Tuesday, July 31, 2007

Contractors Pray for the GWOT

The Pentagon's growing reliance on contractors for such jobs as providing security[1] to bodyguarding,[2] operating US military aircraft, interrogating prisoners, cooking meals, fixing equipment, constructing bases, organizing meetings[3] and providing supplies naturally has led to a contracting boom. A declared infinite "global war on terror" and the recent experience show that the US government will rely more and more on contractors.

Contractors can be broken down into several categories. For the purpose of this article I consider four main categories: contractors as consultants (focusing on capacity building), contractors as logistics, technological and technical support providers, contractors as combat supporters, and contractors as in-theater tactical warfighter. Most important single common goal of all four categories is that they are profit-driven.

Over the past two decades, contractors have moved from providing selected services in wartime to any activity to support military operations, during wartime as well as any military activities.

Public War, Private Fight?

A study conducted by Deborah C. Kidwell of Combat Studies Institute of the US Army,[4] describes in an excellent way the new American way of war in which contractors play an ever increasing role.

She says that “throughout the 20th century, US forces relied on private companies to provide varying levels of transportation, construction, and base support services.” She stresses that “before the Vietnam conflict, private military companies were used more or less as a matter of necessity,” by filling the shortfalls in a limited, all-volunteer force structure. However, “the end of the Cold War and the removal of Iraqi forces from Kuwait in Operation Desert Storm in 1991 marked a sea change in American warfare.[5] The private military industry expanded rapidly to fulfill global security needs, even as many Americans predicted reductions in future military operations. As a result, many paramilitary activities became commodities.” Hence they have become a routine feature of the force mix.

One of her conclusions is eye opening: private military companies “are so vital to current military operations that industry analysts suggest the US can no longer go to war without private contractor support.”

Here are the last words of her study: “It has been observed that war is too important to be left to the generals; industry analyst Peter Singer adds that “war is far too important to be left to private industry.” Americans cannot abdicate their responsibility to govern—and wage war—wisely.”

Outsourcing Gone Wild?

Depends whom you ask! Each passing year in conflict in GWOT is good news for contractors. As we talk about U.S. corporate invasion of Iraq, DOD’s obligations on service contracts nearly doubled in the past 10 years, reaching over $150 billion in 2006.

This is clearly reflected in the defense industry’s increasing shares in the stock market. “Shares of U.S. defense companies, which have nearly trebled since the beginning of the occupation of Iraq, show no signs of slowing down,” says Boston Globe. Indeed, Amex Defense Index nearly quadrupled since the beginning of Iraq war. No wonder the booming business of war profiteers is also given one of the reasons why the US is not leaving Iraq.[6]

The total dollar volume of TOP 10 Department of Defense prime contract awards in have more than doubled in just 5 years, reaching over $100 billion in fiscal year 2006.

Top four on the list are major weapon manufacturers with one major customer: Pentagon. Is it because of that that big corporations are eager to recruit high ranking retired military officials?

Number 1 contractor Lockheed Martin’s website has the following sentence under its logo: “We never forget who we’re working for.” Sure.

Richard Cummings pointed out in an article on Lockheed in Playboy, that Dick Cheney's son-in-law, Philip J. Perry, is a registered Lockheed lobbyist and his wife Lynne was on Lockheed's board until he became Vice President. On settling into Washington, George Bush appointed Lockheed's President and CEO Robert J. Stevens to his Commission on the Future of the United States Aerospace Industry. "Albert Smith, Lockheed's executive vice president for integrated systems and solutions, was appointed to the Defense Science Board. Bush had appointed former Lockheed chief operating officer Peter B. Teets as undersecretary of the Air Force and director of the National Reconnaissance Office," and that was just the beginning as the military-industrial revolving door spun wildly and the corporation made money hand over fist.

Well, it is quite normal to see Lochheed Martin as Number 1 contractor. But what do we say for Halliburton? Just 5 years ago, it was Number 37, and now Number 6. Its contracts with DoD grew from under $0.5 billion to over $6 billion. How nice. By the way, you all know who the boss of Halliburton was – Dick Cheney.

I guess in the future we will see more headlines about DoD contractors, such as the ones we had seen in the past, for example on BearingPoint (formerly KPMG Consulting) and on Halliburton.

In any case, as long as GWOT goes on, defense industry will continue to make good business.

Meanwhile cost of GWOT since 9/11 goes up to one direction - UP

According to the most recent CRS estimates[7] (July 2007), the US Congress has appropriated $610.5 billion in budget authority thus far for Iraq, Afghanistan and enhanced security for DOD, the State Department and for medical costs paid by the Department of Veterans’ Affairs.[8] This figure is estimated to jump to $758 billion at the end of FY2008. About 75% of it is for Operation Iraqi Freedom.

A similar figure, $604 billion, came out on July 31, 2007 from the Congressional Budget Office. According to CBO, the projected costs of military operations and other defense activities through 2017 under two alternative scenarios[9] ranges between $481 to $1,1010 billion!

But, blaming on DOD cost reports and budgets to limit transparency, GAO says that “Without transparent and accurate cost reporting, Congress and DOD will continue to not have reliable information on how much the war is costing, sufficient details on how appropriated funds are being spent, or the historical data needed to consider future funding needs.” [10]

Last but not least

It is clear that war profiteering of both military-industrial complex and cronies in Iraq became a feature of Global war on Terror. Yes, power corrupts, and absolute power corrupts absolutely.

“Mismanagement, waste and outright fraud wiped out whatever chances there were for the Iraqi nation-building experiment…..The U.S.-led occupation government couldn't adequately account for almost $9 billion funneled to Iraqi ministries. And a convicted American felon was entrusted with $82 million, much of which went missing. The U.S. may have built a nuclear bomb in four years, but it has yet to make the toilets flush in Baghdad's slums,” says Christian Miller, author of Blood Money: Wasted Billions, Lost Lives and Corporate Greed in Iraq, in his LA Times article in August 2006. He concludes that Iraq war turned into corporate affair, where companies battle for contracts and life-and death decisions are based on the bottom line.

Mr. Miller would have been shocked if he read the recent reports from the US Government Accountability Office. After all, the numbers he cites are peanuts!

Outsourcing is good as long as: it is worth it, brings clear benefits, is based on sound decisions, gets promised results, distinguishes wants or wishes from true needs, is rewarded according to performance and is monitored. Surely many DoD contractors do an excellent job and fit into my outsourcing criteria. As the saying goes “a bad wound may be cured, bad repute kills.”

In the next post I will talk about corporate warriors, or private military contractors.

[1] Congress in 2003 waived a ban on the use of private security guards to protect military bases in the United States.
[2] They guard key U.S. military installations and provide personal security for at least three commanding generals, including Air Force Maj. General Darryl A. Scott, who oversees U.S. military contracting in Iraq and Afghanistan. Isn’t that weird?
[3] BearingPoint, the consulting giant, provides support for Iraq policy making, running software, preparing meeting agendas and keeping minutes.
[4] Deborah C. Kidwell, Public War, Private Fight? The United States and Primate Military Companies, Global War on Terrorism Occasional Paper 12, Combat Studies Institute Fort Leavenworth, US Army. 2005.
[5] Contractor support was crucial to Operation DESERT STORM in 1991, although few contractor employees deployed to forward combat areas. The decision to deploy only US regular combat units necessitated the use of 998 employees from 76 US contractors and over 2,900 employees of 22 foreign contracted firms. For the most part, US contractors provided maintenance, supply, and transportation services. Foreign contractors worked primarily in transportation services as providers of trucks, buses, and drivers (86 percent of the total). So, they played significant but limited role on the battlefield. Their legal status was clearly defined as a noncombatant and their purpose was to support units conduction military operations.
[6] Prof. Ismael Hossein-zadeh, “Why the US Is Not Leaving Iraq: The Booming Business of War Profiteers,” Global Research, January 12, 2007.
[7] Amy Belasco, “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11”
Updated July 16, 2007, CRS, RL33110.
[8] According to CRS estimates, average annual cost (OIF/ONE/OEF) per deployed troop in FY2006 was $325,000.
[9] In the first scenario, the number of personnel deployed on the ground for the war on terrorism would be reduced from the 2007 average of about 210,000 to 30,000 by the beginning of 2010 and then remain at that level through 2017. In the second scenario, the number of personnel deployed to Iraq and other locations associated with the war on terrorism would decline more gradually, from an average of 210,000 in 2007 to 75,000 by the start of 2013 and then remain at that level through 2017. That 210,000 personal CBO cites excludes 15,000 Navy personal deployed aboard ships. Why the CBO figures are about 50,000 more than DOD figures, I don’t know….
[10] United States Government Accountability Office, Securing, Stabilizing, and Rebuilding Iraq: Key Issues for Congressional Oversight, GAO-07-308SP, January 9, 2007. 114 pages.

Tags: Military Contractors, Iraq, Department of Defense, US Military, Military Industrial Complex


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