CNAS on Contracting

Yesterday the Washington, D.C.-based Center for a New American Security released a report "Contracting in Conflicts: The Path to Reform" on the use of private contractors in conflict zones written by CNSAS Senior Fellow Richard Fontaine and CNAS President John Nagl, a retired Army officer who served in Iraq.

I think this is quite an excellent report and I recommend it both for gaining useful background reading on the subject as well as for some of its recommendation. (In the interest of full disclosure, I was a participant in working group sessions designed to help inform this project.)

Let's start at the beginning. The authors make the same point I made in my book, one that is rarely grappled with directly. The explosive growth of the use of private contractors by the U.S. government in recent years is not due to the quest for profits or even the privatization model run amuck. It is about American foreign policy.

When our nation goes to war, contractors go with it. In both Iraq and Afghanistan today, there are more private contractors than U.S. troops on the ground. This state of affairs is likely to endure. Now, and for the foreseeable future, the United States will be unable to engage in conflicts or reconstruction and stabilization operations of any significant size without private contractors. Changes in business practices, the provision of government services and the character of modern conflict, together with limits on the size of the

American military, diplomatic and development corps are driving the size and scope of expeditionary contracting to unprecedented proportions. Absent a significant reduction in America's international commitments and perceived global interests, the employment of private contractors in future American conflicts is here to stay.

Now personally I have long argued that this is precisely where the debate should be. I don't think the U.S. should be maintaining a global military presence or try to be GloboCop. But until we change this, and I'm not holding my breath, we will be using private contractors because the U.S. military is simply not big enough to handle all the missions assigned to it and people don't want to pay the human and monetary price required to make it so. It is exactly that simple. And that is why reform of the contracting status quo is imperative.

Forget about the articles you read that the Obama administration is going to restore the balance between public sector employees and private contractors. "While the most recent Quadrennial Defense Review (QDR) echoes the president's position and talks of finding a more appropriate balance between contractors and federal employees in carrying out necessary tasks, it fails to outline how DOD would establish such a balance among military, federal civilian and contractor personnel, or what exactly that balance would look like. Even if efforts to in-source some functions are successful, they are unlikely to significantly reduce U.S. dependence on contractors. It has become a new reality both of overseas engagements and of American foreign policy."

It is also a simple reality that despite years of effort we still don't have the oversight and accountability we should over contractors working for DOD, State, USAID, and other departments and agencies.

The system within which this contracting takes place has not caught up with the new reality. Tens of billions of taxpayer dollars committed to contracts in Iraq and Afghanistan have been implemented with little oversight. Contracting companies themselves crave clearer guidelines. The roles of contractors remain incompletely integrated into the conduct of American operations. The legal framework within which contractors work remains cloudy. And there have been serious allegations of harm to both local civilians and U.S. personnel as a result of contractor malfeasance.

It also bears repeating that governmental use of contractors is as old as the founding of the country.

During the Revolutionary War, the Continental Congress sought support from various individuals and commercial enterprises for engineering, food, transportation, medical and carpentry services. General George Washington's army, for example, employed contractors to assist with the Delaware River defense in 1777 and to help dig siege fortifications in Savannah, Ga., two years later. Similarly, the Quartermaster General contracted teamsters to transport supplies and private citizens ferried soldiers across the Chesapeake Bay in preparation for the Yorktown Campaign. Due to the limited number of soldiers employed to fight the British, Congress encouraged the use of contractors for tasks deemed too menial for soldiers (e.g., transporting supplies) or overly specialized (such as surgeons and other specialized medical personnel).

Indeed, the first U.S. military aviation organization, the Union Army Balloon Corps, was a contractor run organization.

During the Korean War, 156,000 Korean, Japanese and American contractors, mostly in construction and engineering roles, supported 393,000 U.S. military personnel on the battlefeld. The extensive use of contractor support, both in dollar amounts (12 billion in current dollars) and personnel (with a 2.5:1 military-to-contractor ratio), was due in large part to the mass demobilization of the U.S. military after World War II. Similarly, President Lyndon Johnson's decision not to mobilize reserve units during the Vietnam War led to the increased use of contractors in theater. U.S. military operations in Vietnam, branded the "War by Contract" by Business Week in 1966, created a vast demand for physical infrastructure construction, and the Army awarded support contracts to a number of large American frms. From 1965-1972 the United States disbursed over 2 billion dollars in fees to contractors and involved them in building everything from roads and bridges to power plants, fuel storage depots and jet airfelds. In addition, the military's demand for skilled technicians grew with the first extensive use of helicopters in combat. Throughout the conflict, an estimated 130,000-150,000 contractors worked in support of U.S. military operations in Vietnam.

Defenders of private contractors, such as their various trade associations, often argue that there are voluminous regulations on the books to ensure the necessary oversight and that no more are necessary. Uh huh!

Regulations aimed at preventing fraud, waste and abuse while ensuring proper contracting practices are enshrined in the Federal Acquisition Regulation (FAR). The FAR, however, is not written for contracting in contingency environments, contains an enormous number of regulations and involves laborious requirements before a contract can be cancelled. In addition, relatively few acquisition personnel are familiar with its use in hostile theaters.

Contractor advocates also often argue that using contractors is more cost effective than using government personnel. There is truth to the argument but it is not always the whole truth.

One set of costs that is not always apparent in comparative calculations is the "brain drain" aspect to contracting when military personnel who have been trained by the United States, and who may receive a pension and lifetime health care, depart military service or other federal employment in order to take higher-paying jobs working for private contractors.

Among military personnel, as a 2005 CBO report points out, pay is just one element of total compensation. Te other elements - which constitute a significant portion of the compensation package - include retirement pay, services at military installations (e.g., housing and food) and health care, which may continue for life. While CBO attempted to convert the elements of military compensation into present-value terms, this calculation proved nearly impossible for other federal employees or contractors. In addition, there are substantial differences in cost to the government depending on whether the calculation involves both wartime and peacetime costs, or wartime costs alone.


This and other reports demonstrate, however, the extraordinary difficulties the government has had in making comprehensive cost comparisons between government workers and private contractors carrying out the same functions.

So what does CNAS think ought to be done? Personally, I want to see the national debate on U.S. foreign policy I mentioned in the beginning. I'd also like to see a cure for cancer but don't think that either is likely to happen anytime soon.

CNAS calls for increasing the contracting capacity at DOD, State and USAID and establish a formal (but relatively simple) interagency coordination mechanism.

This effort should include expanding the current DOD Office of Program Support, which is located in the Office of the Undersecretary of Defense for Acquisition, Technology and Logistics. This expanded office, which would be renamed the Office of Contingency Contracting (OCC), should be led by a Senate-confirmed Assistant Secretary of Defense for Contingency Contracting. It should be the unambiguous Department focus for planning, funding, staffing and managing DOD's ES&R and private security contracting.

Similarly, the State Department should expand its Office of Logistics Management into a new Bureau of Contingency Contracting located under the Undersecretary for Management. The bureau should be led by a Senate-confirmed Assistant Secretary (the current office is directed by a Deputy Assistant Secretary). USAID should either direct that its Bureau of Democracy, Conflict and Humanitarian Assistance develop a specific expertise in ES&R [Expeditionary, Stabilization and Reconstruction] contracting (including adding contract specialist personnel to the bureau) and provide guidance to USAID regional bureaus as they manage their own contracts or it should establish a separate contracting bureau headed by an Assistant Administrator-level official.

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