Outsourcing War

P. W. Singer

From Foreign Affairs, March/April 2005

Summary:  Recent scandals in Iraq and elsewhere have shone unaccustomed light on an explosive trend: the growth of private military contractors. Such firms allow governments to accomplish public ends through private means and without much oversight. This lack of scrutiny may be expedient, but it is not necessarily good for democracy. Privatization can benefit everyone, but only if done in the right way.

P. W. Singer is a Senior Fellow and Director of the Project on U.S. Policy Towards the Islamic World at the Saban Center for Middle East Policy at the Brookings Institution. He is the author of Corporate Warriors: The Rise of the Privatized Military Industry and Children at War.

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.