PRIVATE MILITARY CONTRACTORS IN IRAQ AND BEYOND: A Question of Balance Prepared Statement by William D. Hartung Senior Research Fellow, World Policy Institute
For the Briefing on "An Incomplete Transition: An Assessment of the June 30th Transition and Its Aftermath" American News Women's Club Washington, DC June 22nd, 2004 Let me begin by thanking Foreign Policy in Focus (http://www.fpif.org), and its two co-sponsoring organizations, the Institute for Policy Studies and the Interhemispheric Resource Center, for organizing today's briefing. With the recent passing of former President Reagan and the 60th anniversary of D-Day earlier this month, we've been doing a lot of remembering lately. We've been remembering war heroes, and we've been remembering a man who some have regarded as the greatest Republican president since Lincoln. But we haven't heard much about the one man of the past half century or so who fit both of those categories - war hero and Republican president -- most clearly and comfortably, without bragging or bravado, just by virtue of his career path: Dwight David Eisenhower. Not only was Eisenhower one of the generals who helped beat back the fascist powers in World War II, but he also had very distinct ideas about how to go about fighting the battles against communism that defined U.S. foreign policy in the wake of that war. He was all for a strong defense, but he also felt that we as citizens of a Republic needed to be alert to the dangers posed by the military-industrial complex, a term that he coined. He chose his farewell address to warn of the "potential for the disastrous rise of misplaced power" posed by this unprecedented lobby. And he underscored the need for an engaged citizenry to keep it in check to ensure that we "never let the weight of this combination endanger our liberties or democratic processes." Essentially what Eisenhower was saying was that we need a defense industry, but it needs to be watched. Funding for defense should be balanced against other national needs, and decisions about military spending priorities should be subject to democratic discussion and debate. He firmly believed that it was up to the citizenry, acting through its elected representatives, to set the parameters for what should be spent to protect and defend our republic. If Eisenhower were alive today, what would he make of our current situation? Not only are private contractors raking in massive amounts of taxpayer funds under the guise of fighting terrorism, but they are involved in activities that in his day would have been considered strictly government functions. The military-industrial complex is a much smaller share of our economy than it was four decades ago, but it is in the midst of a growth spurt, and it still needs to be watched, now more than ever. Let's start by talking quantity. It's a great time to be a weapons contractor, a rebuilding contractor, an intelligence or communications contractor, or a security contractor. Since the Bush administration took office in January 2001, the annual military budget has increased from roughly $310 billion per year to over $420 billion per year and counting. In addition to these regular appropriations, the United States has overthrown two governments and occupied two nations, at a cost of $177 billion and counting. And we have increased spending on homeland security from $16 billion in 2001 per year to $47 billion per year in this year's budget request, with $39 billion of that amount occurring in agencies other than the Pentagon. While the administration would like you to believe that every penny of this is directly related to fighting what it calls the GWOT - the Global War on Terrorism - an objective assessment suggests otherwise. The results for the contractors have been stunning. In 2003, Halliburton's Pentagon contracts increased from $900 million to $3.9 billion, a jump of almost 700%. And that's just the beginning. The company how has over $8 billion in contracts for Iraqi rebuilding and Pentagon logistics work in hand, and that figure could hit $18 billion if it exercises all of its options. Computer Sciences Corporation, which does missile defense work and also owns Dyncorps, a private military contractor whose work stretches from Colombia to Afghanistan to Iraq, saw its military contracts more than triple from 2002 to 2003, from $800 million to $2.5 billion. But even as these firms involved in Iraq and Afghanistan show the fastest growth, they can't match the sheer volume of work logged by the "Big Three" military contractors. Lockheed Martin ($21.9 billion), Boeing ($17.3 billion) and Northrop Grumman ($16.6) billion split $50 billion in Pentagon contracts between them in 2003. That hefty sum represented almost one out of every four dollars the Pentagon doled out that year for everything from rifles to rockets. Lockheed Martin, the nation's largest weapons contractor, offers an excellent case study in how contractors have been able to dip into the multiple pots of money available in the emerging national security state. Lockheed Martin the nation's leading Pentagon contractor, with $21.9 billion in contracts in fiscal year 2003 for everything from missile defense to precision-guided munitions to advanced combat aircraft. But its national security related contracts don't end there. The company also runs Sandia Laboratories, a nuclear weapons engineering and design laboratory, in a contract worth up to $2 billion per year. It is part of a partnership with Becthel that runs the Nevada Test Site, doing simulated nuclear weapons testing. It is partnered with Northrop Grumman on the Deepwater project, a multi-billion dollar plan to provide new ships, helicopters, and communications for the Coast Guard over the next decade. It is a major contractor for the National Aeronautics and Space Administration. It has contracts with Transportation Security Agency (now part of the Department of Homeland Security) for airport security technology. And, until the recent scandal over the involvement of one or more Titan corporation employees in the abuses at Abu Ghraib prison in Iraq, Lockheed Martin was in the process of trying to purchase that company to add to its corporate empire. At a minimum, one might wonder whether it is wise to depend on one company for so many of our security needs. Given that we have chosen to do so, it is important to have regulatory and monitoring systems in place to ensure that they are spending taxpayer funds efficiently and effectively. Many of the weapons systems and missions funded by this avalanche of spending - over $340 billion in new authorizations for security in fiscal years 2002, 2003 and 2004 alone - have little or nothing to do with fighting terrorism. I would argue strenuously that the war in Iraq has done more to undermine the war on terrorism than it has to advance it. Many of the weapons systems that we are funding with these hundreds of billions of dollars - from advanced fighter planes to nuclear-powered attack submarines - have little application to fighting terrorism. Conversely, many of the things that we should be doing to stave off the worst cases of mass casualty terrorist attacks are being underfunded. To cite just one example, while we are spending $4 to $6 billion per month on a misguided war in Iraq and $9 billion per year on an unproven missile defense system, we are spending only about $1 billion on Nunn-Lugar style Cooperative Threat Reduction programs designed to reduce the threat from "loose nukes" and nuclear materials in the former Soviet Union. At current rates it will take thirteen years to secure the nuclear materials in the former Soviet Union - thirteen years during which any terrorist or thug with money or guns can try to buy or steal some of those bomb-making materials. We went to war in Iraq, we were told, to make sure that weapons of mass destruction didn't find their way into terrorist hands. We now know that justification was either a lie or a massive error. Whichever it was, shouldn't we now be able to find a few billion dollars to accelerate spending against the very real threat posed by loose nuclear weapons and nuclear materials in Russia, and in any other country that has an unguarded research reactor, or an under-inspected nuclear program? Just as the arms industry has its lobby to make sure we keep buying F-22 fighter planes and nuclear attack subs that we no longer need, shouldn't we build a "people's lobby" to spend the few billion dollars on the absolutely urgent priorities that could make the difference in whether or not some terrorist group gets its hands on nuclear materials in the future? In addition to the issue of priorities, which will obviously be a large and contentious one going forward, there is also the related question of how to regulate and monitor private contractors to make sure they don't engage in waste, fraud and abuse. And there is what I think is an even more critical question of where to draw the line in terms of what kinds of activities should be done by private contractors, and what functions military or other government personnel should do. If the privatized occupation of Iraq is an object lesson in how not to regulate and monitor private companies -- and I believe it is -- then Halliburton has got to be exhibit A. Much of what we know about this is due to the fine work that has been done by Rep. Henry Waxman and the minority staff of the House Government Reform Committee, and their colleagues on the Senate Democratic Policy Committee. Without their persistent questioning and probing, Halliburton's malfeasance in Iraq would still be hidden from public view. What do we know about Halliburton's work in Iraq? We know that they have overcharged by more than a dollar a gallon for bringing gasoline and fuel oil into Iraq from Kuwait, and that they are now under criminal investigation for doing so. We know that they charged for three times as many meals as they served to our troops at mess halls in Kuwait, and at some of those mess halls the food was so bad that our troops chose not to eat it. We know that there were millions of dollars in kickbacks on one or more of their Kuwaiti contracts. We know that while our troops were suffering shortages of "up-armored" Humvees and body armor, Halliburton's Brown and Root subsidiary was wasting money in Kuwait on luxury items like monogrammed towels for the company health club and SUV's for company executives leased at $7,500 a month. We know that they were leaving perfectly good trucks worth $85,000 to rot in the desert for want of a spare tire, and keeping employees on the payroll with nothing to do. And we know that when employees asked about these wasteful practices they were either fired, or told "don't worry, it's cost-plus." Meaning, in effect, don't try to save money for the taxpayers, because the more we spend, the more Halliburton makes. We know that they haven't issued proper bills to the Pentagon for the $8 billion in work they have done so far, and they haven't kept track of what there subcontractors are up to, at a cost to the taxpayers that Pentagon auditors have described as "indeterminate." We know that the General Accounting Office now believes that Halliburton's major contracts in Iraq, including the contracts to plan for contingencies in the Iraqi oil fields, may have been improperly awarded. As Senator Richard Durbin of Illinois pointed out when these abuses were first revealed, every dollar that Halliburton wastes on monogrammed towels or overpriced vehicle leases means less money for armoring Humvees to protect our troops in the field, or buying Kevlar vests, or for other basic equipment. So it's not just a waste of money, it's a security issue when Halliburton wastes taxpayer funds that are supposed to be spent on security and siphons them off into unnecessary spending. The regulation, monitoring, and punishment of Halliburton for its abuses in Iraq have been piecemeal at best. The company is no longer handling the contract for bringing fuel in from Kuwait. It has paid back the money involved in the kickbacks, and payment has been suspended on some of the more controversial overcharge cases. But the company has continued to receive new contracts from the Army in the midst of its abuses. The slow pace at which Halliburton is being disciplined for its apparent wrongdoing comes just as new revelations have emerged suggesting that its original no-bid contract for work on Iraq's oil infrastructure may have been coordinated with the office of Vice-President Cheney. Cheney spent five years as Halliburton's CEO before joining the Bush ticket in 2000, and he continues to get annual deferred compensation checks from the firm. Whether or not Cheney's office was directly involved in the decision to give Halliburton the multi-billion dollar no-bid contract for work in Iraq or was merely being given a "heads up" about it, these interactions give the appearance of a conflict-of-interest which further taints Halliburton's already questionable performance in Iraq. Halliburton is exceptional in terms of the size of its rebuilding contracts and the nature of its relationship to the White House, but the problems with monitoring contractors in Iraq run far deeper than just one company. The Pentagon has acknowledged that it isn't even precisely sure how many companies are involved in providing goods and services in Iraq. And many of them are involved in functions that go far beyond cooking meals or maintaining vehicles. Blackwater, which became well known only after the tragic death and mutilation of four company employees in Falluja, provides security to Paul Bremer and the soon to be defunct Coalition Provisional Authority. CACI and Titan were involved in interrogations at Abu Ghraib, and personnel from those companies were cited in the Army's internal investigation, the Taguba report, as being involved in directing the abuses at the prison. From shooting guns in combat zones to interrogating high value prisoners, there seem to be very few missions that private military contractors are not being hired to do. At 15,000 to 20,000 employees in theater, private military contractors are the second largest contingent of the "coalition of the willing" in Iraq, after the United States and before the United Kingdom. There are a series of problems that arise from utilizing private contractors. The first, and perhaps most important, set of problems, have to do with military discipline and chain of command. Employees of private contractors aren't subject to the military code of justice, and don't answer to the military chain of command in the same way that a member of a military unit does. This can raise several types of problems. For one, when the going gets tough, private contractors are free to leave, with at most a contractual (monetary) penalty. There have been reports since last summer that in parts of Iraq troops have gone without clean drinking water, or clean laundry, or other key services due to contractors "opting out" of danger zones. In addition, when contractor employees commit abuses, as happened at Abu Ghraib, they fall into a gray area in terms of enforcement. They are not subject to courts martial, like regular troops. And in Iraq thus far, they have been exempted from local laws. That leaves the question of whether they can be prosecuted under U.S. law. In theory they can, but in practice it has never been done. CACI and Titan employees alleged to have directed abuses at Abu Ghraib have yet to face criminal charges, while a number of the guard and reserve personnel they allegedly directed have already faced military justice. There have also been reports of a "skills drain" as Special Forces, Navy Seals, and other highly trained troops leave the military to sign up with private firms, where they can reportedly make four to five times as much money for doing similar work with greater freedom of action (e.g., the ability to leave the theater of conflict on their own initiative). Finally, there is the issue of who monitors and regulates these thousands of contractors in a war zone to make sure they aren't ripping off the taxpayers or letting our military personnel down by not supplying needed services in a timely fashion. Amazingly, the Pentagon's solution to this problem has been to hire more contractors to monitor the contractors. And in a number of instances, those contractors have business relationships with the companies they are supposed to be monitoring, a classic conflict of interest. To add insult to injury, the Pentagon recently hired a private contractor to coordinate "security support" in Iraq. The company chosen, Aegis Defense Services, is run by Tim Spicer, the closest thing we have in the modern private military services world to a mercenary. In prior incarnations, firms run by Spicer violated the arms embargo on Sierra Leone and were involved in a controversial contract to put down a rebellion in Papua New Guinea that led the local army to rebel and landed Mr. Spicer in jail. P.W. Singer, whose book Corporate Warriors: The Rise of the Privatized Military Industry (Cornell University Press, 2003) is the most complete treatment of this subject, notes that in two of the most controversial recent contracts in Iraq, the CACI contract for Abu Ghraib and the Aegis Defense Services contract for security coordination, the agencies awarding the contracts had "no apparent experience in dealing with the private military industry." The interrogators at Abu Ghraib were originally hired via an Interior Department contract for computer services, and the Aegis deal came via the Army transportation command in Fort Eustis, Virginia. As I have said before in another context, the growing reliance on private military contractors didn't happen over night. It evolved over the past fifteen years, starting when then Defense Secretary Dick Cheney asked Halliburton to study what it would take for a private firm to handle the logistics of a major U.S. overseas deployment back during the administration of George H.W. Bush. It accelerated in the Balkans when Halliburton built bases, served meals and maintained vehicles in Bosnia and Kosovo, and MPRI trained Croatian forces at a critical stage of the Bosnian war. It moved forward under the radar screen in Colombia, where private firms ran reconnaissance and defoliation missions as part of the State Department's private anti-drug air force. And it grew to new heights in the current war in Iraq, where one out of ten people in theater is a contract employee, compared to one out of one hundred in the first Gulf War, according to P.W. Singer. That huge shift is partly due to the growing reliance on private companies that was already under way, and partly due to poor planning by the Bush administration. They ignored the advice of military professionals like Gen. Eric Shinseki about how many troops it would take to secure Iraq in the immediate aftermath of "regime change," and then tried to "fill the gap" in part by hiring more private security firms. But the Bush administration was also ideologically inclined to believe that private companies can do the job - almost any job - better than government can. And that was a huge miscalculation when it came to sensitive security-related missions. So, here we are, fifteen years into an experiment with privatization of military and security functions, with a re-constituted military-industrial complex that is involved at least as much with military services as military equipment. What should be done? I take my cue from President Eisenhower, and suggest that we need to restore a sense of balance. I would suggest the following six steps to guide a program of reform in military-industrial regulation: 1) Re-draw the line between public and private military functions: To the extent possible, we need to get military contractors off of the front lines, and out of sensitive military functions like interrogation, security for key military and political officials in war zones, and other combat-related missions. 2) Inject competition into the contracting process wherever possible: In the rebuilding of Iraq, the prime contracts are still overwhelmingly going to U.S. firms. We need to open up the process so that Asian, European, Middle Eastern, African, and Iraqi firms start getting a fair share of the business, particularly as more of the rebuilding is funded out of Iraq's own revenues. If favoritism is to be involved, it should be towards Iraqi businesses and Iraqi workers, to give them an economic stake in the rebuilding of their own country that goes beyond low level subcontracting. Public agencies should be allowed to compete for functions currently being done by private firms like Halliburton, to see whether some elements of their work can or should be brought back into the public sphere. 3) Move away from cost-plus contracting: Many of the abuses carried out by Halliburton were tied to the fact that they were under cost-plus style contracts, in which the contractor gets reimbursed for all of its costs plus a profit. More sophisticated contracting methods that provide incentives for holding down costs rather than running them up should be used in the future, particularly for open-ended deals like the one Halliburton is operating under. In particular, we need to move away from massive - indefinite cost, indefinite quantity- contracts that can give billions of dollars in business to a single firm that could otherwise be bid out in smaller lots to small and medium-sized firms. 4) Promote greater transparency on military contracting and budgets: Most of the problem areas relating to the costs of the war in Iraq and Iraq- related contracts involved contracts or budget decisions that were made behind closed doors or with minimal detail provided to Congress and the public. Greater openness on contract bids and awards, and greater detail on current and future budgetary costs (with projections for future years and breakdowns by major category of expense) would be a good start towards providing the public with the tools it needs to have an informed debate on the costs of the war in Iraq, and the larger military and security budgets of which it forms a part. 5) Address the 'revolving door' between the arms industry and military policy making positions: Even more so than in administrations of the recent past, the Bush administration has kept the "revolving door" between the arms industry, the Pentagon, and the White House spinning rapidly. In its first year alone, the White House appointed at least 32 former executives, paid consultants, or major shareholders from military industry to top positions, and personnel have been moving in both directions since that time. Revolving door issues have been at the center of major scandals of recent years such as the decision to put the Boeing tanker-lease arrangement on hold after it was revealed that the company had offered Air Force procurement official Darleen Druyun a job while she was negotiating that arrangement with the firm. At a minimum, there needs to be a stronger reporting mechanism in place so that Congress and the public can be aware of past relationships between policymakers and major arms companies on a real-time basis. In addition, a panel should be appointed to assess whether current laws regarding time limits on dealing with past employers are adequate to prevent conflicts of interest. 6) Create a new Truman Committee to root out war profiteering in Iraq and the broader war on terrorism: As my colleagues at Taxpayers for Common Sense recommended at a hearing back in February, the time has come to create a bipartisan special oversight committee with subpoena power and the power to conduct far-ranging investigations into the nature of the contracting process, modeled on the Truman Committee that have saved taxpayers $15 billion by investigating and rooting out war profiteering during World War II. The amounts of money being lavished on small numbers of contractors - many of whom have records of questionable conduct - requires that we take concerted action. Unfortunately, the leadership of this Congress has so far been unwilling to take even small steps in the right direction. Last year, when amendments were passed with bipartisan support to limit price gouging on Iraqi contracts and to require open competition on Iraqi rebuilding, they were stripped out in the dead of night in closed-door conference committees on Capitol Hill. How long are we going to let the taxpayers be ripped off while our troops continue to go without vital equipment and services that could save lives on the battlefield? War profiteering isn't just a monetary issue - it is also a security issue, and any member of Congress who stands in the way of common sense measures aimed at preventing this abuse of funds set aside to protect this nation should be called to account by their constituents. All of the reforms referenced above have to do with how to manage and monitor military contractors. Getting them enacted into law will require the other half of Eisenhower's equation, the "alert and engaged citizenry" that is needed to ensure the proper meshing of the industrial machinery of defense with our democratic needs and priorities. That's a harder point to put in a simple recommendation. It has to do with whether people can rise to the point of deciding that the defense of our country is too important to be left to the generals and contractors alone. As much as we value their expertise, we need to find a way to inform ourselves and make our voices heard in favor of a balanced defense policy that draws on all of the sources of our national strength -- military, cultural, diplomatic, and economic. There is an important role for contractors in the defense of the nation, but there is also a role for government in regulating those contractors, and a role for citizens in making sure that both government and the contractors that profit from our tax dollars are being held accountable. To contact the author, William D. Hartung, please email [EMAIL PROTECTED] or call 212-229-5808 ext. 112 or 917-923-3202 _________________ The Arms Trade Resource Center was established in 1993 to engage in public education and policy advocacy aimed at promoting restraint in the international arms trade. http://www.worldpolicy.org/projects/arms
