THE BLOG
10/05/2012 02:34 pm ET Updated Dec 05, 2012

Getting Data for the Debate: All Hail DTM

Let's suppose U.S. diplomats are serving in a dangerous, violent, conflict-ridden country. He or she obviously need to be protected in the course of performing the country's business. They could be protected either by government personnel, say, an agent of the State Department's Bureau of Diplomatic Security. Or they could be protected by a private security contractor, hired under the Worldwide Personal Protective Services Contract.

Let's further suppose that in terms of their core mission, protecting the diplomat, they both do equally well.

So which does the job more cost-effectively? Many people assume the contractors -- simply because it doesn't have many of the fixed costs of the DS agent, i.e., pensions and other benefits. And, possibly, that might even -- I stress might -- be true. But we don't know for sure simply because the studies documenting that haven't been done. If they have been done they are so secret that not even Wikileaks has them.

That is unfortunate for many reasons, not the least of which is that like anyone else I'm interested in my tax dollars being spent as effectively as possible. Not to mention that after a couple of decades I'm growing weary of writing about the lack of evidence on this point. But one possible reason the studies likely haven't been done is that people simply haven't agreed on how to compare the respective public and private sector costs of providing the security.

Or to paraphrase a 2003 memo by former Secretary of Defense Donald Rumsfeld, we lack the metrics to know if the global effort to privatize and outsource formerly inherently governmental functions is cost-effective.

But perhaps, thanks to (DTM) 09-007 -- no, that's not a relative of R2-D2 -- the end is in sight. DTM stands for Directive-Type Memorandum and this particular one is "Estimating and Comparing the Full Costs of Civilian and Military Manpower and Contract Support." Originally issued on Jan. 29, 2010, it incorporates Change 4, dated Oct. 2, 2012. The purpose of the DTM:

Establishes business rules, required by Deputy Secretary of Defense Memorandum (Reference (a)), in accordance with the authority in Deputy Secretary of Defense Memorandum (Reference (b)), for use in estimating and comparing the full costs of military and DoD civilian manpower and contract support. The full costs of manpower include current and deferred compensation costs paid in cash and in-kind as well as non-compensation costs.


As a Federal Times article by two analysts at the Washington, D.C.-based Center for Strategic and International Studies noted, "Between 2000 and 2010, federal spending on service contracts grew in constant terms from $164 billion to $343 billion... With the federal government facing significant budget challenges in the near term, it is more important than ever that all sourcing decisions be made on a sound analytical basis."

Unsurprisingly, given who funds CSIS, the analysts found:

[...] current cost-estimation methodologies used by the federal government -- exemplified by the Defense Department's Directive-Type Memorandum 09-007 -- fail to capture the fully burdened cost to government, calling into question the soundness of any cost-driven decision. Interestingly, this DoD memo was scheduled to be replaced with a more permanent Defense Department Instruction by Sept. 1, though this has not been done.

Still, the latest iteration of this DTM has detailed language on "service contracts" -- the type of contract by which private security contractors are hired. For example it states, "The costs of service contracts are variable costs in the short run paid by the Department of Defense. The full costs of service contracts include the prices of the contracts plus any additional indirect costs." What might those indirect costs be?

When military or DoD civilian personnel perform a function, their actions are covered by sovereign immunity. However, when a contractor performs a function, the contractor can be sued. To the extent the Government must indemnify or reimburse the contractor or its insurer, the Department of Defense incurs additional expenses and contingent liabilities that would not have to be paid if military or DoD civilian personnel performed the work. If the Department of Defense does not agree to pay these additional costs, the price of the contract would have to be increased to cover the contractor's liability.

Doubtlessly, the methodology is not perfect. Few things are. But I agree with the memo when it states, "These costs are not common costs because they would not be incurred if Government personnel performed the work. If practical and if data are available, the DoD Components should incorporate these costs into their estimates.

And, of course, the costs should subsequently be made public so everyone can see exactly what they are. Then perhaps we'll be free at last, free at last, thank God almighty, free of this debate.