THE BLOG
04/03/2010 05:12 am ET | Updated May 25, 2011

The QDR and Private Military Contractors

When you think about it for a moment, there is actually more than a little similarity between the information technology and the private military contracting (PMC) industries.

For decades Silicon Valley inventors and entrepreneurs have been boasting that they, not the government, are responsible for the rise and growth of the Internet. But the truth is, as most people, who have ever studied it for a bit know, that without the early funding from government agencies like the Defense Advanced Projects Research Agency people would still be limited to reading books on paper, not Kindles.

Similarly, private military and security contractors claim that they are more cost effective and organizationally agile than their public sector counterparts. But the truth is that they generally live or die on government contracts.

That said, the largest governmental employer of private military and security contractors is the Pentagon. And today it released its latest, long awaited, Quadrennial Defense Review.

If any contractors were worried about their future they can relax. While the Defense Department confirms old news, i.e. that it is taking some acquisition positions back in-house and realigning the mix of public and private workers in the overall workforce, the bottom line is what everyone expects. The Department of Defense is not significantly lessening its dependence on private military contractors.

In fact, given the future security environment the QDR says the U.S. military must prepare for (See Chap 1, "Defense Strategy") which will be marked by the need to respond to a broad range of contingencies including more Iraqs/Afghanistans, major humanitarian crises, failing states and natural disasters, one can see that that the future will be a target rich environment for PMCs. Trade groups like the Professional Services Council and IPOA have much to smile about.

As the Lexington Institute noted:

The United States no longer can project power of any significance over any protracted period of time without reliance on the private sector. Civilians are now the equivalent of a new governmental service. The same will be true in the event of a major terrorist incident or natural disaster in the homeland. Since the QDR predicts lots of overseas contingencies of various types and sizes, it is safe to conclude that there will be more work for private contractors in supporting U.S. forces overseas.

Here is the relevant QDR language:

The Department is facing mission requirements of increasing scope, variety, and complexity. To ensure the availability of needed talent to meet future demands, we are conducting a deliberate assessment of current and future workforce requirements. This effort will ensure that the Department has the right workforce size and mix (military/civilian/contractor) with the right competencies. This assessment will be enterprise-wide, enabling the Department to better recruit and retain personnel with the most-needed skills.

...

The services provided by contractors will continue to be valued as part of a balanced approach that properly considers both mission requirements and overall return. In keeping with the Administration's goal of reducing the government's dependence on contractors, the Department introduced its in-sourcing initiative in the FY 2010 budget. Over the next five years, the Department will reduce the number of support service contractors to their pre-2001 level of 26 percent of the workforce (from the current level of 39 percent) and replace them, if needed, with full-time government employees. These efforts will help establish a balanced total workforce of military, government civilians, and contractor personnel that more appropriately aligns public-and private-sector functions, and results in better value for the taxpayer. (pp. 55-56)

Of course, the Pentagon does, at least officially, think that fraud, waste, and corruption are bad things so it has duly noted that it will:

Better align profitability with performance by linking contract fee structures with contractor performance, rigorously examining service-based contracts to ensure that fees are properly earned, eliminating the use of no-bid contracts whenever possible, and ensuring that multiyear contracts are limited to instances in which real, substantial savings are accrued to the taxpayer. (p. 79)

Of course, eliminating no-bid contracts has been something that critics have been calling for years. Given that the Pentagon gives itself the usual "whenever possible" escape clause it remains to be seen whether anything significant will actually happen.

As for taking positions back in-house:

By 2015, the Department also plans to hire 20,000 new acquisition professionals, filling 9,000 new jobs and 11,000 converted contractor positions. (p. 93)

But the initiative to take positions back in-house was announced soon after the Obama administration took office so this is just confirmation of an ongoing process. Still, the lack of qualified acquisition professionals has been a glaring deficiency for decades so the fact that 20,000 more are being hired is a definite plus.