Potential Cost of Private Military Companies

The recent AEGIS video possibly showing inappropriate behaviour (allegations until proven) is further opening the eyes of the public on private military companies. One proported reason for the expanded use of these companies is  that private enterprise can provide services quicker and at lower costthan public enterprises is rooted in the American corporate experience. However, the “low-cost” advantages of private military forces fail to provide net cost savings when the entire engagement is included in the calculus. Consider the value of military procurement when the two options are private firms or public agencies and the private pitch is high efficiency at a lower face value than public agencies.

Not included in this first level of analysis is the loyalty and trust of the public agency, for example the US Marine Corps and soldiers on kitchen duty. Additionally, dollar for dollar comparisons oversimplify long-term costs of private markets which fail to be perfectly competitive with hidden and substantial transactional costs. Hidden costs of the private-public partnership include higher finance costs (the government can always can borrow money at lower rates), vendor incentives to skimp on quality or adhere to the letter of the contract not the spirit, future public costs to return outsourced skills in-house, and transactional costs of writing, enforcing, and monitoring contracts. Most important is a lack of committed loyalty to the project or consequences of under-performing. Further, the private business may seek contractually-allowed alternatives when uncertainty is likely in any war situation when other outcomes are desired by the client. This, along with unpredictability of warfare, results in expensive cost-plus contracts.

The cost of returning the outsourced task to the public agency is actually two-fold. The obvious expense of retraining aside, once the private sector has the ability to conduct war operations (especially large scale war) without the state it is likely to seek clients and projects for its skills, a dangerous situation as the larger the private firm grows, the more influence it wields and the more its is able to shape policy and further inoculate themselves from oversight. Military equipment and training has little value in alternative civilian uses, limited their marketability and companies must seek revenue streams to make a profit and diplomatic costs of this new private ability are likely to be very high in the long run.

While at least one private military company now requires an oath of allegiance of its employees for United States’ paid missions, the company is still for-profit, still outside of military control, a vendor to the civilian leadership, and more frequently, not wholly or even partially infused with US Armed Forces trained and indoctrinated professional soldiers. Missions may now be performed in the name of the state but short-staffed not because of tactical concerns, but because of contractual limits and profit motives. The four Fallujah contractors killed in March 2004 allegedly died in part because their employer did not provide a fifth man for rear cover to save money, did not provide adequate situational intelligence, and did not allow the contractors to become familiar with the territory. The decision of a private military force to withdraw from a combat zone because of rising interest rates, leverage for contract negotiations, or loss of the contract may seriously damage and reduce military capacity with virtual impunity. Outsourcing to private parties shortens the decision making horizon into immediate “commercial concerns and lobbying rather than real gains to the nation and citizens” that encourage the use of companies that “lack verification and mandatory evaluation safeguards to deliver promised results”.

As the accountability tests illustrates, an additional cost is lack of accountability through the military command structure, military legal system, or in-country legal system of the private military force. Hidden costs from the accountability issue includes the impact on moral of public troops, lack of steadfastness in time of need, and public diplomacy and image problems resulting from conduct.

That being said, there are valuable uses of private military companies. They simply should not be used willy-nilly but for specific purposes, with oversight and monitoring. The opportunity for abuse is too substantial but their value is too great to ignore.