Typically, discussion of private military and security contracting focuses on what people actually do when they are fulfilling their contracts. But just as important is the process by which such contracts were approved in the first place.
One of the oldest fears about modern Private Military Security Companies (PMSC) is that they, just like traditional arms sales, could be used to enhance the capabilities of corrupt and repressive police and military forces in authoritarian countries across the world.
Fortunately, to date this has not happened. But it is not in because of an abundance of legislation specifying the criteria on which such contracts should be approved or disapproved.
Note that most PMSC advocates will always talk about the supposed reams of laws and regulations on the books supposedly governing PMSC. But they rarely note some glaring loopholes, such as the fact that the "Montreux Document," that outlines existing international laws relating to private military and security companies, is not legally binding. Or that the "Leahy Law," which could investigate private contractors for human rights abuses, does not apply to training purchased with the procuring country's own money or third-county nationals hired by the contracting firm.
But the truth is that most of this governs how PMSC are supposed to operate in the field, not whether a contract is a good idea to begin with.
To go into the weeds on this let's look at a 2009 paper, "Outsourcing Authoritarianism? Commercialization of the U.S. Defense Industry and its Implications for Developing Country Security Sectors" by Shana Marshall of the University of Maryland-College Park.
Remember that the continued deregulation and commercialization of the traditional arms trade, which includes PMSC activities, exacerbates problems of oversight and monitoring in conflict zones. This is illustrated by a number of trends including an increase in licenses issued for exports to "controlled countries," the increasing use of Direct Commercial Sales or DCS (which entail little or no U.S. Government supervision as opposed to Foreign Military Sales or FMS, which does).
Also bear in mind that any private security contract that involves people using weapons as a part of their work is, from an export control view, an arms contract.
Marshall writes that in the 1990s the Defense Technology Security Administration, a department within the Pentagon charged with evaluating the security of arms export deals, was moved from the policy division to Acquisition, Technology and Logistics, a department whose express purpose is to reduce the costs of U.S. arms procurement. The State Department appointed a semiofficial Defense Trade Advisory Group composed of defense industry officials and trade group representatives to advise the department on arms exports. The Secretary of Defense also established the intra-agency process and "champion" exports, "which DoD and U.S. defense industry support," and facilitate the ability of industry to contribute to the review process early on.
I have been a member of the DTAG twice and while I can say it took its work quite seriously and did excellent work, it never looked at PMSC issues during the time I was there.
Or consider this point. The concentration of expertise within private industry rather than government poses an additional conflict of interest. Individuals in arms and defense service industries are often called upon as expert witnesses and advisers during the policy planning process, and in the particular case of PMSCs and arms exporters, these individuals can recommend that the U.S. government include contracts for personnel in arms deals, or conversely for defense material to be included in contracts for personnel services. According to Marshall:
For example, in 2000 USAID funded a major initiative to improve civilian control over the military in the newly-democratic state of Nigeria. MPRI was given the contract, named Operation Focus Relief (OFR). OFR was notable for its inclusion of extensive lethal material in addition to the standard training and education programs. Previous programs by the U.S. (and coordinating efforts by the UK and France) had included significantly less material, typically only ammunition for marksmanship training. Although it is impossible to infer whether the decision to add weapons to the African conflict resolution plan was made at the behest of MPRI or interested parties -- MPRI is a subsidiary of a corporation (L3 Communications Corporation) that also has a weapons producing arm (Titan Inc.).
Furthermore,
... the consolidation of arms production and personnel provision departments may also assist defense conglomerates in evading reporting requirements and other monitoring mechanisms. For example, Congressional notification is required for contracts valued at $50 million or more, however contracts can be subcontracted to many different entities within the same company to avoid reaching the minimum thresholds.