The Outsourcing of Warfare: Privatized Military Operations by Publicly-Traded Companies
One of the first socially responsible investment (SRI) screens excluded weapons suppliers from investors’ portfolios; today, however, publicly traded companies don’t just build weapons – they fight wars. Privatized Military Operations (PMO) have been integrated into American missions in Iraq, Afghanistan, and other less-visible theaters worldwide.
Researchers at the Industrial College of the Armed Forces have produced a fascinating in-depth review of PMO in modern warfare. The report, released in 2007, highlights the extent of PMO involvement in the Iraq war. For example, the ratio of private contract employees to American troops in Iraq is 1 to 1.5.
Private contractors now provide services that have traditionally been the responsibility of American soldiers. Some of these are support tasks, such as maintaining barracks and running kitchens. A more worrisome trend is PMO contractors’ performance of core combat functions: building overseas bases, maintaining weapons, and providing security details.
The outsourcing of warfare is inherently risky. The most alarming problems involve contractors’ use of force. As the New York Times reported on May 10, the Blackwater USA employees who killed 17 Iraqis in Baghdad were not subject to the same scrutiny that would have faced military personnel. Blackwater has dealt with such incidents internally, if it all. The Times explained:
No charges have been brought in the United States against any Blackwater guard in the September shooting…and the F.B.I. agents in Baghdad charged with investigating whether Blackwater guards have committed any crimes under United States law are sometimes protected as they travel through Baghdad by Blackwater guards.
This lack of accountability extends beyond rank-and-file PMO employees. Contractors have also benefited from higher-level waste and fraud. In a May 20 op-ed in the Boston Globe, Senator Bernie Sanders describes some of the most egregious examples:
In Ramadi, Iraq, the Air Force paid a private US contractor $32 million to construct an air base that was never built. A GAO survey examined $8 billion in contractor incentive fees that were paid out regardless of outcome. In other words, the Pentagon is paying contractors bonuses whether or not they are deserved.
How much of the PMO industry is publicly held? The ICAF report describes the industry as “highly fragmented,” but large public companies with significant PMO involvement include DynCorp International and KBR.
Should investors who screen for military involvement be wary of firms that provide such services? Applying a consistent standard can present a significant challenge to investors, especially when a company’s business is not entirely dependent on the Pentagon. Are a company’s products designed specifically for weapons or battlefield use? Or are they off-the-shelf and essentially “dual use” (for military and civilian markets)?
PMO activity presents a challenge for the SRI community. Outsourcing, subcontracting, and new players in the field have clouded the question of which companies are directly profiting from weapons and warfare. As the industry evolves, SRI investors should reevaluate their weapons screens to make sure they are still achieving their original intent.
Click here to learn more about KLD’s research methodology for military involvement and other business issues.
Libby Edgerly and Alan Petrillo also contributed to this article.
Kudos for addressing this issue! That the U.S. military is paying private contractors big money to do such work within war zones. Work that can be categorized as security, military logistics, maintenance, supply and other services essential to war-making.
In effect, when contractors do this work, they enhance our troops’ abilities to conduct additional combat missions. No longer does a soldier need peel potatoes or load ammo trucks — that gets done by contractors paid two, three or even ten times a soldier’s pay rate. In this war, our fighting men and women are given the privilege of getting shot up repeatedly, allowed to rest some while the contractors support them, and then our soldiers get sent on combat missions over and over again. In effect, contractors increase combat effectiveness and enhance the number of times that a soldier gets sent into harm’s way.
Let us know when you figure out whether your research methodology will reflect the identification or exclusion of military service contractors.
Comment by Eric Bright — June 6, 2008 @ 4:51 pm
The artiucle raises two interesting issues. First is the reversion to the historical example of mercenary companies to fight wars. Drake the privateer springs to mind was a very cost effective way for Elizabith 1 to face off the Spanish. Of course the officers of the crown took a percentage of the take! Second is the persistent efforts of contemporary governments in the West to find mechanisms that either vitiate or mitigate any direct line of accountability. The PMO investment achieves the desired outcome.
This is avoidance of accountability is too real for me as I sit here in Jordan in an hotel where war wounded children from Iraq await treament at the local hospital paid for my the Government of Jordan. Who is accountable for their wasted bodies, who is accounta ble for the fact that they young boy will never play soccer in football crazy Iraq?
Comment by T Welsh — June 7, 2008 @ 11:25 pm