Outsourcing Private Ryan

Peter Singer is the author of Corporate Warriors: The Rise of the Privatized Military Industry and the director of the Project on U.S. Policy Toward the Islamic World at the Brookings Institution in Washington, D.C. Prospect writing fellow Ayelish McGarvey spoke with him last week to discuss the rise of private military contractors in modern warfare.

Tell me about this trend, using private contractors to perform military duties. Haven't mercenary forces been used throughout history?

This is something completely new: Private companies providing military services? This is something that you didn't see until the end of the Cold War. It's quite distinct from past civilian roles in the realm of warfare. What we've seen happen over the last decade has been a surprise in both size and scope, and you can see it very clearly play out in Iraq right now. So today in Iraq, there are somewhere around 20,000 private military contractors, i.e., those that are providing military functions but working for private companies. These are not people doing reconstruction work.

Here are some other ways of thinking about the size: About one-third of the U.S. Army's operating budget has been spent on private military contractors, and they're present in over 50 different countries. As a point of comparison, the ratio of private contractors to U.S. soldiers in the Gulf War was about 1 to 100. In this war, it is 1 to 10, or 1 to 6, depending on the estimate. It has grown by at least a factor of 10. So, however you cut the size, it is pretty significant.

Those numbers are stunning, but the role of contractors in modern warfare is even more important: Most importantly, these are roles that contravene what has been the long-standing military doctrine regarding civilians in the battlefield space. Essentially, the doctrine has held that contractors should not be put in a position where they are in “mission critical” roles, i.e., roles where they affect the success or failure of an operation, nor should they be placed in roles where they are under great threat, or have to carry weapons.

In Iraq, we have contractors doing everything from logistics to local army training to guarding key government installations and officials (all the way up to Paul Bremer and the new Iraqi prime minister). Additionally, contractors escort convoys and interrogate prisoners at places like Abu Ghraib. All of these positions are mission critical -- they so obviously affect the success or failure of the mission. For instance, if logistics break down, or if [Coalition Provisional Authority] installations are overrun by Iraqi rebels, or if your convoys get shot down and don't move, or if a leading official is killed … all of [these] things clearly affect the potential success or failure of the operation.

It is important to note that for almost all of these positions, contractors face great danger because of the situation on the ground. For some of these contracting jobs, people are specifically hired for the military tactical skills they bring to bear. It is no longer an extraordinary circumstance … they are hired precisely because they are carrying a weapon.

Why would the government choose to outsource military work?

Military forces around the world are much smaller than they were during the Cold War: The U.S. military is about 35 percent smaller, the British military is the smallest it has been in two centuries. But at the same time, there is an increased demand. Even though it is much smaller, the U.S. military has been deployed everywhere from Somalia to Haiti, Kosovo, Bosnia, central Asia, and now Iraq. Private companies fill that gap between supply and demand.

But -- especially in Iraq -- political decision making has overridden economic reasoning in influencing the rise of private contractors After all, there are many ways to fill the gap between supply and demand: Call up more National Guard Reserves, make tough compromises with allies, or command the forces. But those all come with political costs. Private contractors don't.

Additionally, public opinion influences the success of an operation, in terms of a willingness to support various initiatives. Using private contractors helps displace some of the unseemly costs of war that could sway public opinion. For example, somewhere over 90 contractors have been killed in Iraq, while another 400 have been wounded. And an unknown number are missing. That is more than an army division's worth of casualties that have not gone on the public record.

Another reason for the rise of contracting is that the nature of warfare has changed. Civilians are playing an increasing role in warfare, and the line between military and civilians got fuzzy. That's true when you're talking about private contractors, but low-intensity warfare: warlords, guerillas, terrorists -- what distinguishes a legitimate combatant? That's a difference in modern warfare.

And the third reason is the privatization revolution, a change in thinking about the public and private space. We used to distinguish certain tasks as quintessentially government ones, but today we say that the private market can and should take over. Those are things like private prisons, garbage collection, the shift toward private responsibility for schools. More money is spent on private policing than public policing in this country. The final frontier was the military.

Are there any cost savings to using contracting? I read recently that American soldiers make, on average, $3,300 each month, while some contractors make up to $1,500 in a single day. And the insurance rate for private-sector employees in the battlefield is exponentially more costly. Are we doing this to save money?

Financial cost savings is not driving the use of private military contractors, but political cost savings are. If it was financial cost savings, we could point to research or data to prove that. But those data do not exist. We don't know whether it is saving us money; no comprehensive survey has been undertaken. What we do know are “postcards” -- case studies frequently show that we're not saving money. The reasons are pretty simple: In theory, contractors could cut down on costs, but the United States military is a very bad client … a dumb client. We avoid all of the lessons of the free market. In theory, by having good competition, you get the lowest possible price. By having good oversight and management, you ensure that you get the best quality. By selecting the best firm, you get specialization, which is another way to save costs and ensure quality. And finally, you let the free market work as a self-correcting mechanism: When a company screws up, it should get a bad reputation and be released from a contract for poor performance.

But in reality, this doesn't happen. The U.S. government encourages infrequent competition, or even no competition at all. When there is competition, we often award these “super contracts” to firms that simply specialize in being middlemen and subcontracting out the actual work.

The U.S. government has terrible oversight and management of contracts -- it's laughably bad. Earlier this week, the Pentagon claimed quite proudly that it had almost 60 people doing contracting oversight in Iraq. But that means 60 people are overseeing the work of some 20,000 contractors, and several billion dollars' worth of contracting revenue. That's not something to be proud of! They should be ashamed -- it's woefully inadequate.

Finally, we don't have a system that punishes firms when they fail. We have a system that turns a blind eye to it. The government knows about overbilling, and many of these firms hire inferior personnel. And yet we hire them again and again. Ultimately, politics drives matters even as important in warfare -- it's all about who you know.

Is this an inevitable trend? Are contractors here to stay? Could this arrangement ever be successful?

There are four things that need to be done. First, the Pentagon needs to develop better public accounting so that it can state with confidence the success of these private companies, money spent, etc. Second, there needs to be better accountability, then closing some of the loopholes in laws to bring contractors under better control and legal authority. Third, there needs to be a clear definition of the appropriate roles and tasks for contractors. And finally, for those roles that are appropriate to turn over to contractors, the Pentagon should do it in such a fashion that it is a cost savings to the government.

We should have set up these mechanisms before we ever started contracting out this work. But unfortunately, we are 10 years, over 3,000 contracts, and $100 billion in contract revenue into this. The burden is on the Pentagon to look at the historical record and change the system. My sense is that people in the military are quite frustrated and want to see these changes implemented. The problem is that they're dealing with a civilian leadership at the Pentagon that has apparently forgotten Economics 101.

I would imagine that the troops on the ground find this contracting business to be demoralizing. After all, they are paid relatively little for risking their lives. Is this correct? Have you heard any such sentiments from military personnel regarding the contractors?

There are several sentiments. On one hand, people in the military often feel caught between challenges and pressures. There is so much work to be done, and contractors can fill some of the roles that they don't have the capacity to accomplish. In other cases, contractors do work that military personnel would prefer not to do.

But the flip side? The pay for contractors is sometimes mind-boggling, especially when compared to the money soldiers are making. A good example of this difference: A truck driver for Halliburton is making the same amount as four-star General John Abizaid -- he's in charge of [everyone] … that's absurd! This can lead to some resentment, but it also affects the numbers of troops who re-up, resulting in retention problems. And finally, there are issues of chain of command, and appropriateness of roles. There are many people moving in and out of these zones who are not officially part of the military chain of command. This is [cause for concern] for many local commanders.

Ayelish McGarvey is a writing fellow at The American Prospect.