The Private Military Services Industry

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For a further discussion of the issues covered here, see Perlo–Freeman, S. and Sköns, E., ‘The Private Military Services Industry’, SIPRI Insight 001, 2008.

Introduction

A marked development in the arms industry over the past twenty years, which has accelerated as a result of the Iraq war, is the growing importance of companies providing military services, as distinct from military equipment.

The end of the Cold War saw a greatly increased role for private companies in a range of conflict situations, the product of both a large supply of discharged former military personnel, and of widespread demand from weak states facing internal conflicts – and sometimes from non-governmental actors operating in conflict zones.The use of private military contractors in Iraq, Afghanistan and elsewhere to provide armed &lqoute;security&rquote; for military bases, oil installations, diplomatic convoys etc, has recently drawn a great deal of attention, due to well&ndashpublicised cases such as the shooing dead of 17 civilians by employees of the US company Blackwater in September 2007. But the private military services industry encompasses a wide range of support activities, such as IT services, equipment maintenance, repair and overhaul, facilities management, logistics, intelligence services and training, as well as armed security. Such activities, previously performed by the armed forces or within defence ministries, have increasingly been outsourced to private companies in market economies— most notably in the US and the UK, although the trend is increasingly spreading.

The military services industry that has been created by these trends can be seen as part of the broader arms industry, which traditionally has been conceived of as providing military goods rather than services. While major equipment providers have provided some services (such as maintenance) for a long time, military outsourcing and the growing use of private companies in war zones have generated a strong expansion in the military services industry. This has involved both the growth of new specialist military services companies, and the increasing diversification of established arms producing companies into military services. This expansion is reflected in the composition of the SIPRI Top 100 arms-producing companies; while the Top 100 for 2006 included eighteen companies specialising in military services, the Top 100 for 1996 included only ten.

Numerous authors have sought to document the military services industry, in particular in relation to the activities of private companies operating in conflict zones and the problems associated with this. Important works include Wulf, H., ‘Internationalizing and privatizing war and peace&rsquo, Palgrave Macmillan 2005; Singer, P.W., ‘Corporate Warriors: the rise of the privatized military industry’, Cornell University Press, 2003; and Holmqvist, C., ‘Private security companies: the case for regulation’, SIPRI Policy Paper no. 9, 2005.

What are military services?

Military services are activities of a military-specific nature and purpose provided on a commercial basis. While most military services constitute activities contracted out by a military establishment (armed forces and defence ministry), services such as armed security in conflict zones are also provided to non-military customers, including other branches of government, multinational companies, NGOs and inter-governmental organizations (e.g. the UN). Military services do not include purely civilian services provided to military customers, such as electricity, health insurance, or cooking and cleaning at military bases. Also not included in this definition are civil security services provided in peacetime.

The table below describes many of the main types of military services currently provided by private companies, along with examples of some of the main companies providing them.

The size of the military services industry

While there are no precise figures available on the value of the military services industry as defined here, Military services represent a significant proportion of military contracts, particularly in those countries—notably the USA and the UK—where outsourcing has been most strongly pursued. In the USA, the Department of Defence (DoD) awarded a total of $295 billion worth of prime contract awards, of which $113.4 billion, or 38.5%, were in the category ‘Other Services’. (48% was for Equipment and Supplies, and 13.5% for Research, Development, Testing & Evaluation.) While some companies in the DoD list provide only civilian services, the majority of the contract value in this category is provided by companies whose services to the DoD appear to consist wholly or mostly of military services. (Similarly, some companies provide only civilian Equipment & Supplies to the DoD, e.g. oil companies.)

In other countries, there are similar trends although not as marked as in the USA. The value of the ‘Defence Support Services’ market in the UK, has been estimated by a British services company to be worth £4 billion ($7.3 billion) in 2005. Consulting firm AMR International estimates the annual sales of the defence support services market to be €1.7 billion ($2.1 billion) per year in Germany, and €1.1 billion ($1.4 billion) in Australia, the largest such market outside the USA and the UK. According to estimates by the European Defence Agence (EDA), in 2006 outsourcing represented 7 per cent of the combined military spending of EDA participating member states, or a total of €14.1 billion ($17.5 billion).

Download a list of the Top 30 contractors for military services to the US DoD for FY2006

As the Top 30 list shows, major providers of military services in the US included both specialist service contractors—such as Halliburton, number one on the list, whose KBR subsidiary (now an independent commpany) provide logistics services to the US Army worldwide, in particular in Iraq—and major equipment manufacturers, such as number two on the list Northrop Grumman, who carry out a wide range of service activities. (One Northrop subsidiary, Vinnell, provides combat training and has a contract to train the new Iraqi army.)

Major UK specialist service providers include: QinetiQ, the privatized former Defence Evaluation and Research Agency (DERA), who now provide a range of research, systems support, IT and training services, Serco who specialise in base management, Babcock who manage several naval bases, VT Group who provide a range of naval and general support services, and ArmorGroup who provide armed security services, including in Iraq and Afghanistan.

Controversies

The trend towards the private provision of military services has aroused considerable controversy, particularly where it concerns private companies being engaged in military–related activities in conflict zones. There are concerns that in some cases the activities of these companies may border on &lsquomercenarism’, and compromise the state’s ‘monopoly of violence’, removing proper democratic accountability for the use of force. In some cases, the legal status and accountability of private contractors in war zones may be uncertain, as was shown by the case of the shooting of 17 Iraqi civilians by Blackwater employees in 2007, where the contractors appeared to be subject neither to Iraqi nor to US civilian or military law. Such issues have led to widespread calls for better regulation of private military companies. The question of regulation is discussed much more thoroughly in the SIPRI Policy Paper, Private Military Companies: the case for regulation by Caroline Holmqvist.

The economic case for outsourcing military activities has also been questioned by some authors, on a number of grounds. Anne Markusen (‘The case against privatizing national security’, Governance, Vol. 16 No. 4, 2003, pp271-301) argues that outsourcing contracts often lack effective competition, and long–contracts, even where competitively awarded, may effectively place the contractor in a monopoly position once the contract is in place. Effective outsourcing requires good monitoring and evaluation of contractor performance, but the political will for this is often lacking. Furthermore, outsourcing may compromise the public sector client’s capacity both to carry out the activity in the future, and even to perform effective monitoring. Many of these problems can be observed in Halliburton’s provision of logistic support to the US Army under the LOGCAP III contract, where government auditors uncovered evidence of over $1 billion worth of questionable or unsupported costs.

Nonetheless, the trend towards outsourcing of military services seems set to continue, and in some cases may be the only viable option if governments wish to maintain high levels of military operations with relatively small numbers of troops, as has been the case for much of the post–Cold War era. But the problems and ramifications of this trend will remain the subject of debate.

For a further discussion of the issues covered here, see Perlo–Freeman, S. and Sköns, E., ‘The Private Military Services Industry’, SIPRI Research Paper 001, 2008.