Department of Defense Contractors in Afghanistan and Iraq: Background and Analysis
Released: 2011-05-13T00:00:00

Background

The Department of Defense (DOD) has often relied upon contractors to support military operations. During the Revolutionary War, the Continental Army relied on contractors to provide such goods and services as transportation and engineering services, construction, clothing, and weapons. Since then, advances in warfare and technology have expanded the functions and responsibilities of contractors in military operations. After the Cold War, reliance on contractors further increased when DOD cut logistic and support personnel. As a result of these cuts, DOD lost in-house capability and was forced to rely even further on contractor support. Many analysts now believe that DOD is unable to successfully execute large missions without contractor support. These analysts point to recent contingency operations in Iraq, Afghanistan, and the Balkans—the three largest military operations of the past 15 years—where contractors have comprised approximately 50% of DOD's combined contractor and uniformed personnel workforce in country (see Figure 1 ).

Contractors are often seen as providing operational benefits to DOD. Using contractors to perform non-combat activities augments the total force and can free up uniformed personnel for combat missions. Since contractors can be hired faster than DOD can develop an internal capability, contractors can be quickly deployed to provide critical support capabilities when necessary. Contractors also provide expertise in specialized fields that DOD may not possess, such as linguistics. Using contractors can also save DOD money. Contractors can be hired when a particular need arises and be let go when their services are no longer needed. Hiring contractors only as needed can be cheaper in the long run than maintaining a permanent in-house capability. Using local nationals as contractors could also help develop the local economy and workforce, contributing to stability and counter-insurgency operations.

Managing Contractors During Contingency Operations

Lack of sufficient contract management can prevent troops from receiving needed support and lead to wasteful spending. In addition, some analysts believe that lax contractor oversight may lead to contractor abuses, which can undermine U.S. counter-insurgency efforts.

Questions have been raised about DOD's ability to effectively manage contractors during contingency operations. Some analysts assert that DOD has not adequately planned for the use of contractors, lacks contingency contracting experience, and does not sufficiently coordinate contracts across military services. In January 2009, Secretary of Defense Roberts Gates acknowledged DOD's failure to adequately plan for the use of contractors, when he testified that use of contractors occurred

without any supervision or without any coherent strategy on how we were going to do it and without conscious decisions about what we will allow contractors to do and what we won't allow contractors to do... We have not thought holistically or coherently about our use of contractors, particularly when it comes to combat environments or combat training.

In 2007, a report by the Commission on Army Acquisition and Program Management in Expeditionary Operations (the Gansler Report) found that contracting officer representatives, who are responsible for managing contracts, usually have no prior experience with contractors and receive negligible training on how to manage contractors. Some analysts and industry representatives argue that as a result, DOD is not getting the most out of the services provided by contractors in Afghanistan and Iraq.

Questions have also been raised about DOD spending on contractors. The Commission on Wartime Contracting highlighted over-spending on contracts as a key concern. It reported that managerial shortages and limited oversight of contractors led to potentially unnecessary construction, such as a new $30 million dining facility to be completed a year before U.S. troops were required to leave Iraq, even though a then-recently upgraded dining facility was located nearby.

Many analysts argue that only a culture shift in the military will improve contracting outcomes. The Gansler Report found that despite the importance of acquisitions to military performance,

the Army apparently has not valued the skill and experience required to perform those processes ... without significant systemic change, the Army acquisition processes [contracting process] can be expected to inevitably return to below-mediocrity.

Other analysts have argued that DOD's current approach to managing service contracts tends to be reactive and has not fully addressed key factors for success. These analysts argue that to improve contracting outcomes, DOD must (1) understand how and why it uses contractors, including the number of contractors and types of services provided; (2) develop better management and contract oversight structures; and (3) establish and commit to a strategic approach that defines how contractors should be used to achieve operational success.

The use of contractors in Afghanistan and Iraq raises a number of issues for Congress, including (1) what role contractors should play in contingency operations, (2) whether DOD is gathering and analyzing the right data on the use of contractors, (3) what steps DOD is taking to improve contract management and oversight, and (4) the extent to which contractors are included in military doctrine and strategy. This report will discuss current contracting trends in Afghanistan and Iraq and steps DOD has taken to improve contractor oversight and management.

Contractors in the Central Command Region

Contractors supply a wide variety of services and products—including base support, construction, security, training local security forces, and transportation—to assist DOD operations in Afghanistan and Iraq. While many of these contractors work in Afghanistan and Iraq, a number are also present in surrounding countries within the U.S. Central Command (CENTCOM) Area of Responsibility and in the United States. For example, at Camp Arifjan, Kuwait, the Army relied on contractors to refurbish and repair vehicles used in Afghanistan and Iraq, such as the Bradley Fighting Vehicle and armored personnel carriers.

DOD did not begin to gather and release data on contractors in CENTCOM until the second half of 2007. As a result, the following CRS analysis covers the period from September 2007 to December 2010. Contractor data in this report is based primarily on CENTCOM's quarterly manual census.

DOD is implementing the Synchronized Predeployment and Operational Tracker (SPOT), which is designed to track and monitor contractor personnel within a contingency operation. In January 2007, DOD chose SPOT as its primary system for collecting data on contractor personnel. In July 2008, DOD, the Department of State, and USAID signed a memorandum of understanding designating SPOT as the system to track contractor. DOD originally planned to have SPOT replace the CENTCOM quarterly census as the tracking mechanism for contractor data by Q1 2010. According to a recent GAO report, the transition to SPOT has been delayed and is expected to be completed no later than Q4 FY2011.

A number of analysts have raised questions about the reliability of the data gathered by DOD. In October 2010, GAO reported that the quarterly contractor reports represent only a rough approximation of the number of contractors and therefore should not be relied upon for precise analysis. GAO has also stated that because of data reliability issues, "caution should be used" when trying to use quarterly census data to identify trends or draw conclusions about the number of contractor personnel. DOD officials have acknowledged data shortcomings and have stated that they are working to improve the reliability and the type of data gathered. Reliable data on local nationals, particularly in Afghanistan, has been the most difficult to gather. According to DOD

The reported number of local national personnel in Afghanistan continues to fluctuate as we address reporting challenges. Specifically, there has been inconsistency in the reporting of day laborer personnel. SPOT [the Synchronized Predeployment and Operational Tracker system] does not require the registration of contractors working on a contract for less than 30 days. However, some contracting activities (in some quarters) include these contractors in their total manual census/SPOT Plus count. The inconsistency of who is counted is compounded by the frequent turnover of personnel responsible to provide input to the census and their individual understanding of reporting requirements. The issue was highlighted in the 4 th quarter FY 2010 census. OSD has, in conjunction with USCENTCOM and the SPOT PM published guidance to clarify census reporting requirements.

Contractors in CENTCOM

Number of Contractors

According to DOD, as of March 31, 2011, there were approximately 174,000 DOD contractor personnel in the CENTCOM AOR compared to approximately 214,000 uniformed personnel in the region who are supporting operations in Afghanistan and Iraq. Contractors made up 45% of DOD's combined contractor and uniformed personnel workforce in the CENTCOM AOR, representing a .81:1 ratio between contractors and uniformed personnel (see Table 1 ).

The number of contractor personnel in the CENTCOM AOR roughly tracks to the number of troops (see Figure 2 ).

According to GAO, lessons learned and data analysis from past operations must be included in the development of a strategic plan to define contractor involvement in future operations. Many analysts agree that understanding the role contractors play in various DOD operations—including the relationship between contractors and troop levels—could help to more effectively determine contractor support requirements in Afghanistan and Iraq, as well as future operations.

According to DOD, contracting with local nationals is an important element in counter-insurgency strategy. Employing local nationals injects money into the local economy, provides job training, builds support among local nationals, and can give the U.S. a more sophisticated understanding of the local landscape, says DOD. In January 2009, General Raymond Odierno issued a memorandum to this effect, stating "employment of Iraqis not only saves money but it also strengthens the Iraqi economy and helps eliminate the root causes of the insurgency—poverty and lack of economic opportunity." The memorandum set forth a goal of increasing the percentage of local national contractors. Despite this policy, DOD has trended away from using local nationals as contractor personnel in Afghanistan and Iraq. The percentage of contractors who were local nationals in both countries dropped from 49% in December 2009 to 36% in March 2011.

An analysis of contractor data also appears to indicate differences in how DOD used contractors in Afghanistan when compared to Iraq. For example, 51% of contractors in Afghanistan are local nationals compared to only 15% in Iraq (see Figure 5 and Figure 11 , respectively). Some analysts contend that understanding these differences—and why they occur—could help DOD to strategically plan for the management and use of contractors in future operations. For example, had DOD understood the extent to which it would rely on private security contractors in Afghanistan and Iraq, DOD might have put in place a more robust oversight and coordination mechanism earlier.

DOD Contract Obligations

According to the Federal Procurement Data System – Next Generation (FPDS), DOD obligated approximately $27.2 billion on contracts in the Afghanistan and Iraq theaters of operations in FY2010, representing 17% of DOD's total war obligations in the Afghanistan and Iraq theaters of operations. From FY2005 through FY2010, DOD obligated approximately $146 billion on contracts in the Iraq and Afghanistan theaters of operations (see Figure 3 ), representing 18% of total war spending for operations in Afghanistan and Iraq.

Contractors in Afghanistan

Number of Contractors

As reflected in Table 1 , according to DOD, as of March 2011, there were 90,339 DOD contractor personnel in Afghanistan, compared to approximately 99,800 uniformed personnel. Contractors made up 48% of DOD's workforce in Afghanistan (see Figure 4 ). This compares to December 2008, when contractors represented 69% of DOD's workforce in Afghanistan.

Type of Work Performed by Contractors

DOD does not report the breakdown of services that contractors provide in Afghanistan, with the exception of data on private security contractors. Nevertheless, the types of services provided by contractors in Afghanistan are similar to those conducted in Iraq, including logistics, construction, linguistic services, and transportation; the percentage of contractors providing each service is likely different. DOD officials have stated in the past that they will start providing data on the breakdown of services in Afghanistan. However, to date, they have not done so.

Profile of Contractors

As of March 2011, of the approximately 90,000 contractors in Afghanistan, 20,000 were U.S. citizens, 24,000 were third-country nationals, and 46,000 were local nationals (see Table 2 ). Local nationals made up 51% of contractor personnel.

As discussed above, the number of local nationals in recent census reports continues to fluctuate as DOD works to "address the challenges associated with the day to day employment of individual [local national] contractors."

In September 2010, General Petraeus, Commander of the International Security Assistance Force/United States Forces—Afghanistan, wrote that US and NATO forces must "[H]ire Afghans first, buy Afghan products, and build Afghan capacity" Based on the available data, DOD uses more local nationals in Afghanistan than U.S. citizens and third-country nationals combined. However, the percentage of contractor personnel who are local nationals has steadily declined from a high of 86% in September 2008 to a low of 51% in March 2011 (see Figure 5 ), despite DOD's policy of trying to hire local nationals.

Pursuing an Afghan First policy raises a number of issues. For example, focusing on the nationality of contractor personnel, and not where in Afghanistan workers are from, can undermine some of the goals of the Afghan first policy. When contractors are working in a given region, the local population often wants local residents to be hired to perform the work. In such situations, bringing in Afghan contractors who are not from the local community could undermine efforts to build relationships with the local populace. Another issue to consider is whether in certain circumstances awarding contracts to local nationals could empower bad actors, criminal gangs, or corrupt individuals. In those instances, it may be preferable to award a contract to foreign companies.

The International Security Assistance Force (ISAF) has generally had little visibility into who the local national contractors and subcontractors are who work for DOD, including not knowing the extent to which money from government contracts is empowering bad actors or groups whose interests run counter to the mission of coalition partners.

One of NATO-ISAF's objectives is to reduce corruption and neutralize "criminal patronage networks." In an effort to address corruption, ISAF established the Combined Joint Interagency Task Force (CJIATF) Shafafiyat (which means 'transparency' in Dari and Pashto) in August 2010 under the leadership of Brigadier General H.R. McMaster to address the issue of corruption. Under CJIATF Shafafiyat are three specialized units: Task Force Spotlight (focused on private security companies), Task Force 2010 (focused on the risk of contracting funds going to hostile groups), and CJIATF Nexus (focused on the link between drug traffickers, insurgents, and corrupt powerbrokers). CJIATF Nexus operates in the south and southwest of Afghanistan.

DOD Contract Obligations

According to FPDS, DOD obligated approximately $11.8 billion on contracts in the Afghanistan theater of operations in FY2010, representing 15% of total obligations in the Afghanistan in the area. From FY2005-FY2010, DOD obligated approximately $33.9 billion on contracts primarily in the Afghanistan theater, representing 16% of total DOD obligations for operations in that area (see Figure 6 . For a breakout of contract obligations see Table C -1 ).

Contractors in Iraq

Number of Contractors

As reflected in Table 1 (above), according to DOD, as of March 2011, there were approximately 64,000 DOD contractor personnel in Iraq compared to 46,000 uniformed personnel in-country. Contractors made up approximately 58% of DOD's workforce in Iraq. Both contractor and troop levels have decreased every quarter for more than two years (see Figure 7 ).

Type of Work Performed by Contractors

Contractors perform a wide range of services in Iraq. As of March 2011, approximately 39,000 personnel (61% of contractors) performed base support functions such as maintaining the grounds, running dining facilities, and performing laundry services (see Figure 8 ). Security was the second most common service provided, with approximately 10,500 personnel (16% of contractors). Combined, these two categories accounted for almost 80% of DOD contractors in Iraq.

As the overall number of troops in Iraq has decreased, so too has the overall number of contractors. For example, since June 2008, as troop levels dropped by approximately 108,000 (70%), total contractors fell by approximately 95,000 (60%). However, as reflected in Appendix A , the number of contractors did not decrease uniformly across the contractor workforce. For example, during the same period, contractors providing base support and construction declined by 57% (51,000 personnel) and 98% (35,000 personnel) respectively, whereas the number of contractors providing security actually increased by 14% (1,000 personnel).

This data indicates that as the services required by DOD change during the course of operations, the percentages and numbers of contractors providing different types of services also change. The drop in the number of contractor personnel performing base support and construction is a reflection of DOD's shrinking footprint and winding down of reconstruction activities. As reflected in Figure 9 , the percentage of contractors performing base support has remained relatively constant, the percentage working in construction has decreased, and the percentage performing security has increased.

Profile of Contractors

Of the approximately 64,000 contractors in Iraq as of March 2011, some 18,000 were U.S. citizens, 9,000 were local nationals, and 37,000 were third-country nationals (see Table 3 ). Third-country nationals made up more than half of all contractor personnel.

From June 2008 to March 2011, the number of Iraqi contractor personnel dropped by almost 61,000 (87%), while the number of U.S. personnel decreased by 8,000 (31%) (see Figure 10 ). This can be only partially explained by the drop in the number of contractor personnel performing construction; local nationals generally represent more than 80% of these workers.

The percentage of contractors who are local nationals has steadily dropped from a high of 53% in September 2007 (see Figure 11 ). This drop has occurred despite a DOD policy to increase the percentage of local national contractors.

DOD Contract Obligations

DOD obligated approximately $15.4 billion on contracts in the Iraq theater of operations in FY2010, representing 20% of total spending in those regions. From FY2005 to FY2010, DOD obligated approximately $112.8 billion on contracts primarily in the Iraq theater of operations, representing 19% of total obligations for operations in Iraq.

Efforts to Improve Contractor Management and Oversight

In January 2009, Secretary Defense Robert Gates testified that contractors were used in Iraq "without any supervision or without any coherent strategy on how we were going to do it and without conscious decisions about what we will allow contractors to do and what we won't allow contractors to do …and those are the areas that I think especially we need to focus on first."

In light of DOD's experiences in Afghanistan and Iraq, and in response to legislation and the findings of numerous studies (including the Gansler Report, GAO reports, and Special Inspector General for Iraq Reconstruction reports), DOD has taken a number of steps to try to improve how it manages contractors in Afghanistan and Iraq. These efforts have included organizational changes such as setting up the Joint Contracting Command to provide a more centralized contracting support and management system; implementing regulatory and policy changes aimed at improving management; improving training for uniformed personnel on how to manage contractors; and increasing the size of the acquisition workforce in theater.

DOD senior officials are also making a concerted effort to elevate the importance of contracting and think about the role of contractors during contingency operations. In a September 2010 memorandum to commanders, contracting personnel, uniformed personnel, and civilians in Afghanistan, General Petraeus, Commander of the International Security Assistance Force/United States Forces—Afghanistan, stated that "contracting has to be a 'commander's business.'" This statement is consistent with the efforts of other senior leaders, including the Chairman of the Joint Chiefs of Staff's establishment of a task force on contractor reliance in contingency operations and Secretary Gates' testimony.

A number of these initiatives have been reflected in or were the result of legislation. For example, the Joint Contingency Acquisition Support Office was established as a result of section 854 of the FY2007 John Warner National Defense Authorization Act (NDAA) requiring DOD to create a team of contingency contracting experts that can be deployed to support military operations. In the FY2008 NDAA, Congress mandated contingency contracting training for non-acquisition military personnel who will have relevant contracting responsibilities.

A number of analysts and government officials believe that some of these efforts have improved DOD's ability to manage and oversee contractors in Afghanistan and Iraq. For example, in Iraq, DOD established Contractor Operations Cells to coordinate the movement of PSCs and the Armed Contractor Oversight Directorate to manage PSCs. The improvements in how DOD manages PSCs in Iraq have been noted by the Special Inspector General for Iraq Reconstruction, the Commission on Wartime Contracting, and the GAO.

Despite these efforts, DOD still faces challenges in managing contractors. As an April 2010 Joint Staff report stated, "[A]lthough progress has been made in the past 4 years to improve operational contract support (OCS) policy and doctrine, significant challenges remain." For example, DOD was recently criticized for not knowing who is receiving money from U.S.-funded contracts in Afghanistan. There have been allegations that money from U.S.-funded contracts has gone to local warlords and the Taliban. Recent criticism also includes DOD's continued inability to accurately track contracts and contractor personnel in Afghanistan and Iraq.

Selected Congressional Hearings and Legislation

Congress has held a number of hearings and passed legislation relating to DOD contracting efforts in Afghanistan and Iraq. Hearings have taken place in a number of different committees and have covered a wide array of related issues, including private security contractors, interrogators, logistic support, contract management and oversight, and training requirements. Congress has also passed legislation annually in a number of these areas. Such legislation generally occurs in the National Defense Authorization Act (NDAA). The following section provides a highlight of key congressional activity related to contingency contracting.

Private Security Contractors

Congress has focused more on private security contractors than other contracting issues, even though such contractors have generally comprised roughly 10-20% of DOD contractors in Afghanistan and Iraq. Hearings have been held in the Senate Committee on Armed Services, the Senate Committee on Homeland Security and Governmental Affairs, the House Committee on Oversight and Government Reform, and the House Committee on Armed Services. This issue was also raised in other hearings, such as the House Committee on Oversight and Government Reform's hearing on the Commission on Wartime Contracting: Interim Findings and Path Forward and the House Committee on the Judiciary' hearing on Enforcement of Federal Criminal Law to Protect Americans Working for U.S. Contractors in Iraq. The National Security and Foreign Affairs Subcommittee of the House Committee on Oversight and Government Reform conducted a hearing Investigation of Protection Payments for Safe Passage along the Afghan Supply Chain, which focused on armed private security contractors providing convoy security along the Afghan supply chain. More recently, the Senate Armed Services Committee issued a report that found evidence of U.S.-funded prime contractors supporting the Taliban and subcontracting to warlords.

In the FY2008 NDAA, Congress required the Secretary of Defense, in coordination with the Secretary of State, to prescribe regulations and guidance relating to screening, equipping, and managing private security personnel in areas of combat operations. These regulations were to include tracking private security personnel (PSC), authorizing and accounting for weapons used by PSCs, and reporting requirements whenever a security contractor discharges a weapon, kills or injures another person, or is killed or injured. Included in the FY2009 NDAA is a "Sense of Congress" that private security contractors should not perform inherently governmental functions, such as security protection of resources, in high-threat operational environments. In the same legislation, Congress mandated that interrogation is an inherently governmental function that DOD may not outsource to contractors.

Contractors Training Local Security Forces

Congress has turned its attention to contractors training local security forces in Afghanistan and Iraq. Such hearings have raised a number of issues, including the behavior of such contactors, whether there is sufficient contract oversight, and the cost of such contracts. The Senate Committee on Armed Services held a hearing on Contracting in a Counterinsurgency: An Examination of the Blackwater-Paravant Contract and the Need for Oversight, which focused on the shooting of Afghan civilians by two Paravant employees. The Ad Hoc Subcommittee on Contracting Oversight of the Senate, Committee on Homeland Security and Governmental Affairs held a hearing Afghan Police Force Training , which raised the issue of waste and a lack of oversight on $6 billion spent on contracts to train the Afghan national police force.

Contract Management, Oversight, and Coordination

Management and oversight of contracting personnel in contingency operations has been of significant interest to Congress. Hearings on these issues have been held in the Senate Committee on Armed Services and the Senate Committee on Homeland Security and Governmental Affairs. This issue was also raised by the House Committee on Armed Services' hearing on Coordinating Contract Support on the Battlefield: Defense, State, and U.S. AID and the House Committee on Oversight and Government Reform's hearing on Commission on Wartime Contracting: Interim Findings and Path Forward.

In the FY2008 NDAA, Congress mandated the creation of a memorandum of understanding between the Secretary of Defense, Secretary of State, and Administrator of the United States Agency for International Development to promote coordinated contingency contracting practices. Congress also established the Commission on Wartime Contracting to study wartime contracting in Afghanistan and Iraq, determine the extent to which the federal government relies on contractors, and examine how U.S. objectives are achieved by this reliance on contractors. In the FY2009 NDAA, Congress added additional requirements and reporting mechanisms for alleged crimes committed by or against contractor personnel in Iraq or Afghanistan.

Training Contractors and the Military in Contingency Contracting

Some testimony at various hearings emphasized that increased training is necessary for non-acquisition personnel throughout the military. Concerned that DOD contractors and personnel are not sufficiently trained to execute contingency contracting, Congress passed legislation requiring DOD to implement training requirements for contingency contracting personnel (in coordination with the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, and the Defense Acquisition University), and to provide specific training to contract management personnel. In the FY2008 NDAA, Congress called for contract management training for personnel outside the acquisition workforce who are responsible for contractor oversight. The FY2008 NDAA also mandated the incorporation of contractors in mission-readiness exercises with uniformed personnel. In addition, Congress passed legislation establishing of a government-wide Contingency Contracting Corps that will be available for deployment in responding to an emergency or major disasters, or a contingency operation. Congress authorized this corps to receive specific training in contingency contracting.

Appendix A. Contractor Personnel in Iraq by Type of Service Provided

Appendix A.

Appendix B. Contractor and Troop Level Data

The Department of Defense posts the results of its quarterly CENTCOM census report at http://www.acq.osd.mil/log/PS/hot_topics.html . Data is usually posted between six and eight weeks after the end of the quarter. Because the website only posts the most recent two quarters, CRS has provided the data from previous census reports in the tables below.

Appendix C. Comparison of CRS, CBO, and GAO Methodology for Determining DOD Contract Obligations in Afghanistan and Iraq

In 2008, CBO published a report that tracked the U.S. government's obligations in Iraqi theater from FY2005-FY2007 using FPDS-NG data. CRS used the same methodology in determining the value of contract obligations in the Afghanistan and Iraq theaters, relying on the data in federal government's FPDS database to conduct its analysis. Differences in the data reported by CBO in its 2008 report can be attributed to FPDS, which subsequent to the release of the CBO report, has continuously updated information and restated prior years.

For the past three years, GAO published annual reports on contracting in Afghanistan and Iraq. The GAO reports included only information on contracts performed in Iraq and Afghanistan. However, in some cases, these contracts included performance in other countries as well. Because of how DOD reported the data to GAO, GAO could not isolate the portion of obligations that were specific to Afghanistan or Iraq. GAO did not include in its analysis contracts performed wholly outside of Afghanistan and Iraq but still within the respective theaters of operations. GAO's analysis did not rely exclusively on FPDS data: GAO also reviewed manually compiled lists of obligations and deobligations, and took other steps to refine the data.

The data used by CRS and CBO allocates place of performance based on the principal place of performance as indentified by FPDS. Because FPDS only allows for one country to be listed as the place of performance, contracts listed as being performed in one country can also involve substantial performance in other countries. As a result of differences in methodologies, some contract obligations may be allocated to different countries by GAO, CRS, and CBO.