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War and Private Contractors: Can't Live with Them, Can't Live Without Them

Anybody who was dreaming that that the military was going to divest itself of contractors can put that fantasy to rest. Now that the CWC has said the government is over-reliant on contractors, you can see that we have a bit of a contradiction.
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For those who follow private military and security contracting issues, Wednesday was rubber meets the road day. By that, I mean that Aug. 31 marked the official release of the final report of the Commission on Wartime Contracting in Iraq and Afghanistan.

This concluding report by the CWC is the capstone of three years of work, numerous hearings, interviews, field trips to Iraq and Afghanistan, including keeping offices in both Baghdad and Kabul, the hiring of a highly professional and qualified staff, and the smooth working of eight bipartisan and nonpartisan commissioners. As commissions go, it would be hard to find one working on such an important issue that had such impressive credentials.

So what did they conclude and what did they recommend? This post deals with the first question.

Let's take a look at some of their numbers. According to the eight-chapter, 240-page final report, Transforming Wartime Contracting: Controlling Costs, Reducing Risks:

Spending on contracts and grants performed in Iraq and Afghanistan in support of operations in those countries is expected to exceed $206 billion through the end of fiscal year (FY) 2011. Actual expenditures will be even higher because not all contracts that support contingency operations in Iraq and Afghanistan are identifiable as such.

The number of Department of Defense (Defense), Department of State (State), and the U.S. Agency for International Development (USAID) contractor employees in Iraq and Afghanistan has varied, but exceeded 260,000 in 2010. The contractor employee count has at times surpassed the number of U.S. military personnel in the two countries.

Although contract activity has taken on increasing importance, the resources devoted to managing contracts and contractors have not kept pace. The number of contract specialists -- an occupation critical to the execution of contingency contracting -- rose by only 3 percent government-wide between 1992 and 2009, despite an enormous increase in contracting activity during that period.

That last point is a diplomatic way of saying that even after 10 years of extensive use of contractors to enable and facilitate military, diplomatic and reconstruction operations, government still doesn't know how, or even worse, doesn't care, to carry out due diligence on the activities it contracts out. Think I am exaggerating? Here is what the report says:

Defense has promulgated important policy and doctrinal changes. However, the structure needed to force important lessons learned through the system and the authority to enable resource shifts to support the acquisition process does not exist. More than half of Defense's contract spending is for services and not for hardware procurement. Yet Defense's culture and processes remain focused on weapons systems. This imbalance in focus is particularly risky in the context of operations in Iraq and Afghanistan, where 66 percent of contract spending is for services.

While the Pentagon is the primer offender, it is not the only one. The CWC said this about the State Department: "But State has not fully recognized or implemented many of the needed changes. Therefore, significant additional waste -- and mission degradation to the point of failure -- can be expected as State continues with the daunting task of transition in Iraq."

Considering that the State Department is now assuming many of the missions formerly done by the U.S. military in Iraq, this can't be good.

Given the above, this explains why the report said, "Because the heavy reliance on contractors has overwhelmed the government's ability to conduct proper planning, management, and oversight of the contingency-contracting function, the Commission concludes that the government is over-reliant[emphasis added] on contractors."

Speaking of services, see page 23 of the report for a breakdown of the 10 most commonly acquired services, which account for 44 percent of total services obligations. Despite all the histrionics about Blackwater, DynCorp, Aegis Defence and other private security firms, guard services were a relatively small part of the total spent on services. After 10 years the CWC estimates that only $3.8 billion was spent on guard services.

But if you are going to be a contingency contractor, size matters. A total of 22 individually identifiable contractors received at least $1 billion each and account for 52 percent of contract awards. You can be sure that none of these were mom-and-pop or small-business firms. Instead, say hello to:

  • Agility

  • DynCorp
  • Kuwait Petroleum Corporation
  • Fluor Intercontinental, Inc.
  • The Bahrain Petroleum Company
  • Combat Support Associates
  • ITT Federal Services International
  • The Louis Berger Group, Inc.
  • International Oil Trading Company
  • Readiness Management Support
  • L-3 Communications
  • Red Star Enterprises, Ltd.
  • IAP Worldwide Services
  • Environmental Chemical Corporation
  • Perini Corporation
  • Blackwater Lodge and Training Center
  • Contrack International, Inc.
  • Triple Canopy, Inc.
  • DAI/Nathan Group, LLC
  • Washington Group, International
  • Bearing Point, LLC
  • By the way, try doing a search for lawsuits and the above company names. Off the top of my head, at least 10 of the above -- and I'm being conservative -- have been in trouble with the government for work in Iraq and Afghanistan since 2001.

    Also, speaking of big firms, pause to consider the similarities between large PMCs and the financial services industry. The CWC did and found, "Because the U.S. government relies on only a handful of contractors to provide most of the support for the contingencies in Iraq and Afghanistan, this reliance potentially presents a situation analogous to the U.S. financial industry's "too big to fail" calamity."

    Interestingly, the second-highest obligations category, however, is "miscellaneous foreign contractors." The $38.5 billion recorded for "miscellaneous foreign contractors" suggests the difficulty of compiling reliable, accurate procurement-transaction data.

    But this not just an issue of wasted money; it is far more serious that that. People's lives are at stake. The report noted, "In Afghanistan, for instance, carrying out stabilization-and-reconstruction projects in insurgent-contested areas with contractor employees has led to deaths, delays, and waste."

    Speaking of deaths, it was good that the report confirmed what many of us who follow the issue have long known but doesn't get nearly enough public mention:

    The extensive use of contractors obscures the full human cost of war. The full cost includes all casualties, and to neglect contractor deaths hides the political risks of conducting overseas contingency operations. In particular, significant contractor deaths and injuries have largely remained uncounted and unpublicized by the U.S. government and the media.

    As of July 2011, that total is 2,429 contractor deaths.

    We all know that wars are expensive. And generally we don't begrudge money spent if it is doing something useful. As the cliché goes, nothing is too good for our boys. But the cliché may require a corollary -- "so that's what we'll give them, nothing" -- given that the report found:

    U.S. operations in Iraq and Afghanistan have entailed vast amounts of spending for little or no benefit. That is waste. The Commission's conservative estimate of waste and fraud ranges from $31 billion to $60 billion, based on contract spending from FY 2002 projected through the end of FY 2011.

    If the $31-billion estimate is correct, that would mean that 15 percent of the total $206 billion spent on contracts to date was wasted, and $60 billion would be 29 percent. No matter how you slice it or inflation adjust it, that's real money. By the way, can anyone point me to a private business whose CEO still has a job when an audit reveals that comparable amounts of their revenue have been wasted? Anyone? Yes, I didn't think so, either.

    But let's take the middle of that range, say, $45 billion, or $4.5 billion a year. That works out to $12,328,767 a day, $1,875,000 an hour, $31,250 a minute and $520 per second. Clearly, if one could bring back Willy Sutton from the dead, he would be a private contractor, not a bank robber.

    Of course, that is not to say that most private military contractors are crooks. Perish the thought. But it does mean that there is a lot of wasted money that could be saved fairly easily. According to the CWC, "Some degree of waste and fraud has always accompanied the uncertainties of war. But much of the waste and fraud in Iraq and Afghanistan that resulted from ineffective contingency contracting was foreseeable and avoidable."

    During the recent press briefing for the report, one of the CWC commissioners, Dov Zakheim, said he thought the total was closer to the upper end of the estimate. But even if you take the lower end, the eventual total will be higher. That is because the report also found:

    A particularly troubling outcome of the Commission's examination of waste is that billions of dollars already spent, including spending on apparently well-designed projects and programs, will turn into waste if the host governments cannot or will not commit the funds, staff, and expertise to operate and maintain them.

    Second, let's consider the geopolitics of this. The report said that the use of contractors in the United States' earlier contingencies did not overtax agencies' capacity to support, manage and oversee them, because the contingencies' scope or duration were comparatively smaller or shorter than the ongoing operations in Iraq and Afghanistan. However, in every year of the past 23 years, the United States has been engaged in an overseas-contingency operation. For the past 12 years, the United States has always and simultaneously been engaged in two or more overseas regions.

    More recently we've seen the unexpected campaign executed by the United States and NATO to suppress the Libyan government's attacks on its citizens. Unrest in Somalia and Yemen also raises the potential of a contingency operation that might require contractor support and stabilization-and-reconstruction operations.

    Given that kind of record, it is rather difficult to envision that the United States is going, to cite the Beatles, to give peace a chance anytime soon. That, by the way, is not a pejorative assessment of U.S. foreign policy, just a fact-driven assessment of what is likely to happen in the future.

    Thus, it is not hard to see why the CWC says, in its best Star Trek Mr. Spock fashion, "The logical implication of this geo-political environment is that contractors will remain a significant element of the U.S. government's total force. The Under Secretary of Defense for Acquisition, Technology, and Logistics recently testified before the Commission, saying, 'We're simply not going to go to war without contractors.'"

    Anybody who was dreaming that that the military was going to divest itself of contractors can put that fantasy to rest. Of course, if you remember what the CWC said earlier, namely that the government is over-reliant on contractors, you can see that we have a bit of a contradiction, or, as the sheriff said in the movie Cool Hand Luke, "What we've got here is (a) failure to communicate."

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