Business on the battlefield: The role of private military companies

The Corporate Research Project, Corporate Research E-Letter, No.30, December 2002

In a war against Iraq, many of the soldiers on the battlefield will not be part of the U.S. military. Rather, they will be civilians employed by private military companies (PMCs). PMCs were instrumental in providing both operational and logistical support in the war on terrorism in Afghanistan, and have been used by the U.S government to engage in regional and ethnic conflicts across the globe, from Bosnia to Sierra Leone to Colombia. Unlike traditional defense manufacturers, PMCs are primarily service providers of hi-tech warfare, including communications and intelligence, logistical support and battlefield training and planning.

A recent report by the Center for Public Integrity's International Consortium of Investigative Journalists (ICIJ) into the business of war reported the existence of at least 90 private military companies that have operated in 110 countries worldwide. The New York Times recently estimated that there are about 35 PMCs in the U.S. These include: Vinnell Corp., a subsidiary of TRW; Logicon, a unit of Northrop Grumman; and L-3 Communications, a spin-off created through the merger of Loral Corporation and Lockheed Martin in 1996, as well as a number of smaller less well-known operations.

A number of factors have contributed to the rise of PMCs in the U.S. The U.S. defense budget, while still ranking first globally, contracted after the end of the Cold War, with the number of uniformed personnel reduced by 38 percent. At the same time, the military was being called on more frequently. The Army alone has deployed troops 36 times, compared with just 10 operations during the entire Cold War. Along with the growth of high-tech weaponry and the worldwide proliferation of regional conflicts in which there was U.S. presence, an increasing share of defense activities was outsourced to PMCs.

BRAVE NEW WORLD OF PMCs

According to ICIJ, since 1994, the U.S. Defense Department has entered into 3,061 contracts valued at more than $300 billion with 12 of the 24 U.S.-based PMCs. More than 2,700 of those contracts were held by just two companies: Kellogg Brown & Root (KBR), a subsidiary of Vice President Dick Cheney's former employer, Halliburton Corporation, and Virginia-based management and technology consulting firm, Booz Allen Hamilton. The ICIJ report could not determine what percentage of these contracts was for training, security or logistical services because of the breadth of the services offered by the larger companies and the paucity of information provided by the Pentagon.

The Pentagon does not even know how many contractors it uses. According to U.S. News and World Report, a preliminary report to Congress in April 2002 guessed that the Army contracted out the equivalent of between 124,000 and 605,000 persons in 2001. It is also hard to estimate how many people are working for PMCs because many of them are freelance contractors who may work for more than one of the PMCs. Often, it's hard to tell where the U.S. army ends and a private company begins, as certain training programs run by PMCs allow retired military personnel to put their uniforms back on. One of the best known, privately held MPRI, based in Alexandria, Virginia, with over 700 full-time employees boasts of having “more generals per square foot than in the Pentagon.”

Private military companies have to be registered with the U.S. government and must apply for a license with the U.S State Department in order to export their services abroad, under the International Traffic in Arms Regulation (ITAR) Law. However, as the ICIJ report points out, PMCs can sell their services abroad through the Defense Department's Foreign Military Sales (FMS) program, under which the Pentagon pays the contractor for services offered to a foreign government. Companies often use FMS in order to avoid the lengthy ITAR licensing process.

PRIVATE BUSINESSES OR MERCENARY SERVICES

PMCs include both smaller companies providing specialized military services, such as MPRI, as well as subsidiaries of traditional defense contractors like DynCorp. Some private contractors, such as ICI of Oregon, don’t have any restrictions against using weapons in combat situations, while others do. Many PMCs, including the larger ones, also use freelance contractors. Private military companies, while not technically fitting the definition of mercenaries under Article 47 of the Geneva Convention (i.e., persons recruited for armed conflict by or in a country other than their own and motivated solely by personal gain), in reality, are often no different from mercenaries. As a recent New York Time article reported, “Mercenaries, as they were once known, are thriving—only this time they are called private military contractors, and some are even subsidiaries of Fortune 500 companies.”

According to Deborah Avant, an associate professor of political science and international affairs at Georgetown University, PMCs are different from mercenaries in the sense that they aren’t part of a country's armed forces that are being hired by another country. Nor are they like the “dogs of war” or freelance agents who would do anything for money. She maintains that PMCs have a reputation that they want to preserve in order to gain a long-term market share by providing a legitimate function, such as military services. They have even formed a trade group, the International Peace Operations Association.

TO PRIVATIZE OR NOT TO PRIVATIZE

Other than the legal issues that arise from using for-profit soldiers, there is also the more straightforward subject of costs to taxpayers. While the Defense Science Board (a division under the Department of Defense) has recommended that contracting out services could save $6 billion a year, no one knows whether any savings are actually achieved. Federal contracts for such services are notorious for cost over-runs. A September 2000 report by the General Accounting Office found that effective oversight of KBR's contract in the Balkans was impaired by the government's confusion about its authority over the contract and insufficient training of Army auditors. Between 1996 and 2000, the company collected more than $2.1 billion in additional costs for its contracts, nearly twice the amount agreed to originally. In February 2002, KBR paid $2 million to settle a lawsuit filed by the U.S government that claimed the company inflated prices for repair and maintenance work at the Fort Ord military installation in California.

The increased use of PMCs also raises the issue of the relationship between Congress and the executive branch. Critics contend that privatizing military functions undermines national security and by proxy, foreign policy, by circumventing accountability and information to Congress by giving more power to executive agencies. An October 13, 2002 New York Times article quotes a Vietnam veteran, “These new mercenaries work for the Defense and State Department and Congress looks the other way. It allows us to get into fights where we would be reluctant to send the Defense Department or the C.I.A.” By using for-profit soldiers, the executive branch can evade Congressional limits on troop strength. Experts have pointed out that the consequence of outsourcing strategic military training and advice has the consequence of the U.S government losing a foreign-policy tool to private companies whose central motive is profit, i.e., when a PMC provides a service to a foreign government, it is the company, and not the U.S. government, that establishes a direct relationship with that foreign government.

Some question the propriety of selling military services for profit, particularly because of the strong links that exist between the U.S government and the PMCs that contract with them. As Defense Secretary, Dick Cheney helped command the Gulf War and launched into one of the largest privatization efforts in the history of the Pentagon. The Pentagon, under his leadership, also paid KBR (then known as Brown and Root Services) $3.9 million to produce a classified report detailing how private companies, like itself, could help provide logistics for American troops in potential was zones around the world. Soon after he left his federal job, Cheney joined KBR parent Halliburton. More recently, as the war on terrorism has brought significant additional business for KBR, the company categorically stated that Mr. Cheney played no role in helping the company win the contracts.

Other unresolved issues include the specific obligations of private contractors in times of combat. Experts agree that private contractors are not obligated to take orders or to follow military codes of conduct, since a contractor is bound by contract, not by oath. One suggested solution is to have contractors sign pledges to stay in the battlefield. But according to a legal opinion cited in an Army study, such agreements cannot be enforced, since it would constitute involuntary servitude. Nor are contractors subject to the Uniform Code of Military Justice. Equally ambiguous is the question of who protects contractors in combat and who exactly is in charge of them. According to a November 2, 2002 U.S. News and World Report article, the Army has ordered an about face in the use of battlefield contractors. The article also reported that a series of exercises run by the Joint Staff showed that contractors make the military more visible to its enemies, require more troops for force protection, and require backup plans if contractors default.

The issue of accountability extends beyond the boundaries of the battlefield. For example, DynCorp has been the subject of unflattering coverage in the U.S. and British press after being caught in a scandal in 2000 when two employees deployed on the company's $15 million annual contract in Bosnia and Kosovo alleged that several of their colleagues had colluded in the business of prostitution of women and children. The company fired the whistleblowers, who sued the company for wrongful dismissal. In late November, DynCorp was ordered by an employment tribunal in Britain to pay one of the former employee 111,000 pounds as compensation. The other suit was settled out of court. As employees of a company, rather than the U.S. government/military, the accused were able to avoid trial by a military court.

CONCLUSION

Despite scandals, cost over-runs and potential conflicts of interest, contractors are frequently tasked with conducting their own performance evaluations. As government outsources more tasks with inadequate oversight, and the lines between military/security and logistical support blurs, the widening role of PMCs raises troubling questions.

RESOURCES

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