Some interesting news:
The U.S. Justice Department said on Thursday it sued the Houston-based military contractor KBR Inc (KBR.N) for alleged false claims act violations over improper costs for private security in Iraq.
The lawsuit, filed in federal court in Washington, D.C., alleged that KBR knowingly included impermissible costs for private armed security in billings to the U.S. Army covering the 2003-2006 time period, the department said.
KBR has been the U.S. military’s largest private contractor in Iraq and Afghanistan. It has been criticized for cost overruns in Iraq, and lawmakers in Congress last month questioned the Army’s continued use of KBR for logistics work.
The company said it had to hire private security because the government failed to protect its employees, and added that it believed the government filed the lawsuit to avoid reimbursing it for security costs.
The Justice Department said the case, which seeks unspecified damages, was brought as part of an initiative to crack down on procurement fraud.
Has there ever been a definitive analysis examining whether private contractors actually are cheaper than having a larger military?
Warren Terra
I think the argument in favor is about flexibility and the ability to rapidly supplement a reduced standing army. Doesn’t explain why we’d still be using them eight years into a situation.
Sly
GAO concluded a two year study about two weeks ago about State Dept. personnel vs. contractors (who provide Embassy security, etc), and found that the training and recruitment costs for State pushed their total costs higher than PMCs. I would assume the same is true for the Defense Dept., which has is more opaque when it comes to studying the breakdown of deployment costs.
All things being equal, mercenaries are likely cheaper than regular forces. Regular military still has procurement fraud associated with non-personnel contractors like GE, Lockheed, Boeing, etc, which I have a hunch is a lot bigger than any fraud perpetrated by personnel contractors.
Dino
Amen. The “private corporations always do it better ” ideology needs thorough analysis. Sloth may create inefficiencies, but so does greed. Free markets are powerful things, but in some areas they have dubious applicability.
The real danger is a modern day spoils system, where political connections/contributions directly determine recipients of government contracts, much like the party machines of fifty years ago determined who was on the city payroll. ( I think Krugman first pointed this out) This obviously exists today, but privatization creates more opportunities.
Maybe politicians should base their campaign on: ” If you elect me, the virtuous company A will get the sewage contract. But if my opponent wins, then the pederasts at company B will fill your basements with feces.”
Graeme
I asked McMegan about this years ago, and I got the glib answer that no other nation was like the US, and that the good thing about this was that there will be no VA costs in the future.
I heard a couple months ago via Terri Gross’ Fresh Air that there’s a movement afoot to give all the contractors VA benefits because they’re basically soldiers.
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jayackroyd
I imagine replacing soldiers with third world workers in latrine digging and potato peeling would be cheaper if the outsourcing was done honestly and in a transparent open bid process. (Not to start a fight on the morality of that.) This would also improve the combat to total troop ratio. In point of fact, of course, the contractors who hired in Filipinos to do the dirty work probably marked them up above the cost of having a private do these tasks.
It certainly cannot be the case that mercenaries are cheaper than soldiers assigned to the same mission. And there are many disadvantages, like being outside the chain of command, governed by no law and unaccountable their actions.
Ash Can
Cheaper is good only if what we get from either the private or the government source is on par. If what we get from the private sector is Blackwater, I don’t care how much cheaper it is. It’s not fucking worth it.
Whackjob Militia Leader soonergrunt
It’s only cheaper to use contractors in wartime. During peacetime operations, normal jobs should be done by military or government civilian personnel, but many wartime jobs will go away at the end of the war and keeping a duty position open and occupied will cost more than hiring it out.
Having said that, there are a lot of jobs that contractors currently do that government civilians should be doing.
The job I just lost for example–I was an IT systems analyst for an agency of the Air Force on Tinker AFB. A lot of the work was taking care of and protecting the secured networks. I was paid about 58k/year. The Air Force paid my company 160k/year for my services. A government civilian who does what I do at the level I do it makes between 45k and 75k.
The difference is that when the government no longer needs my services, they can drop me like a bad habit and after a couple of years save money.
Svensker
What Ash Can said. “Cheaper” is not necessarily better. Unaccountable and outside the chain of command? As my old granny used to say: penny wise and pound foolish.
asiangrrlMN
Ditto Ash Can and Svensker. I’d rather pay a bit more and get quality, thankyewverymuch.
Andrew
That’s kind of a hilarious understatement no? Seeing as how they’ve also been criticized for murdering soldiers.
Oh wait, hilarious is the wrong word. Fuckers.
Third Eye Open
I do seem to remember an abstract idea–i’m a little reticent to call it a tool–that allowed a state to pull charters for misbehaving corporations. A corporate death penalty, if you will. Today, a bad round of scandal and waste requires the services of an experienced, triage PR firm. Funny how our standards and norms change, t’aint’it?
Toast
Oh, come on, like we need “analysis”. Put down the bong, ya hippie. Everyone knows that private firms do everything better because THE MARKET!
WereBear
Dang, you nailed it: they have to have licenses to operate, don’t they? If we can pull a fry cook for not washing their hands, we can pull a whole corporation for, like, murdering people.
racrecir
There was this:
The Defense Department estimates it will save an average of $44,000 a year for every contractor it replaces with full-time federal personnel to perform critical defense jobs, according to the House-Senate conference report on the fiscal 2010 defense appropriation bill.
The measure, which passed Congress on Saturday, contains $5 billion to hire replacements for contractors currently performing what have been termed “inherently government functions” both at home and abroad. Those functions include a wide range of activities, from supervising other contractors who provide guard services at forward operating bases, to providing oversight of aid projects overseas.
marion
Your friends at FDL had a post about this awhile ago which linked to various studies showing that (surprise) it’s usually more expensive. http://firedoglake.com/2009/12/26/contractors-cost-more-no-one-could-have-anticipated/ (I’m sorry, but I can’t make out how this link thing works here)
There’s an interesting cycle that shows up regularly in the business world: 1) co has in-house supply capacity producing the widgets they need for making their products; 2) genius decides that outsourcing will provide competition/lower costs; 3) good results for awhile; 4) co realizes outsider suppliers pocketing huge profits; 5) co brings capacity in-house again to capture profits; 6) rinse and repeat. We’re at stage 4.
balconesfault
Sly @ 2 GAO concluded a two year study about two weeks ago about State Dept. personnel vs. contractors (who provide Embassy security, etc), and found that the training and recruitment costs for State pushed their total costs higher than PMCs.
Of course, the fact that the US spending so much money on these private contractors enables the contractors to outbid our DOD for the services of the soldiers we’ve spent a lot of money to train … which then pushes up the cost of recruiting and training new soldiers to replace the ones hired away … and of course after they really become valuable the new soldiers will also be hired away by the contractors …
So we largely pick up the tab for recruiting, training, and providing someone the experience to become really valuable … and then pay a private contractor to provide us with their services after they’ve become really valuable.
Brilliant.
Larv
Yeah, that’s why they call it the invisible hand. It’s silly to expect market effects to be “analyzed” or whatever. How are you going to measure it? It’s invisible!
Tohmmy from Boston
Two GAO reports on this to recommend, one came out 3/31 and deals with poor integration of contractors into operational planning at DoD and the other deals with the abject futility of the DCAA (Defense Contract Audit Agency). Basically the DCAA is completely inept (65 of 69 audits failed to meet basic standards) so any attempt at cost-benefit analysis is largely based upon numbers that aren’t reliable.
1. http://www.gao.gov/new.items/d10472.pdf
2. http://www.gao.gov/highlights/d10163thigh.pdf
Larv
Whoops, that was a reply to Toast at 12. Where’s the damn “reply to” button? Did Tunch eat it?
Svensker
@ Larv
Sadly, yes.
Lisa K.
That misses the point, when you consider that the advocates of private contractors subscribe to the philosophy that there is nothing the government can do as well as private enterprise, even defend us.
WereBear
Well, when you consider that private firms can throw people away when they are done with them, and no longer provide pensions or medical care; then, yeah.
Steaming Pile
I was going to say it’s cheaper politically to use contractors. The size of the military is set by Congress. If the President (or Secretary of the Army, or whoever) wanted soldiers doing these jobs that KBR is doing now, he’d have to go ask Congress for authorization to go recruit Xty thousand more people and put them in uniform. This comes at the expense of a certain amount of political capital.
El Cid
I think we need to remember that there are a lot of good people working at this company and we should concentrate on how they reform rather than focusing on how to punish them for the past.
August J. Pollak
Has there ever been a definitive analysis examining whether private contractors actually are cheaper than having a larger military?
Dude, has there ever been a definitive analysis examining which parts of the actual military aren’t economically viable? We canceled a jet fighter meant to fight off Soviet aircraft fourteen months ago.
bey
The “bridal train” of retirement benefit costs was one of the main drivers for our DoD IT slash and burn. We lost 1/3 of our people to outside contractors and were required to come in at 10% lower than the lowest bid during our 18 month manpower study. We were not allowed to address certain manpower requirements of our software development workload, nor were we allowed to report ancillary duties – stuff that isn’t officially part of what we do, but things that have to be done anyway.
We lost of course, and within 30 days the winning contractor had offered a contract mod to cover the above – at 1/3 more than the original bid.
Due to the constant changes in IT, everything new requires a modification to the contract. New management tool that will affect the contractors? Mod. Installation of new hardware? Mod. Change in certifications? Mod. Plus all associated training and testing costs.
Within 2 years we were spinning up in Iraq and Afganistan and working under an aggressive deployment schedule.
It’s been a huge challenge.
furioso ateo
All my evidence is anecdotal, but there are guys out here who make 40k just watching Local Nationals clean toilets all day. And a lot of contractors are Foreign Nationals out here. It’s weird, odds are pretty good they’re either from Eastern Europe or Houston.
I get the idea of using contractors to fill a gap when starting operations, but shouldn’t we ramp up the size of the services to close that gap as time goes on?
Suzan
We still have it. And use it with alacrity when an organization actually commits a capital crime like Acorn.
bonzotex
Historically, armies have always relied on civilans to provide non-combat services. From the camp-followers of ancient times all the way to today, armies need a lot of transport and services they can’t provide with their organic troops and organization. There is not an easy answer to which is cheaper. In peacetime they are cheaper for some tasks and in wartime much more expensive. In general, civilian contractors get replaced to an extent with militarized logistic units during long campaigns/wars because they are more reliable, controllable and cheaper.
The US has broken that pattern by continuing to rely on civilian equivalents during the long Iraq and Afghan occupations. Whether with Napoleon’s Grand Armee, Grant’s Army of the Potomac or today’s Central Command, the decision to use civilians for “military” missions has very little to do with cost or effectiveness and everything to do with the political connections of the contractors.
bcinaz
Using mercenaries is probably cheaper than creating a bigger army (GI Bill, VA Care, etc.) , however, paying for college and healthcare for many of our young people boost the economy, when, I can guess that a large chunk of the dough paid to KBR and other contractors, never makes it back into our economy, it just keeps going until it ends up in some Dubai Oil Fund.
john b
@Whackjob Militia Leader soonergrunt
yeah, as an engineer and contractor for the air force, that seems to be my impression as well. it is more expensive for the air force to have me at the moment. but in the long-term it is much cheaper because they can cut my contract without much warning, whereas firing a gov’t employee isn’t nearly as easy. consequently, it is actually fairly difficult (and sought after) to get an actual gov’t employee gig in my office and it seems that the only young people who get those jobs are already in the gov’t system through some sort of internship program and stay with the gov’t through inertia.
The Other Steve
Did you see the news last week that Gen. McChrystal is pulling the Burger King and Taco Bell’s and such from the military bases in Afghanistan?
He cited two reasons:
#1. Resupplying Burger King makes it harder to get other supplies to the field.
#2. It’s a fucking war zone, you’re not on freaking vacation!
PeakVT
Has there ever been a definitive analysis examining whether private contractors actually are cheaper than having a larger military?
I just don’t think our government should use a contractor for anything that might involve pointing a gun at someone. The idea of delegating the right to use deadly force to a private, profit-making enterprise just churns my stomach.
jenniebee
How is the cost even relevant to the discussion? The mission of the US Military isn’t to cut costs or generate revenue, it’s to maximize security and achieve specific foreign relations objectives through the use of force. It doesn’t matter if it’s cheaper to use third-world imported nationals or American mercenaries if doing so creates a risk to the mission, which (isn’t it obvious?) it does. Even if the chain of command and quality control issues got fixed – and that isn’t likely – we would still be creating a situation where we are creating an unnecessary vulnerability for ourselves by making our ability to conduct military operations subject to market availability of key operations at that time.
slippy
@ Susan
I hope that’s sarcasm. Since the creator of the heavily-edited ACORN “sting” video has since been arrested for trying to sneak into the offices of a US Senator to bug her phones and also exposed as a complete fraud in every single thing he does.
Glen Tomkins
Silly question
“Has there ever been a definitive analysis examining whether private contractors actually are cheaper than having a larger military?”
The question implies that the purpose of letting lucrative contracts to private contractors is to get some needed service performed more cheaply than the military could do it. That’s an absurd assumption on the face of it. The purpose of giving private contractors large amounts of your money is to give private contractors large amounts of money. It’s an unfortunate accident that it’s your money, but the rest is quite purposeful.