Having laid out the staggering expansion of a
budget-busting Pentagon as diplomat, arms dealer, spy, intelligence analyst,
domestic disaster manager, humanitarian caregiver, nation-builder, and global
viceroy in part one
of her series on the Bush military legacy, Frida Berrigan, arms expert at the
New America Foundation, turns to the issue of privatization. In these last
seven years, the Pentagon's key role as war fighter has increasingly become
a privatized operation. In Iraq, for instance, a Congressional Budget Office
report in August revealed
that the U.S. has already spent at least $100 billion on private contractors.
(Pentagon auditing has, however, been so bad that that's considered a low-ball
Approximately one out of every five war dollars spent on the war went private.
That's not so surprising, as James Risen of the New York Times reported,
since private contractors now outnumber the 146,000 U.S. troops in that country.
At 180,000, they represent, as Risen writes, "a second, private army, larger
than the United States military force, and one whose roles and missions and
even casualties among its work force have largely been hidden from public view."
Moreover, as modest drawdowns of U.S. troops occur, American taxpayer dollars
going to private contractors in Iraq, especially private security contractors,
are actually on
the rise. Part of the charm of privatizing war, of course, is that you
can also privatize information about it, so we really have little idea just
how many armed, Blackwater-style mercenaries there are in that country (though
the number may rise into the tens of thousands). No less curious, amid all
the talk of drawdowns and withdrawals, you seldom see any serious discussion
of those hired guns in the mainstream. When withdrawal does come, who
withdraws them? Who decides that? Who knows?
In the meantime, let Frida Berrigan take you past the obvious Blackwater issues
and into the deeper quagmire of the massive privatization of the American military.
It's an issue whose time should long ago have arrived, but don't hold your
breath till the media discussion and debate begins. Tom
Military Industrial Complex 2.0
Cubicle mercenaries, subcontracting warriors, and other phenomena of a
by Frida Berrigan
Seven years into George W. Bush's Global War
on Terror, the Pentagon is embroiled in two big wars, a potentially explosive
war of words with Tehran, and numerous smaller conflicts and it is leaning
ever more heavily on private military contractors to get by.
Once upon a time, soldiers did more than pick up a gun. They picked up trash.
They cut hair and delivered mail. They fixed airplanes and inflated truck
Not anymore. All of those tasks are now the responsibility of private military
corporations. In the service of the Pentagon, their employees also man computers,
write software code, create integrating systems, train technicians, manufacture
and service high-tech weapons, market munitions, and interpret satellite
People in ties or heels, not berets or fatigues, today translate documents,
collect intelligence, interpret for soldiers and interrogators, approve contracts,
draft reports to Congress, and provide oversight for other private contractors.
They also fill prescriptions, fit prosthetics, and arrange for physical therapy
and psychiatric care. Top to bottom, the Pentagon's war machine is no longer
just driven by, but staffed by, corporations.
Consider the following: In fiscal year 2005 (the last year for which full
data is available), the Pentagon spent more contracting for services with private
companies than on supplies and equipment including major weapons systems.
This figure has been steadily rising over the past 10 years. According to a
recent Government Accountability
Office report, in the last decade the amount the Pentagon has paid out
to private companies for services has increased by 78 percent in real
terms. In fiscal year 2006, those services contracts totaled more than $151
Ever more frequently, we hear generals and politicians alike bemoan the state
of the military. Their conclusion: The wear
and tear of the president's Global War on Terror has pushed the military
breaking point. But private contractors are playing a different tune. Think
of it this way: While the military cannot stay properly supplied, its suppliers
are racking up contracts in the multi-billions. For them, it's a matter of
letting the good times roll.
What a Difference a War Makes
As we prepare to close the book on the Bush presidency, it is worth exploring
just how, in the last seven-plus years, the long War on Terror has actually
helped build a new, privatized version of the Pentagon. Call it Military
Industrial Complex 2.0.
Consider fiscal year 2001, which conveniently ended in September of that
year. It serves as a good, pre-War on Terror baseline for grasping just how
the Pentagon expanded ever since and how much more it is paying out to
private contractors today.
Back then, the Pentagon's top 10 suppliers shared $58.7 billion in Department
of Defense (DoD) contracts, out of a total of $144 billion that went to the
top 100 Pentagon contractors. Number 100 on the list was The
Carlyle Group with $145 million in contracts. Keep in mind, of course,
that this was the price of "defense" for a nation with no superpower rival.
Fast forward to 2007 and the top 10 companies on the Pentagon's list of
private contractors were sharing $125 billion in DoD contracts, out of a
total of $239 billion being shared among the top 100 contractors. The smallest
contract among those 100 was awarded to ARINC
and came in at $495 million.
In those seven years, in other words, contracts to the top 10 more than
doubled, the size of the total pay-out pie increased by two-thirds, and the
lowest contract among the top 100 went up almost four-fold.
Just as revealing, almost half the companies on the Pentagon's Top 100 list
in 2007 were not even on it seven years earlier, including McKesson,
which took in a hefty $4.6 billion in contracts and MacAndrews
and Forbes, which garnered $3.3 billion.
And here's a fact that makes sense of all of the above: Given the spectrum
of services offered and the level of integration that has already taken place
between the Pentagon and these private companies, the United States can no
longer wage a war or even run payroll without them.
These have been the good times for defense contractors, if not for the military
itself. Since September 2001, many companies have made a quantum leap from
receiving either no Pentagon contracts or just contracts in the low hundred
millions to awards in the billion-dollar range. Here are just a few portraits
of companies that are booming, even as the military goes bust.
URS Corporation: This engineering,
construction, and technical services firm based in San Francisco employs more
than 50,000 people in 34 countries. A publicly-held firm, which recently acquired
Washington Group International, it had numerous reconstruction contracts in
Iraq. More than 40 percent of the company's revenue ($5.4 billion in 2007)
comes from the federal government. Between 2001 and 2007, its Pentagon contracts
increased more than a thousand fold (by 1,400 percent) from $169 million to
URS began the War on Terror at number 91 on the Pentagon's Top 100 list.
It is now number 15.
Electronic Data Systems Corporation: Founded by political maverick
Ross Perot, EDS is a global technology services company headquartered in
Plano, Texas. In March, the Pentagon awarded it a $179 million contract to
provide information technology support services to the Pentagon's Defense
Manpower Data Center, its central archive of all kinds of data on personnel,
manpower and casualties, pay and entitlements, as well as the whole gamut
of financial information. The company which employs 139,000 people in 65
countries boasted $22.1 billion in revenue in 2007. Computer giant HP
bought EDS in August 2008.
In 2001 the company occupied slot 71 on the DoD's Top 100 list with $222 million
in contracts. By 2007, it had climbed to number 16 with $2.4 billion in contracts,
an increase of almost 1,000 percent.
Harris Corporation: This communications
and information technology company is headquartered in Melbourne, Florida,
and employs 16,000 people. Harris boasted $4.2 billion in revenue in 2007,
with more than one-quarter of that ($1.6 billion) coming from Pentagon purchases
of communications and electronics capabilities like Falcon II high-frequency
When the Global War on Terror began, Harris had a modest $380 million in
Pentagon contracts (and was number 43 on that top 100 list); over the last
seven years, it has steadily risen in rank and now is number 30.
KBR: Gaming the System
The United States first heard the phrase "military industrial complex" during
Dwight David Eisenhower's Jan. 17, 1961, Farewell Address. As he left public
office, our last general-turned-president warned that the "conjunction of an
immense military establishment and a large arms industry is new in the American
experience" and its influence "economic, political, even spiritual is felt
in every city, every statehouse, every office of the federal government
"In the councils of government, we must guard against the acquisition of
unwarranted influence, whether sought or unsought, by the military industrial
complex. The potential for the disastrous rise of misplaced power exists and
If, in many ways, Ike's comment is still applicable, in the last 47 years
the military industrial complex (MIC) he described has evolved in startling
ways and massively. Today, it does more than wield influence; it has created
unparalleled dependence and unrivaled profit.
What this means in practice can be illustrated by KBR,
a privately held company that does not publish quarterly reports. Nonetheless,
its recent history provides an object lesson in what the MIC 2.0 can do for
the profitability of a private contractor.
KBR has shadowed the U.S. military every step of the way through the invasion
and occupation of Iraq: first as Kellogg Brown and Root, a subsidiary of
Halliburton (for which Dick Cheney was once CEO), and then as KBR, an independent
company. It has, in fact, made its corporate fortune on the Pentagon's now
infamous "no-bid," "cost-plus contracts." Since December 2001, KBR has been
working for the Pentagon under the Logistics
Civil Augmentation Program (LOGCAP) a multi-billion dollar agreement
that guarantees the company those cost-plus profits for fulfilling contracted
This huge and sweeping contract was awarded without the rigors of the competitive
marketplace. Its "no-bid" nature was a sign that KBR was anything but a run-of-the-mill
Pentagon contractor. A second sign lay in the Pentagon's acceptance of that
cost-plus arrangement. A rarity in the business world, "cost plus" means that
the more a job costs, the more profit the company pockets. Professor Steve
Schooner, a contract expert at George Washington University Law School, commented,
"Nobody in their right mind would enter into a contract that basically says,
'come up with creative ways to spend my money, and the more you spend the happier
I'll be.'" Under this contract, the Pentagon has doled
out $20 billion to KBR to build and staff facilities for military personnel
in Iraq and provide food and other necessities to U.S. troops there.
Ironically, the Pentagon isn't even getting what it paid for
not by a long
shot. KBR's fraudulent activities have, according to the Government Accountability
Office, included the failure to adequately account for more than a billion
dollars in contracted funds; the leasing of vehicles to be used by company
personnel for up to $125,000 a year (despite the fact that these vehicles
could have been purchased outright for $40,000 or less); the purchase of
unnecessary luxuries such as monogrammed
towels for use in company-run recreation facilities for military personnel;
the overcharging for fuel brought into Iraq from Kuwait for military use;
the charging to the Pentagon's tab three to four times as many meals as were
actually consumed by U.S. military personnel; and the provision of unclean
water for U.S. troops.
All of these abuses came to light thanks to investigations by Representative
Waxman (D-Calif.), the Pentagon's own Office
of the Inspector General, and others, but Halliburton and its former subsidiary
got off with little more than such wrist slaps as the revocation of the fuel
supply contract and of KBR'S exclusive LOGCAP contract for Iraq. That was recently
divided into three parts and put out to bid. KBR was, however, allowed to join
the bidding, and is now sharing the contract with DynCorp and Fluor Corporation.
Each company has received a $5 billion contract that includes nine one-year
options for renewal that could be worth, in total, up to $150 billion, according
Hedgpeth of the Washington Post.
The most recent of many
black marks against KBR came when members of Congress and investigators
charged that substandard
electrical work by company employees in showers at military bases in
Iraq had resulted in the electrocution deaths of 16 American soldiers.
To understand what privatization means in action at the Pentagon, consider
just one modest example of the corruption that infects KBR and how it was
addressed. In 2004, the company submitted requests for reimbursement on more
than one billion dollars in charges that Army auditors deemed "questionable,"
in part because they weren't backed up by reliable records. Charles Smith,
the Army official managing Pentagon contracts, refused to approve the payments
and threatened to levy fines against the company if it did not get a better
handle on its spending. Later, he told James
Risen of the New York Times that KBR had "a gigantic amount of
costs they couldn't justify. Ultimately, the money that was going to KBR
was money being taken away from the troops."
Despite his 31 years with the Army, and without notice, Smith was transferred
from his post, while the requested payments were subsequently sent to KBR.
According to the New York Times, the Army argued that "blocking the
payments to KBR would have eroded basic services to the troops. They said
that KBR had warned that if it was not paid, it would reduce payments to
subcontractors, which in turn would cut back on services."
In other words, the Pentagon in charge of hundreds of billions of dollars
and more than a million personnel in and out of uniform was essentially
held hostage by a company which threatened to withhold services that (just
to be clear) had been pretty shoddy to begin with.
Robert Byrd (D-W.V.) saw the problem: "We have found ourselves dependent
on profit-oriented companies for even the day-to-day basics of feeding and
housing our troops, [and] for carrying out a myriad of other functions of the
mission, including security. These kinds of contracts opened the door for every
manager to game the system in order to maximize profits."
And game the system they do. For example, the sort of corruption that seems
endemic to KBR has created a profitable new market for another kind of private
military corporation one specializing in oversight and accountability.
After the Army replaced Smith, it hired RCI Holding Corporation to review
KBR's records. Smith says the private company "came up with estimates, using
very weak data from KBR," while ignoring audit information gathered within
the Pentagon. While KBR was subsequently awarded high performance bonuses
and a portion of that new 10-year contract with the Army, Serco (RCI Holding's
parent company) also received a new contract to continue to oversee KBR's
And so dependency begets deeper dependency, while corruption, incompetence,
and callous indifference become ever more ingrained in the military way of
During his first presidential campaign, George W. Bush identified Christ
as his favorite political philosopher. But as the first American president
with a masters of business administration (and from Harvard,
no less), he has done a much better job of applying the profit-first principles
of Donald Trump and Jack Welch than exemplifying the man from Galilee who promised
the rich young man "treasure in heaven" once he sold all he owned and gave
it to the poor. As president, Bush has brought a corporations-can-do-no-wrong
perspective to the Oval Office and quickly sought to give the private sector
an ever freer rein over a smorgasbord of public works and services. Today,
the military sector leans remarkably heavily on private corporations to perform
what used to be their basic functions, from war to disaster relief to washing
the dishes. KBR is just one multi-billion dollar example of the MBA presidency's
Beyond Blackwater: The Pentagon's Cubicle Mercenaries
The new Complex 2.0 regularly employs companies whose job it is to send
armed mercenaries into action beside U.S. soldiers or to guard U.S. diplomats
and high military officers. Fighting wars for hire has become an essential
part of the Pentagon's MO since 2001, and the Blackwater employee gunning
through Baghdad in a Kevlar vest, a kafiyah, and wrap-around shades
is the ultimate symbol of the new moment.
But there's another dimension of the Bush era's privatization surge at the
Pentagon that has gotten far less coverage: Private military firms are also
doing the paperwork of war. According to a March
2008 GAO report, Additional Personal Conflict of Interest Safeguards
Needed for Certain DoD Contractor Employees, in offices throughout the
Department of Defense, cubicle mercenaries in startling numbers are working
shoulder-to-shoulder with uniformed military staff and federal employees.
The Government Accountability Office (GAO) looked at 21 different Pentagon
offices and found that private contractors outnumbered Department of Defense
employees in more than half of them. In the engineering department of the Missile
Defense Agency, for example, employees from private contractors made up more
than 80 percent of the work force. The GAO found that contractors were responsible
for carrying out a wide range of tasks and were not subject to federal laws
and regulations designed to prevent conflicts of interest including the rules
that concern personnel who want to take positions with companies they had awarded
contracts to as federal employees.
Another March 2008 GAO report
assessed the Army's Contracting Center of Excellence where private contractors
made up less than 20 percent of the workforce. The average hourly cost of an
employee from a private contractor, however, was more than 26 percent higher
than that of a government employee. Similar disparities in pay can be seen
even more starkly in Iraq, where a soldier is paid little more than minimum
wage, while a private military contractor can earn well above $100,000 a year
For perhaps the ultimate contrast in military privatization, consider this:
at a congressional hearing in July, Blackwater CEO Erik Prince offered a ballpark
estimate for his annual salary "more than a million." He assured Rep. Peter
Welch (D-Vt.) that he would "get back" to him with a more exact figure. Welch
noted at the time that Gen. David Petraeus then responsible for more than
160,000 U.S. military personnel in Iraq earned $180,000 a year.
Privatization at the Bottom
Once private companies take on military and war-making tasks, where does
the buck stop? It is not uncommon, for example, for a company hired to perform
a service for the Pentagon to subcontract part of the job to another company,
which may then subcontract part of its task to a third. Who, then, is in
charge? When something goes wrong, who is culpable?
A recent investigation by Craig and Marc Kielburger, Canadian co-founders
of the NGO Free the Children, and Toronto-based journalist Chris Mallinos
found that KBR has subcontracted to more than 200 different firms many
based in Kuwait to transport materials into Iraq.
One result of this: The United States has ended up paying companies that are
essentially enslaving Filipinos, Sri Lankans, and other "third country nationals"
who drive supplies into Iraq. In a recent article in Epoch
Times, the trio recount a series of fact-finding trips to Kuwait to
meet with dozens of South Asian and Filipino men "recruited to the Middle East
with the promise of good jobs, only to be hired by Kuwaiti transport companies
driving into Iraq." A Filipino described how Jassin Transport and Stevedoring
Company one of KBR's sub-subcontractors took his passport, nullified the
contract he had signed in the Philippines, and issued him a new contract written
in Arabic. Employees were "given an ultimatum: sign or be abandoned." Then
they were handed the keys to unarmored tractor-trailer trucks and told to drive
fast along roads known to be dangerous. The authors concluded that these companies
"openly flout U.S. labor laws by using cheap imported labor, withholding employee
passports and housing workers in decrepit conditions."
Officially, nothing like this is supposed to happen. The Philippines, Nepal,
and other countries bar their citizens from taking work in Iraq. In 2006,
the Defense Department actually
issued stricter regulations forbidding such labor trafficking, and KBR
and other companies pledged that they and their subcontractors would follow
local labor laws. But regulations or no, the truth is that the Pentagon is
no longer really in control of the process, and sub-sub-subcontracting is
how you make the big money in places like Iraq.
and despite hearings, investigations, and legislation, Congress isn't
in control either. In an attempt to address the privatization of the military,
for example, the Senate's
Democratic Policy Committee has held a total of seventeen hearings on waste,
fraud, and corruption in Iraq. Rep. Henry Waxman's Oversight and Government
Reform Committee has made the role of congressional gadfly respectable. Hearings
in both the House and Senate have offered riveting, sometimes shocking, inside-the-Beltway
theater, but subsequent legislation created to make decent Pentagon reporting
and oversight a reality, close gaping loopholes in accountability, criminalize
fraud, and curb some of the worst abuses of private contractors has proven
well-meaning but hopelessly weak and ineffective in practice.
Is MIC 3.0 in our Future?
President Bush will leave office boasting that the United States has the
most powerful and professional military machine in the world. We have paid
dearly for this machine in the past seven-plus years. The bill for all that
might and muscle comes to more than $3.8 trillion since 2001 plus another
$900 billion plus for actually flexing it in Iraq, Afghanistan, and elsewhere.
And if the U.S. military machine is now both oversized and staggeringly
expensive, it is also more prone to breakdown in a more dangerous and unstable
world. So think of George W. Bush's legacy to us as a Pentagon bloated almost
beyond recognition and crippled by its dependence on private military corporations.
As for Bush's legacy to the Lockheed Martins, the KBRs, and the Pentagon's
whole "Top 100" crew, it's been money beyond measure, enough to leave them
all hard at work on Military Industrial Complex 3.0. They naturally want to
make sure that the money continues to pour into their ever upgrading war machine,
no matter who takes over the White House in 2009.
Frida Berrigan is a senior program associate at the
New America Foundation's Arms and Security Initiative. She is a
columnist for Foreign Policy in Focus
and a contributing editor at In
These Times. She is the author of reports on the arms trade and
human rights, U.S. nuclear weapons policy, and the domestic politics of U.S.
missile defense and space weapons. She can be reached at firstname.lastname@example.org.
Copyright 2008 Frida Berrigan