Key Points

• Private military companies (PMCs), performing an array of security services for a variety of clients, have proliferated.
• With the downsizing of the U.S. military and an expansion of overseas training programs, the Pentagon has increasingly hired the services of private military firms.
• Although private military companies have long performed covert and unsavory tasks, today’s PMCs are seeking a legitimate public role.

During the post-cold war era, there has been a proliferation of private companies providing a wide array of security services ranging from military advice and training to operational support to security protection, logistics support, policing, drug interdiction, intelligence, and more. Western governments, developing countries, international organizations, nongovernmental organizations, and private companies who operate in the world’s hot spots have each purchased these services. Military advice and training has been one of the most significant areas of growth, particularly in the United States. It also comes closest to the core mission of the military. Private provision of military training thus merits particular attention. A few examples include the following:

• Hungary hired Cubic (an American firm) to help it restructure its military to meet the standards required to become part of NATO.
• In 1995 Sierra Leone’s President, Valentine Strasser, initially hired Gurkha Security Guards (a British firm), then employed Executive Outcomes (a South African firm) to shore up and train its forces. Then, in 1997, deposed Sierra Leonean President Ahmed Kabbah hired Sandline International (another British firm) to train and arm his troops to retake the government after a coup.
• Croatia and Bosnia each hired Military Professional Resources Incorporated (MPRI, another U.S. firm) to help professionalize, train, and equip their armed forces in 1995.
• The State Department and the Pentagon have outsourced portions of America’s expanded military training in Africa to three U.S. companies—MPRI, DFI International, and Logicon—in order to ease the strain on U.S. forces stretched thin by increasing operations during the post-cold war downsizing of troops.

Hiring private firms to provide military training is not new. British companies were involved in the Middle East and Africa in the 1950s and 1960s, and the U.S. hired companies to train the Vietnamese forces in the 1960s. During the cold war, private U.S. firms were associated with tasks “too dirty” for the U.S. government. In Vietnam and Central America, reports of shady and illegal private military activities were rampant. In the wake of the Iran/contra scandal, for example, it was alleged that companies like Southern Air Transport and Setco Aviation facilitated the supply of weapons to the Nicaraguan contras after Congress cut off aid.

In the post-cold war period, however, the number of firms offering military services has grown, the scale of their operations has expanded, and their role has become more public and regarded as being more legitimate. Revenues from the global international security market are expected to rise from $55.6 billion in 1990 to $202 billion in 2010, according to private industry projections. The Pittsburgh Post Gazette (February 2000) reported that private security companies with publicly traded stocks grew at twice the rate of the Dow Jones Industrial Average in the 1990s. Private firms trained militaries in more than 42 countries during the 1990s. Although the older companies such as Vinnell, Booz-Allen, and Cubic are still active, many of the highest profile firms (including MPRI, which boasts that its 1997 volume of business exceeded $48 million), postdate the cold war.

As the industry has grown, private military companies (PMCs) have sought to polish their images. They establish websites, grant interviews, and appear at conferences. Sandline’s website offers everything from British government documents regarding Sandline’s activities to opinion papers on how the private security industry might best be regulated.

Foreign military training programs have expanded in the post-cold war period, offering greater opportunities for private military companies. Training foreign armies is a prime component of current U.S. engagement strategy, according to the Office of the President’s 1999 document “A National Security Strategy for a New Century.” Military training is said to further U.S. contact with other countries, to aid in the spread of democracy and good civil-military relations, and to enhance specific U.S. strategic concerns regarding such issues as counternarcotics and counterterrorism. To achieve these objectives, U.S. Special Forces train with over 100 countries annually.

While major threats have diminished in the post-cold war period and U.S. forces have been downsized, ethnic conflict, humanitarian emergencies, and the desire to prevent further problems with the U.S. engagement strategy have boosted the number of operations involving the U.S. military. In scrambling to meet more requirements with fewer personnel and a more competitive labor market, policymakers have turned to private contractors to conduct some of their foreign military training programs. The current generalized push toward the privatization and outsourcing of government functions only abets this trend.

Problems with Current U.S. Policy

Key Problems

• It is not clear that outsourcing of military training saves the U.S. government any money.
• Privatizing military training may weaken the U.S. armed forces’ expertise and capacity for engagement. Using private contractors may make implementing the engagement policy easier, but by avoiding public debate, such a practice undermines the democratic process.
• There is not enough oversight and control of private firms that sell training directly to foreign countries.

Because military training is today a larger part of American foreign policy and because more of this training is being privatized, the implications of privatizing training must be considered carefully. Although interviews both with U.S. government officials and with personnel from private firms working in the Balkans and Africa indicate that U.S. PMCs have well-trained, highly motivated professional staff on a par with (or in some cases superior to) U.S. military units, there are three major concerns with the outsourcing of military training.

First, it is not clear that outsourcing saves money. Studies of privatization have found that cost savings depend on competition. As Ann Markusen, senior fellow at the Council on Foreign Relations, argues, it is difficult to maintain competition in defense services. There is often collusion among competing firms, and long-term contracts lead to opportunistic behavior, such as firms bidding low, knowing that they can add on later. Further, the calculated costs of outsourcing rarely take into account the fact that the Pentagon must hire people to police the contractors. A 1991 RAND report looking at private provision of professional military education programs in the U.S. found no cost savings. Although several recent Center for Naval Analyses (CNA) studies demonstrate that cost savings are obtained when competition can be insured, long-term training programs require continuity, which makes it difficult and costly to reopen contracts to bids by competitors.

Second, privatizing training may weaken the U.S. military’s capacity for engagement. When the U.S. government pours money for training into companies rather than into its national forces, it encourages private rather than public expertise. It also changes the career calculations of military personnel, adding the private sector into the mix and signaling to the military that training is not a core task. This could reinforce the U.S. military’s traditional preferences for focusing on high-tech warfare and could move military organizations away from supporting involvement in the array of new post-cold war missions.

Third, employing private firms reduces the need to involve both Congress and the U.S. public in foreign policy. Using private contractors may make foreign operations easier in the short run, because politicians do not have to make the case to send “our boys (and girls)” overseas. Public participation—including public consideration of the risks and benefits of U.S. military operations—is fundamental to democracy. Avoiding public disclosure and debate by contracting private companies is likely to have long-term political costs.

Contracts that outsource U.S. military functions are governed by the Federal Acquisitions Regulation (FAR) and a Defense Department supplement (DFARS), but these constitute only part of the market for U.S. PMCs. Firms also sell the same training directly to foreign governments. An examination of these private contracts, which are regulated by the International Transfer of Arms Regulations (ITAR), reveals more problems.

The licensing process itself is somewhat idiosyncratic. The Defense and State department offices that have input into the process vary from contract to contract, and neither the companies nor independent observers are exactly clear about how the process works. Also, according to the ITAR, Congress need not be informed ahead of time, unless the contract is over $50 million. Few contracts reach that amount. More importantly, once a company receives a license, there are no oversight or reporting requirements for the duration of the contract. Although U.S. embassy officials in the contracting country are charged with general oversight and though firms often liaise with U.S. defense attaches, no paperwork is filed, and no one has specific responsibility to monitor how these training contracts are fulfilled. The governments in many of these countries including Croatia, Nigeria, Colombia, Angola, and Equatorial Guinea are relatively weak or corrupt, and there is much speculation about military involvement in illegal activities. Allowing private firms to train such militaries without supervision opens possibilities for misbehavior.

Thorny issues also arise over the relationship between PMCs and official U.S. foreign policy. The same American companies that export military training to foreign governments also work for the U.S. government. On the one hand, comparisons with PMCs in other countries demonstrate that the contracts American PMCs receive from the U.S. government give them greater incentives to stay in tune with U.S. policy. The close relationship between the U.S. government and these military contractors, however, also opens the potential for companies to take actions (with Washington’s tacit support) that violate official U.S. policies, norms, and practices. It has been widely speculated that in 1995, MPRI trainers, ostensibly hired to teach the Croatian army democratic civil-military relations, may have violated the UN arms embargo by helping them formulate their war plans in the months leading up to the Croats’ major offensive, “Operation Storm.” MPRI has denied these claims. Whatever the truth, exporting military training opens the way to foreign policy by proxy, whereby private companies are used to hide U.S. fingerprints.

Finally, the companies themselves are liberally sprinkled with retired military officers, leaving military attaches to, in some instances, oversee their former bosses, perhaps hampering careful supervision. The cachet of retired generals may also cause Pentagon and State Department officials, as well as members of Congress, to give undue credence to their lobbying efforts. This is a special problem when these retired military officers are proposing overseas training missions in countries with weak or crumbling governments.

Toward a New Foreign Policy

Key Recommendations

• Policymakers should investigate the cost savings afforded by outsourcing, and their evaluation of the overall costs and benefits should consider the long-term political and foreign policy implications of privatization.
• Stronger U.S. regulation of military exports is needed, including a more transparent licensing process, U.S. government oversight of contracts, and PMC reporting requirements.
• Both the U.S. government and PMCs need to work toward international regulations requiring transparency and accountability and promoting the rule of law and respect for human rights.

The purported goal of privatization is to introduce market discipline in order to improve performance and cut costs. These benefits are only obtained, however, under particular conditions. Furthermore, privatization can have unintended costs. A sound policy must carefully weigh both the costs and benefits.

The jury is still out on the cost savings gained from outsourcing training. Policymakers should establish procedures to investigate whether using contractors saves money, rather than assuming it does, and such investigations should include oversight costs and actual (as opposed to projected) spending on long-term contracts in order to reveal the true costs.

Privatizing military training has long-term political and foreign policy implications. Employing private companies may increase the flexibility and expand the capacity of the U.S. military. Such flexibility may help impose stability in troubled regions in the short run and may avoid lengthy political debates over the proper number of U.S. troops required to support the engagement policy outlined in “A National Security Strategy for a New Century.” The downside of this approach, however, could be a public increasingly disengaged from global problems; a military ever more focused on high-tech combat operations rather than military training, assistance, and other engagement activities; and significant reliance on private firms for a central part of U.S. military assistance and overseas operations.

Managing the costs and benefits of military training exports is even more complicated. Many weak states (and nonstates) are demanding the training services that private companies provide. In the absence of Western governments’ willingness to provide training services via their own militaries, PMCs offer an alternative to traditional mercenaries, and they are more likely to provide advice on norms of good civil-military relations and professional military behavior in addition to training in military operations. When states hire PMCs from a position of weakness, however, the potential for individuals to involve themselves in corrupt or criminal behavior is high.

Stronger and clearer U.S. regulations are therefore needed. A more transparent licensing process should be established. It should specify U.S. government oversight of PMC military training exports, and there should be a system established whereby firms must report on their activities. Also, Congress might want to reexamine the thresholds regarding its notification process, since considerable military services can be purchased for $50 million.

A “U.S. only” approach, though, is not enough. The market for assistance and training is global. In the U.S., PMCs employ former military personnel who are aware of professional norms, who are generally concerned about their reputations, and who tend to perform their activities with an eye toward preserving their reputations and enhancing their legitimacy. However, U.S. firms are also competing against PMCs from other countries with different—and sometimes little or no—regulations. If State Department concerns prevent MPRI from selling advice and training to Equatorial Guinea, for instance, that government is likely to turn to PMCs from other countries or to even less scrupulous mercenaries.

The U.S. government and private military companies need to work toward an international regulatory structure that will increase transparency and accountability and will encourage military training that promotes stability, the rule of law, and respect for human rights. The British company Sandline has already voiced its support for international regulation. An international office, perhaps at the UN (replacing the UN’s special rapporteur on mercenaries), would be one mechanism through which the international community could bolster the industry’s fledgling efforts at self-regulation. Such a structure could also open the way for a dialogue regarding how and whether private military firms should be employed by NGOs—or even the UN—to carry out certain tasks, such as providing security or training for UN forces in complex emergencies.

In sum, policymakers need to evaluate the economic and political implications of privatizing military training before the U.S. proceeds further down this path. If they decide that private firms are to play a role in training security forces, Congress and the administration should work at both the international and domestic level to ensure that PMC practices are regulated to comply with international law and human rights norms.