Almost since the first American tank rolled into Iraq last year, the role of private military contractors has been controversial. When Kellogg Brown & Root Inc. (KBR), a subsidiary of Halliburton Co. (HAC), billed the government hundreds of millions of dollars to support the invasion, critics griped that it was receiving preferential treatment because of ties to the Bush Administration -- and was overcharging to boot. When the bodies of four security guards employed by Blackwater USA were mutilated in Fallujah in March while escorting food deliveries to U.S. troops, Marines laid siege to the city, igniting widespread violence. And when a classified U.S. military report came to light in late April alleging abuses of detainees at the Abu Ghraib prison, private military contractors (PMCS) found themselves in the center of a firestorm.
The end of the Cold War and Pentagon efforts to increase efficiency, speed the delivery of services, and free troops for purely military missions have triggered a boom in the outsourcing of work to private contractors. Indeed, with the strength of America's armed forces down 29%, to 1.5 million, since 1991, contractors have become a permanent part of the military machine, doing everything from providing food services to guarding Iraq Administrator L. Paul Bremer.
Now, along with the heady growth, come mounting concerns that an industry dependent on taxpayer dollars has been spiraling out of control. That has Congress, the Defense Dept., and the Coalition Provisional Authority (CPA) in Iraq scrambling to draft regulations that make contractors -- both on the security and services/reconstruction side of the industry -- more accountable.
Like many businesses that have to staff up rapidly, some security contractors have cut corners in the rush to expand. On the ground in Iraq, contractors appear to have operated with little or no supervision. Mercenaries are not choirboys, but some outfits have signed up hired guns trained by repressive regimes. And revelations that civilians are performing sensitive tasks such as interrogation have jolted Congress and the public. "This outsourcing thing has gone crazy," says Gary D. Solis, a former Marine Corps judge advocate and now adjunct law professor at Georgetown University. "You have a lot of people with heavy weaponry answerable to no one."
TAKING A PLEDGE. Contractor problems are not confined to the headline-making security and interrogation side of the business. The CPA's new inspector general, Stuart W. Bowen, is currently auditing five of the biggest contractors in Iraq -- Fluor (FLR), Parsons, Washington Group International, Perini (PCR), and KBR --to make sure they are following U.S. laws and codes of ethics, BusinessWeek has learned. "Our intent is to deter waste, fraud, and abuse and ensure compliance with federal law," Bowen said in a phone call from Baghdad.
There is no single industry association for contractors, but one group, International Peace Operations Assn. in Rosslyn, Va., is trying to bring some order to the security outfits. Members of the IPOA must pledge to follow a code of conduct and "strictly adhere to all relevant international laws and protocols on human rights." The IPOA currently has just nine members, including ArmorGroup International Inc., a British security firm with 900 employees in Iraq. But, says IPOA President Doug Brooks, "companies are starting to come together and realize the value of having an organization that sets standards."
BIG, BUT HOW BIG? Although many PMCs agree that the industry would benefit from increased oversight, some say Uncle Sam's proposals may go too far. Blackwater USA, based in Moyock, N.C., which has been criticized for employing former Chilean commandos trained during the dictatorship of Augusto Pinochet, takes issue with a Defense Dept. proposal to apply the Uniform Code of Military Justice to contractors. But, says Blackwater spokesman Chris Bertelli, "we have no problem with industry standards for hiring practices."
The exact size of the PMC business is difficult to determine because there is no central register of contracts, and the Defense Dept. sometimes has other agencies do its purchasing. For example, the contract with CACI International Inc. (CAI) at Abu Ghraib prison was administered by the Interior Dept., according to The Washington Post. Still, P.W. Singer, a fellow at the Brookings Institution and author of Corporate Warriors: The Rise of the Privatized Military Industry, estimates it is a $100 billion industry with several hundred companies operating in more than 100 countries.
In a May 4 letter to the House Armed Services Committee, Defense Secretary Donald H. Rumsfeld said that approximately 20,000 private security workers are employed in Iraq. That doesn't include the thousands of civilians reconstructing bridges, roads, and phone lines. In the Gulf War, the military outsourced only 1% of its work, primarily for airfield maintenance. Singer estimates that contractors are handling as much as 30% of the military's services -- including reconstruction -- in Iraq. "We have pushed outsourcing way beyond what anyone contemplated," he says.
Spying a growth business, some big defense contractors are scooping up PMCs, many of which -- especially in the security sector -- are small and privately held. Computer Sciences (CSC) acquired DynCorp, Northrop Grumman (NOC) bought Vinnell, and L-3 Communications nabbed Military Professional Resources Inc. "[Defense giants] have been buying up these companies like mad," says Deborah D. Avant, a professor at George Washington University who is writing a book about military contractors. "This is where they think the future is."
Yet in the wake of Abu Ghraib, critics, including current and former military officials, are starting to ask some hard questions: Has the military pushed outsourcing too far too fast? Where do you draw the line? And who's in charge? A June, 2003, report by the General Accounting Office concluded that there are no Defense Dept.-wide policies "on the use of contractors to support deployed forces," a situation that sows confusion.
Few analysts see a fundamental problem with contractors building base camps, serving food, and cleaning toilets -- the logistical side of making war. The growing concern is about using contractors to perform functions such as security and interrogation. A report by Major General Antonio M. Taguba concluded that two interrogators-for-hire, one from CACI and one from Titan Corp. (TTN), in conjunction with military officers, "were either directly or indirectly responsible for the abuses at Abu Ghraib." Titan says the individual worked for a subcontractor.
"Why the hell were contractors there in the first place?" asks John D. Hutson, a former Rear Admiral and Navy judge advocate general who is now dean of the Franklin Pierce Law Center. "I have a problem with people carrying weapons in an offensive way. And I have a serious problem with people in sensitive positions, like interrogators."
Blindsided by the Abu Ghraib scandal and allegations that PMCs have hired questionable employees, Congress is putting the Pentagon on notice to get a grip on mercenaries and even more benign contractors. House and Senate bills would require Defense to provide Congress with a plan for collecting data on contractors and clarifying the responsibilities of commanders who manage them. This Wild West of a business is not going to go away, but it could get a lot tamer fast.
Corrections and Clarifications
Because of an editing error, "The other U.S. military" (Defense, May 31) erroneously described one of the civilians cited in a military report on conditions at Abu Ghraib prison in Iraq as an "interrogator-for-hire" employed by Titan Corp. Titan says the person in question, whom the report by Major General Antonio M. Taguba listed as "a civilian interpreter" but identified as an employee of CACI International Inc., in fact worked for a Titan subcontractor. Titan maintains that the only service it provides in Iraq is translating or transcribing.
By Spencer E. Ante in New York, with Stan Crock in Washington