David Isenberg wrote in his Dogs of War column Friday discussing whether or not PMCs are cost effective.
If you’ve heard it once, you’ve heard it countless times: Governments and corporations turn to private military contractors because it is more cost-effective than using regular military forces. But is it true?
But whether it’s true that contractors are cost effective is at best an open question, the answer to which depends, in part, on what you mean by cost.
While outsourcing can be effective, doing things in-house is often easier and quicker. You avoid the expense and hassle of haggling, and retain operational reliability and control, which is especially important to the military.
Then there is the fact that outsourcing works best when there’s genuine competition among suppliers. …
The Bush/Cheney administration has greatly reduced competition:
An analysis showed that fewer than half of all “contract actions” - new contracts and payments against existing contracts - were now subject to full and open competition. Just 48 percent were competitive in 2005, down from 79 percent in 2001.
Many academics who examine the issue of the relative cost of private versus public point to the politics behind the ways one can measure cost. What you include or exclude can be a complicated, and highly political, exercise. Economists disagree on how to answer the question at least in part because they use different variables when measuring cost.
… What little cost-benefit analysis there has been to date has focused on narrow economic cost comparisons and generally avoided addressing equally important political factors, such as avoiding tough choices concerning military needs, reserve call-ups and the human consequences of war.
As Tyler Cowen, an economics professor at George Mason University, wrote, “Excessive use of private contractors erodes checks and balances, and it substitutes market transactions, controlled by the executive branch, for traditional political mechanisms of accountability. When it comes to Iraq, we’ve yet to see the evidence of a large practical gain in return; instead, use of contractors may have helped to make an ill-advised venture possible.”
And related to the “human consequences of war”, one big question is who pays which costs? The military budget, and the government’s operating budget are hardly the only ones affected. Many employees of the PMC corporations are finding that their immediate employer is a shell incorporated outside the US to avoid US laws, such as medical coverage for the PMC employees. Quite a number of PMC employees are third country nationals, and as individuals, may have to carry a lot of the cost of their participation. The other cost may be to their countries of origin. What needs or expectations will they bring back? And how will their training in Iraq affect their participation in society and government at home?
Outsourcing is a way of cost shifting rather than cost saving. I see it every day. The young Spanish speaking woman who cleans our offices daily is our colleague. She does a superb job. Yet the contractor she works for pays her minimum wage and no benefits. My employer “saves” money by not paying permanent employees salaries and benefits to do the cleaning. The costs are shifted onto the individual at the bottom of the pay scale who is least able to bear these costs. And of course, the costs come back to government, which must deal with the emergency situations this cost shifting generates. Walmart is famous for these cost shifting “savings”, but its size makes it visible, it is hardly alone.
As Isenberg says, it depends on what you mean by cost.