OUTSOURCING SECURITY

By William Fisher

As a new report forecasts that the 190,000 private contractors in Iraq and neighboring countries will cost U.S. taxpayers more than $100 billion by the end of 2008, an under-the-radar Florida court case suggests that President George W. Bush – a staunch contractor supporter -- is preparing to throw security firms such as Blackwater under the political bus.

In the Florida case, relatives of three American servicemen killed in the 2004 crash of an aircraft owned by Blackwater Aviation in Afghanistan are suing the company for damages, based in part of U.S. government reviews that concluded that errors committed by Blackwater staff were responsible for the deaths. This week, despite President George W. Bush's support for what he has called the critical roles played by overseas contractors, his Administration failed to meet a deadline for presenting the court with any defense of Blackwater.

The Administration’s silence has caused consternation among Blackwater and its supporters. Erik Prince, Blackwater's chairman, told TIME magazine, "After the President has said that, as Commander-in-Chief, he is ultimately responsible for contractors on the battlefield it is disappointing that his Administration has been unwilling to make that interest clear before the courts.”

Some observers have speculated that the Administration’s silence can be attributed to the controversial nature of the contractor issue and a reluctance to address it during a hotly contested presidential election year.

The Florida battle, which could eventually find its way to the U.S. Supreme Court, turns on the question of whether Blackwater and other overseas contractors are subject to U.S. law. That question arises because of a decree issued in 2005 by the then U.S. Iraq Administrator, L. Paul Bremer, granting contractors legal immunity. The Iraqi government claims that Blackwater and other contractors have been responsible for the deaths of Iraqi civilians and wants to make them subject to Iraqi law.

The U.S. has resisted this move, which is thought to be part of the ongoing stalemate in negotiations with Iraq over the future status of U.S. forces in that country.

The White House has also attacked a bill recently passed by the House of Representatives that would place combat-zone contractors under the jurisdiction of U.S. courts. It called the measure is an unacceptable extension of federal jurisdiction overseas, and said it would place additional burdens on the military.

Blackwater’s argument is that the company should be covered by the same "sovereign immunity" that protects the U.S. military from lawsuits because the downed flight was under the command and control of the U.S. military.

Last month, this argument was rejected by three federal judges, who cited the U.S. government's failure to take a position in defense of Blackwater as one of their reasons. In their opinion to allow the lawsuit to proceed, the judges ruled that "The apparent lack of interest from the United States... fortifies our conclusion that the case does not yet present a political question.”

Lawyers for many major contractors including DynCorp, Kellogg Brown and Root, Blackwater and others, say a dangerous precedent would be established if this and similar cases are allowed to go forward. Such a decision, they say, would open contractors to large money damages and greatly higher risk insurance costs that could adversely affect their ability to carry out the jobs the U.S. government has hired them to do.

As the Florida case made its way through the U.S. legal system, a new report from the Congressional Budget Office (CBO) contends that the cost of having military personnel provide security services in Iraq might be little different from the prices charged by private security contactors.

The report said that $6-$10 billion has been spent on security contactors thus far in 2008 and estimated that about 25,000-30,000 employees of security
firms were in Iraq as of early this year. It estimates that, if spending for contractors continues at about the current rate, $100 billion will have been paid to military contractors for operations in Iraq.

The report revealed that about 20 percent of funding for operations in Iraq has gone to contractors. Currently, it said, there are at least 190,000 contractors in Iraq and neighboring countries, a ratio of about one contractor per U.S. service member. It noted that the U.S. has relied more heavily on contractors in Iraq than in any other war to provide services ranging from food service to guarding diplomats.

The report also noted that the legal status of contractor personnel is a gray area of U.S. law, particularly for those who are armed. It said that military commanders have less direct authority over contractors because their contracts are managed by a government contracting officer rather than a military commander.

The CBO review was requested by Senator Kent Conrad, a North Dakota Democrat who is chairman of the Senate Budget Committee. In a statement, Conrad said the Bush administration's reliance on military contractors has set a dangerous precedent. The use of contractors "restricts accountability and oversight; opens the door to corruption and abuse; and, in some instances, may significantly increase the cost to American taxpayers," he said.

The report comes at a time when the actions of contractors in Iraq and Afghanistan are coming under increased scrutiny. Contractors, including Blackwater and KBR, have been investigated in connection with shooting deaths of Iraqis and the accidental electrocutions of U.S. troops. The Senate Democratic Policy Committee heard testimony a few weeks ago from a former DCAA contract overseer who was effectively fired because he refused to authorize $1 billion in unsubstantiated charges from KBR. The Government Accountability Office released a report that confirmed whistleblower complaints of DCAA supervisors issuing unsupported findings that were favorable to contractors. And last week, Government Executive reported that nearly a dozen former DCAA employees see DCAA as a very troubled agency that is more concerned with performance goals than actually overseeing contracts.

The death of a U.S. soldier, who was electrocuted in January while showering in Iraq, prompted a House committee oversight hearing last month into whether KBR Inc. has properly handled the electrical work at bases it maintains. The military has also said that five other deaths were due to improperly installed or maintained electrical devices, according to a congressional report.

Contractors’ activities have drawn sharp criticism from private non-governmental watchdog groups, such as OMB Watch. OMB stands for the Office of Management and Budget, which prepares and presents the president’s budget to congress.

Craig Jennings, OMB’s Federal Fiscal Policy Analyst, told us, “$100 billion is a very large amount of money -- in fact, Iraq's GDP was just over $100 billion in 2007. But what staggers my imagination is how sober adults would be willing to divert such vast sums of America's financial resources to the bank accounts of private firms whose dealings are opaque to taxpayers and, for the most part, held unaccountable.”

He added, “I think advocates of unaccountable privatization are beginning to reap what they have sown: defending privatization of war-making on such an enormous scale is becoming tenuous. It's hard to paint a picture of contractors providing taxpayers value when so many instances contractor misconduct have found their way into the public's consciousness.”
Jennings also called attention to the shortcomings of the military auditing process.

He told us, “This magnitude of expenditures on private contractors is especially striking in light of recent government and media reports of dysfunction in the Defense Contract Audit Agency (DCAA). The protection of the interests of American taxpayers is apparently suffering a number of impediments.”