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. 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 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. 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).