THE BLOG
01/08/2011 08:34 pm ET | Updated May 25, 2011

Put Your Empirically Proven Data Where Your Mouth Is

As a military veteran, and someone who is more interested in actual facts than rhetoric, I have long been bugged by two claims made by private military and security contracting advocates, i.e., first, that most security contractors are, by way of past military experience, somehow more "professional" than the average soldier or marine on their first or second hitch, and, second, that most private military contractors are more cost-effective than using their public sector counterparts.

Of course, one expects PMC trade associations to say this kind of thing; it is what they get paid for. Their membership would hardly be paying their dues if they said, for example, gee, I don't know the answer to that question but we should form a group to study it.

Still, given how often they make those sorts of claims, one might think they would at least provide some evidence. I mean how difficult is it to create a page on their websites and cite a few, empirically sound, methodologically rigorous, peer reviewed studies to back up their claims?

If a military veteran takes work as a private security contractor after their first tour of active duty, not all of which will have been spent in a war or conflict zone, are they really going to be that much more experienced than someone on active duty who, nowadays, likely has had repeated tours of duty in Iraq or Afghanistan?

To provide some perspective let's look at a recently published paper It is Outsourcing, Managing, Supervising, and Regulating Private Military Companies in Contingency Operations and was a 129-page thesis written by Ali Kemal Dogru, a student at the Naval Postgraduate School. He is a First Lieutenant in the Turkish Army and has earned an M.A. in Security Studies (Stabilization and Reconstruction) from the NPS.

It's important to remember that Lt. Dogru is not against the use of PMC. But it is clear he feels that they can be better controlled and regulated. Here are two excerpts relevant to the above points. The first, for those who have actually been in the military, is not new or original, but given how little it is actually mentioned in public bears noting.

Both militaries, which are public agencies, and PMCs, which are private corporations, are security providers; however, there are striking differences between them. The first difference is that unlike militaries, private military is not considered to be a profession. Samuel Huntington defines professionalism by means of three primary characteristics: expertise, social responsibility, and corporateness. He conceptualizes the military as a profession, only if its officer corps has internalized all of these characteristics. According to Huntington, what separates an officer from a mercenary is that while for an officer, social responsibility outweighs monetary motivation; for a mercenary, private gain is the primary motivation. When the criteria that Huntington uses to measure professionalism are applied to PMCs, it becomes clear that private security is not a profession for two prominent reasons: first; money, most of the time even if not always, outweighs social responsibility in the private military sector. Second; unlike militaries, PMCs lack of corporateness. PMCs are private entities that have distinct organizational cultures and norms. Expertise, on the other hand, is perhaps the most important reason that principals prefer PMCs, as they provide some services that require considerable proficiency. Nevertheless, though necessary, expertise is not sufficient alone to make private military a profession.

The second difference is that militaries are responsible to both the state and the society, whereas PMCs are only responsible to their principals in terms of their contracts. As Martha Minow states, "Military training, unit discipline, the Uniform Code of Military Justice, and international legal standards governing war and armed conflicts ensure accountability for the military but not for private corporations and their employees engaged in military work." According to Peter Warren Singer:

Private employees have distinctly different motivations, responsibilities, and loyalties than those in the public military. No matter their background, while in a private company, employees are directly responsible to the corporation and its executives; they are hired, fired, promoted, demoted, rewarded, and disciplined by the management of their private company, not by government officials or the public.

There are many regulations and laws that keep militaries accountable at both national and international levels. However, there is neither overarching international regulatory framework nor effective regulatory mechanisms at the national level that keep PMCs accountable, including the Geneva Conventions. Moreover, even though some countries have written laws and regulations that seek to exert control over PMCs, enforcement still remains a challenge. Despite the patches to existing gaps in regulations, some PMC personnel still fall outside of the national and international regulatory framework. In other words, PMCs in a sense operate in the grey area.

Last but not least; while for militaries there is only one legitimate principal (state), for PMCs, there are many options, including: states, international organizations, such as the UN, regional organizations, non-governmental organizations (NGOs), private corporations, and weak governments. Picking and choosing between multiple principles brings about many potential hazards on the part of the governments that employ them, while providing PMCs with considerable flexibilities. Unlike militaries, PMCs have the opportunity to select between these alternatives, and to switch sides, depending on who pays the most. Integrity and probity, which are important components of the military profession, do not make sense in the private military sector.

Then there is the cost-effectiveness issue. As Bill Clinton might have said, it all depends on what you mean by cost. It also depends on what your time frame is. I find this passage particularly relevant, and not a little ironic, given that the studies mentioned below has been cited by PMC supporters as proving their claims.

In contingency operations, governmental agencies have basically two alternatives: using a military unit, or contracting with a PMC. In this context, in order to properly decide to contract out a particular function, governmental agencies need to know whether it is less expensive to use a PMC rather than a military unit or not. However, there are extraordinary difficulties in making a comparison between a PMC and a military unit.

First, pay is just one factor that determines the total costs. If governmental agencies just rely on direct or production costs in their make-or-buy decisions, they may fail to make the right decision, either by overestimating the possible benefits of outsourcing PMCs or by underestimating the actual costs of outsourcing PMCs. Governmental agencies may waste taxpayer's dollars unless transaction costs are thoroughly analyzed. How, for example, can costs associated with training, healthcare, retirement salaries, and compensations of military personnel be incorporated into calculations and compared? How should training costs for contractors, monitoring, information and contract management costs be taken into account while making comparisons between military units and PMC alternatives? Traditional cost analysis generally ignores these transaction costs.

The second complication is that gathering detailed data with respect to PMCs and military personnel is painstaking. For instance, a March 2010 GAO report demonstrates that the Pentagon could not provide the GAO with critical data to make a comparison, since it does not have enough information regarding "the number of military personnel that would be needed to meet the contract requirements or the cost of training personnel to carry out security functions."

The third complication is that even though there are aggregated data with regard to money spent on PMC, it is often difficult to break down this general data into individual contracts. For example, A 2008 CBO report states: "From 2003 through 2007, U.S. agencies awarded $85 billion in contracts for work to be principally performed in the Iraq theater, accounting for almost 20 percent of funding for operations in Iraq." The Department of Defense's share in this total is almost 90 percent ($76 billion). According to the CBO figures, total expenditure for private security services was between $6 billion and $10 billion during the 2003-2007 period. The CBO also notes that "between $3 billion and $4 billion of that spending was for obligations made directly by the U.S. government for private security services in Iraq."

Though providing a general picture, these figures are not comparable, since they do not give any idea of how much the agency would spend if it performed the same tasks internally. At this point, it is useful to look at comparable figures to better understand whether PMCs are costeffective.

...

What then is the cost of contractor personnel in comparison to military soldiers? Is outsourcing really cost-effective? The CBO released a cost comparison analysis of a PMC versus its military alternative in 2008. According to the report, "the costs of a private security contract are comparable with those of a U.S. military unit performing similar functions." Nevertheless, "during peacetime, the private military contract would not have to be renewed, whereas the military unit would remain in the force structure." To put it another way, there is no savings during wartime.

In this analysis, CBO took three types of costs into consideration while estimating the military unit's cost: military personnel costs, operating costs, and equipment costs. In the analysis, the military pay rates include "basic pay, subsistence and housing allowances, plus a federal tax advantage because those allowances are not taxed," however exclude "free health care for military families back home, and deferred benefits, such as pay and health care for those who receive military retirement benefits." While estimating the costs associated with Blackwater employees, CBO took personnel, monitoring, contract management, equipment, and insurance costs into consideration. Summations on both sides were then compared. Nonetheless, training costs on both sides are not incorporated into these calculations. This is partly because while staff of organizations are usually considered "assets," money spend on their training is not recognized as "asset specific." In other words, it is assumed that the investment in training of military personnel has no value to the organization, if these personnel leave the job. However, since human capital of PMC relies on former military personnel, who were already trained by the military in the past; calculations that exclude training costs may misrepresent the actual situation.

The chart above shows that there is not much difference between Blackwater and an Army infantry unit in terms of operational costs. However, this comparison does not reflect the real picture, since costs may change depending on the type of function that is outsourced, the length of contract, and the conditions under which the function is performed. Moreover, it is difficult to generalize these findings, as different PMCs would have different performances. On the other hand, there are considerable reasons that make us believe that militaries are less efficient in the long-term than PMCs. Most significantly is that, unlike PMCs, militaries are idle in peacetime. From the government's perspective, the money, which is spent on weapon, equipment, and manpower in peacetime, is a lost economic output, since most of this capital is idle when not being used. Therefore, rather than maintaining huge forces that must be paid and trained periodically, sometimes outsourcing some tasks to PMCs only when necessary may be cost-effective. For example, in 2005, CBO estimated that over a 20-year period including both peacetime and wartime, outsourcing logistical functions to PMCs would cost around $41 billion, whereas obtaining the same logistical functions from the United States military would cost approximately $78 billion. This estimation clearly shows that it is profitable for the Department of Defense to outsource some logistical functions to PMCs. PMCs also perform other functions, such as security, military training and military advice. In order to figure out which functions PMCs execute more efficiently, performances of PMCs and militaries must be measured and compared on a case-by-case basis. Although it is relatively easier to measure costs associated with logistics, it is more difficult to measure costs related to functions like security, military training and advice. Alternatively, it may sometimes be costly to utilize PMCs, particularly when there is no effective oversight mechanism to keep their activities under control. Paying for duplicate services, fraud, and sustainability problems of the reconstruction projects may yield unintended consequences if PMCs are not properly managed and supervised. In fact, effective monitoring and good contract management are themselves costly, even if there is no fraud.