, if these calls were serious and we actually wanted to fix the problems. The end goal of such a process would be to reign in negative sides of the culture of outsourcing that has taken hold in the Defense Department, particularly in contingency operations, while providing better oversight and management, designed to yield savings and conduct more effective operations.

Defining the Problem: Management, Oversight and Leadership Needed at the Highest Levels

We have an extensive and elaborate system in place to review the development and procurement of hardware (both in the Department of Defense (DoD) and on Capitol Hill). Yet, the scope of our defense purchasing has changed at its most fundamental level, from almost exclusively on goods to services. DoD spending on contracts in the last fiscal year was $316 billion, including roughly 20 percent of all Iraq-related spending. That is, we now spend as much money buying services throughout the DoD as we do equipment.

More broadly, the number of contractors in the battlespace has grown enormously, as well as the scope of their activities. During the first four years of the Iraq war, the U.S. government hired approximately 190,000 contracted personnel in direct service contracts there. This amount is greater than the total number of U.S. troops at the high point of “the surge” and is roughly 23 times the number of troops provided by our allies. To put this in a historical perspective, the ratio of uniformed military to contractors in the 1991 Gulf War was around 50:1. The contracting presence in Afghanistan is on a somewhat smaller scale, but reportedly rising to over 100,000 contractors in the last years, resulting in a 1:1 ratio.

The personnel in this “coalition of the billing” come from over 30 countries, with about a quarter American and the rest divided among third country nationals and local citizens. As many as a quarter are in armed roles in the battlespace, sometimes described as “private security” (but “security” clearly takes on a different meaning than private security at facilities not in active combat zones). The others handle roles that range from logistics to Unmanned Aerial Vehicle (UAV) services to staffing out military advisory teams. It is important to note, however, that these numbers and roles remain in great dispute. For example, while one study reported that there were as few as 10,300 total contractors in armed security roles in Iraq, the Ugandan Ministry of Labor reported in 2008 that there were 9,000 Ugandans alone working in that role in Iraq.

This system of outsourcing has greatly benefited our military operations in many respects, providing an abundance of support (arguably the U.S. mission in Iraq is now among the best supplied and equipped in history), while avoiding added pressures on the active and reserve forces that would occur if there was not so much contracting. Additionally, the ad hoc manner in which this system has grown and the lack of an overall DoD strategy concerning contracting missions has incurred great costs. The Pentagon estimates that as much as $10 billion dollars have gone missing or been misspent by private military contractors in Iraq. Literally thousands of weapons have similarly disappeared in Iraq and Afghanistan, with some even ending up in the hands of local insurgents or transnational terrorist groups. As many as 15 or more U.S. troops have died inside U.S. bases as a result of shoddy electrical work performed or imporperly supervised by logistics contractors. And, at the strategic level, contractors were involved in many of the most egregious and embarrassing incidents in the war, including Abu Ghraib and the Nisour Square shootings in September 2007. These incidents matter not only because of the consequent embarrassment to the nation, but also because many military officers believe private contractors have undermined our counterinsurgency goals, reflecting negatively upon U.S. grand strategy across in the region.

In management terms, the military contracting of services has risen at such a rate that the system of oversight and supervision has become wholly inadequate. Moreover, at a time of unprecedented growth in contracting services (as much as 700 percent), the Pentagon workforce responsible for this role has shrunk (by about 25 percent). The result is that in 1997 one DoD auditor was responsible for $642 million in private contracts; today it is one for every $2.02 billion in contracts. Contracting officers in the field similarly describe being far too busy in signing new contracts to go back and review performance of ongoing contracts. It is not surprising then that at many of the incidents where contracts turned sour (such as the electrocutions or Abu Gharib), no government contracting officer was even present on site, simply to be made aware of the situation and potentially intervene to stop it. Without change, this situation is only going to get worse, as more than half of all contract auditors are expected to retire within the next 10 years, meaning the Pentagon will soon have even less officers with experience.

At the core of this issue is a more fundamental question: What tasks are appropriate to outsource in the first place? The DoD has never really come to grips with meaningfully defining what are “inherently governmental” functions in light of new market and political realities. Private military firms today can provide almost any military service or function, from strategic leadership to piloting jet fighters to cooking. The core question is for what areas they should? The term “inherently governmental” is used some 15 times in U.S. code and appears in over 120 pages of DoD documents, but remains misunderstood and often ignored when it comes to actual contracting in the field. This is how, for instance, a company ended up providing private military interrogators at Abu Ghraib, using an IT services contract written in 1998 as the point of origin.

More broadly, it is becoming clear that a sort of dependency syndrome has set in, where the Pentagon cannot carry out many of its most basic public responsibilities without firms. To be blunt, the reliance on contracting is far more than DoD senior leadership is willing to admit. Arguably, across the entire Department—in the absence of contractors—we might, for example, have great difficulty supporting operations in Iraq, Afghanistan, and elsewhere. This includes basic tasks like convoy movement, provision of critical supplies (e.g. food, fuel, and ammunition), and also such roles as running the very Office of the Secretary of Defense and the Joint Staff. Various new weapons sectors are becoming exceptionally dependent on private contractors, from cyberwarfare to the over 75 percent of Predator/Reaper unmanned aerial systems maintenance and weapons loading in CENTCOM. The intelligence community is also highly outsourced, with a recent book finding that over 60 percent of intelligence operations are now outsourced.

In short, it is time to subject these enormous expenditures on defense services to the same measure of scrutiny and transparency that we currently bring to bear on defense systems and other goods, as well develop an over-arching set of measures to provide strategic guidance, oversight, and management. As attention is paid to the service contracting issue, thought should be given to the size, training and flexibility of the workforce we need to oversee and perform these services.

Set the Agenda

Given the present circumstances of manpower, contractor support services provide flexibility in the workforce. Thus, a thorough analysis is necessary before the DoD considers divesting itself of these capabilities and expertise – particularly in a time of war. Senior leadership should order a rigorous, comprehensive review of what services we are procuring throughout the DoD, and to what extent we are dependent upon them. Such a review would examine DoD interactions with contractors, the current numbers of hired contractor personnel (both U.S. citizens and foreign), the number of auditors/contracting officers supervising contracts, the percentage of contracts that are no-bid or sole source, as well as functions outsourced for which there is a monopoly in the marketplace, and the exact capabilities that are being provided from private sources. Such inappropriate roles may include having contractors in legal or contractual oversight roles, roles that relate to the use of force, or roles that relate to other core military functions.

Rebuild the Ability of Government to Oversee and Manage

Secondly, senior leadership must set a goal of reconstituting a DoD-wide, rigorous contract management system that establishes checks and balances to create an incentivized system of accountability. Such a government management system would define clear performance metrics for private military providers, uniformly enforce performance standards, reduce reliance on no-bid or sole source contracts, and ensure an active marketplace for any and every outsourced function. Most importantly a comprehensive DoD management system would move contractors out of roles that are deemed inappropriate for private outsourcing.

On the uniformed side, the Chairman of the Joint Chiefs and combatant commanders should be tasked with designating a senior officer, whose primary responsibility is military service contracting. Beyond supporting the above goals, the officer would be responsible for ensuring that contracting was integrated into all deliberate and contingency plans as a separate contracting annex, the exact opposite of the ad-hoc manner in which contracting emerged in the first years of operations in the Balkans and then Iraq and Afghanistan. Such inclusion in the planning machinery will force many tough questions to be answered before rather than after deployment, as has been the case more recently.

Work with Other Agencies to Fill Policy Gaps

The irony of the private military contracting issue is that many of the toughest problems and needed solutions actually lie outside the Pentagon. For example, the shootings of civilians like at the Nisour Square may have had an immense effect on U.S. military counter-insurgency operations in Iraq, but the personnel involved were State Department contractors. Thus, they did not fall under either military contractual control, nor the chain of command, nor arguably military law. The private contractors’ amorphous status has thus been used to muddy the water of any potential prosecution and stymie cooperation with on-scene force commanders.

Working with the Department of Justice, the DoD should make clear that it supports (1) the use of qui tam lawsuits to inculcate a culture of accountability (Note: The DoJ has yet to utilize this legal option that was effective in deterring fraud and recouping losses in past wars, thus not incentivizing whistle blowing or creating positive financial returns) and (2) greater prosecution of civilian contractors who commit crimes in warzones.

Working with the State Department, the DoD should make clear that its concerns over the use of armed contractors are not merely concerns over “coordination,” as it is usually described in public statements and congressional testimony. The lack of “coordination” prior to the Nisour Square shootings was certainly a vexing concern for military officers in the field, but it was not a cause of the shootings. Thus, any remedy that only focuses on coordination, as has been the case so far, is insufficient. DoD should also work with State on identifying measures where the United States can lead multilateral efforts to establish standards and norms in international public law regarding the private military industry. Such efforts would move the U.S. into a pro-active role on an issue of global strategic importance.

Reach out to Congress

In many areas, only legislation can firmly re-establish the once clear line between where public authority ends and private initiative begins. Therefore, the Executive Branch must work with Congress to improve the laws that govern contracting with private military companies.

At a minimum, DoD should develop a dialogue with Congress to develop a sense of what activities must not be outsourced and therefore demand a “resident capacity” within either the active duty, National Guard, Reserve or DoD civilian workforce. This designation will give political top-cover as well as force Congress to wrestle with resourcing issues that might be associated with any policy changes. Most importantly, it would break the cycle that DoD now finds itself in of Congress picking and choosing specific contracts that it believes are inappropriate in mid-stream and demanding immediate action to end it.

Second, senior officials at DoD should encourage Congress to pass legislation on MEJA to cover contractors not currently under the Uniform Code of Military Justice. The MEJA Expansion and Enforcement Act of 2007, which has been passed by the House but not by the Senate, sought to provide legal accountability for private contractors employed by the State Department. This gap is still a hazy one in how it is to be implemented, not only on the case of State Department contractors, but also if the contractors are third country nationals or subcontractors. The Congress should also act to specify the exact boundaries between UCMJ and an enhanced MEJA, making the logical decision that actions in the midst of battle should be judged by a military court, while those off the battlefield with a civilian law equivalent should be judged by a civilian court.

Send Proper Market Signals

The marketplace is a reactive entity. Guided by clients that know their own goals and deliver proper incentives to meet them, it will deliver optimal returns. When clients are unclear with their vendors, lack coordination and oversight in the meeting of their goals, and fail to provide both positive and negative incentives, the market will offer sub-optimal results. Firms prefer the clarity of the former situation, as it offers them the most sustainable business model. That is, the industry will not resist improved Pentagon oversight and management as much as some might think and in many cases will greatly welcome it.

On the positive side of signals, each governmental department working with private contractors should establish a regularized chain of communication with military service companies. This channel would be separate from individual contract talks or reviews but instead take on a more industry-wide perspective. The goals of this channel would be to create a process at which the parties can raise priorities, discuss lessons learned, and share ideas on the best means to incentivize positive results in current and future contracting, from both the public and private perspective.

Among the areas that should be initially raised at the agenda of such meetings include questions on 1) what measures can be written into contract to create a more desirable reward structure, as well as 2) how the industry itself can self-police any systemic abuses, 3) develop high practices and training standards, and 4) commit to increased transparency. The military services industry currently is trending towards establishing a “code of conduct,” which is a positive sign of its eagerness to problem-solve. Moreover, industry leaders want to establish a long-term structure that rewards firms that meet the shared goals of professionalism and efficiency.

But that effort is nascent and the interface with DoD is marginal. Most importantly, the code involves no accountability measures yet. In actuality it is a voluntary guideline rather than a code. It doesn’t reward firms that follow it nor punish those that do not. DoD can work with the industry to make this effort more effective by identifying areas of enhancement, as well as ways that the DoD (as the most powerful client in the field) can support these reform efforts. For example, these standards might be enhanced to include such requirements that all contractors deploying into an operational zone be trained in the laws of war as well as human rights law, and not simply in the rules of engagement for a particular theater of operations. While many firms already voluntarily take this step, the DoD could mandate the minimal training criteria into all its contracts to give the standard actual market weight. Similarly, it should also explore vetting procedures regarding third-country and local-country nationals to ensure that those with criminal pasts (and particularly those guilty of human rights abuses) are prevented from serving as U.S. government-funded contractors.

It is important, however, to recognize that a structure of only positive incentives ignores the basic lessons of economics. While rewarding exemplary firms, the DoD must also do a far better job at creating accountability for those rare firms that are the opposite. It must not only think of this in raw financial terms (i.e., streamlining the monetary fine and contract termination process for firms that underperform or are found to have engaged in any contract overbilling or fraud), but also do its utmost to eschew “cowboys” and others who damage the nation’s –and industry’s— reputation.

To demonstrate its earnestness in creating a new culture of accountability, each service point of contact should also be asked to create a reporting mechanism to identify any firm that has embarrassed the U.S. (e.g. activities either authorized or not that have caused a severe setback in the campaign to win ‘hearts and minds’ and/or damaged U.S. image abroad). They should also enact measures to write this new standard into existing and future contracts as a cause for termination. The standard should be kept flexible but high in its definition. Importantly, it is the very act of this designation that will incentivize better employee oversight within the industry (that is, firms will then restructure their own employee contracts and enhance their internal screening measures) as well as send a positive signal to partner states and allies that the U.S. is taking responsibility for bringing its own outsourcing problem area into order. In the end, all of these steps rely on one critical assumption: that we have the political will to face this problem area directly. Unfortunately, after over 10 years of researching the private military industry and working with almost every government agency and branch on various aspects of their relationship with it, I remain unconvinced that we actually do.