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Part 2: Myths and mystery
By David Isenberg

  • See also Part 1: Profit comes with a price (May 19, '04)

    The war in Iraq is exposing private military companies (PMCs) to an unprecedented degree of public scrutiny. Many old assumptions are being questioned and heretofore conventional wisdom is being shattered.

    For example, in regard to the party line that PMCs are more cost-effective and more flexible in offering military services, Eric J Fredland, a professor at the United States Naval Academy, writes in a forthcoming article in Defence and Peace Economics that even if there are cost savings, inevitable contractual hazards sharply limit the combat/combat support role of these companies.

    And as for the liberal mantra that reliance on PMCs is a Republican innovation, it is worth remembering that the push for outsourcing was strongly supported by the administration of US president Bill Clinton, especially under the National Performance Review initiated by Clinton's vice president, Al Gore.

    Sometimes PMCs do good things and sometimes they not. DynCorp personnel had the distinction of acting unprofessionally when they escorted CNN journalist Tucker Carlson on a trip to Baghdad and gave him an AK-47 and commandeered an Iraqi gas station.

    And before the news about the Abu Gharib prison scandal broke, Titan had been in the news because the Pentagon's Defense Contract Audit Agency said it had inadequate systems for documenting its billing of the Pentagon for labor costs, for tracking the work of non-US consultants and could have as much as US$4.9 million in payments withheld until it fixes accounting deficiencies uncovered by a government audit.

    It is also the case that some PMCs are very well politically connected, which helps them get contracts, regardless of their innate merit. For example, one of the PMCs registered with the State Department to do business in Iraq is Diligence LLC.

    Diligence first set up shop in Baghdad last July to provide security for companies involved in Iraqi reconstruction. In December, it established a new subsidiary called Diligence Middle East, and expanded its services to include screening, vetting and training of local hires, and the provision of daily intelligence briefs for its corporate clients. One of its co-chairmen is Joe Allbaugh, President George W Bush's campaign manager in 2000. In late 2003 Diligence sold a 40 percent stake in its new subsidiary to Mohammed al-Sagar, a wealthy Kuwaiti who also runs the Foreign Relations Committee of Kuwait's parliament. Last month, it quietly announced it had formed a joint venture with New Bridge Strategies, a consulting company headed by Joe Allbaugh and Republican lobbyist Ed Rogers, which was established in 2003 to advise companies on business deals in postwar Iraq.

    Diligence was founded by William Webster, the only man to head both the Central Intelligence Agency (CIA) and the Federal Bureau of Investigation. Mike Baker, its chief executive officer, spent 14 years at the CIA as a covert field operations officer specializing in counter-terrorism and counter-insurgency operations. Whitley Bruner, its chief operating officer in Baghdad, was once the CIA station chief in Iraq. Shortly before the US invasion, he directed a covert operation for the Bush administration to convince high-ranking generals loyal to Saddam Hussein to cooperate with US forces. Although that management team sounds formidable, it's Diligence's directors and advisers who are the real power in the firm.

    Richard Burt, the chairman, is the former US ambassador to Germany and a key adviser to the Carlyle Group, the Washington private equity fund where Bush's father, George H W Bush, worked for the past seven years. Ed Rogers, Diligence's vice chairman, was one of Bush Sr's top assistants when he was US president. Among Diligence's senior advisers are John Major, the former British prime minister and chairman of Carlyle Europe; Ed Mathias, Carlyle's managing director; and Lord Charles Powell, a former foreign-policy adviser to Margaret Thatcher.

    Similarly, ArmorGroup announced that former British Conservative foreign secretary (1995-97) and defense secretary Sir Malcolm Rifkind had been appointed its chairman. Rifkind served in John Major's government during the 1990s and is now the prospective parliamentary candidate for Michael Portillo's safe Tory seat of Kensington and Chelsea.

    Last month the Steele Foundation announced that retired US ambassador Robert Frowick had joined its executive advisory board as an executive director. Prior to joining the Steele Foundation, Frowick was a career diplomat appointed to numerous ambassadorships under four different US presidents.

    Yet PMCs are still viewed as valuable for their on-the-ground operational expertise. This year it was reported that the United Nations intended to hire "a top-tier security firm" to provide services for its global operations after a highly critical report blamed "dysfunctional" UN security for unnecessary casualties in the bombing of its headquarters in Baghdad last August, which killed 23.

    A request for security firms to express their interest in competing for the contract, obtained by Associated Press, lists a wide-range of specialized services that the UN. They range from security assessments and crisis management planning to personal protection services for VIPs and consultations on kidnapping.

    The rewards for PMCs are clear. Profit, and lots of it. As attacks by insurgents have increased security has become an increasingly important component of reconstruction contracts.

    But PMCs also have increasing costs. Employers are required by law to provide insurance to all employees in war zones, under the United States' Defense Base Act, but such coverage is usually limited to $4,000 a month in the event of death or disability. Policies for additional coverage are often needed to attract workers to Iraq - with potential payments ranging from $250,000 to more than $1 million - and have been rising in price.

    For contractors with employees in Iraq, this currently costs about 20 percent of insured value. Firms are guarded about how much they are spending on security and insurance. But high risk staff, such as PMC workers, account for the brunt of the costs.

    It is estimated that for every $100 in salary paid by the employer, $15-$20 is spent on life-insurance premiums. In light of the worsening security situation in Iraq, the insurance companies are forced to raise tariffs on a weekly basis. US law also requires the companies to insure their Iraqi workers against death or injury. As a result, companies that were awarded contracts to provide services in Iraq are forced to foot heavy added expenses that can amount to 15-20 percent of the total worth of the project.

    Another cost is finding qualified people. Industry professionals say that the most important factor in the risk-management trade was choosing and training the right people. At some firms all candidates are subjected to a rigorous vetting to weed out people with a history of everything from domestic violence and drug use to committing a felony.

    Unfortunately, there is no reason to believe this is true for all PMCs. Demand for experienced staff in Iraq now outruns supply. "There is a shortage of quality labor," said David Claridge, head of Janusian Risk Management, a London-based security company. "Hiring people takes time now whereas before we had a database of people we could just call up. Now we have to wait for people to come off other jobs."

    A case in point is Derek William Adgey. He was a former British Royal Marine from Belfast, sentenced in 1995 to prison for four years on 10 counts of soliciting murder for passing security details to loyalist terrorists in Ireland, who has been serving with an ArmorGroup armed protection force in Iraq. The men who recognized Adgey in Iraq have called for him to be sent home, saying it was "appalling" that they were expected to carry out anti-terrorist duties alongside a convicted terrorist.

    Critics say the rapid growth of the industry also raises concerns. There is little regulation of the quality of training or recruitment by private firms, they say. The result may be inexperienced, poorly prepared and weakly led units playing vital roles in combat situations. Even elite former commandos may not be well trained for every danger, those critics say.

    One of the notable consequences of the Iraq war on industry is that it has caused those in the PMC sector to become more self-critical. David Claridge, managing director of the British company Janusian Security, said, "Most of the serious players are quite supportive of bringing in some degree of regulation. It is traditionally globally an unregulated industry except with a few exceptions. Iraq is forcing the industry to grow up and consider how the industry should be regulated."

    Mark Whyte of UK-based company Pilgrims Security says most of these men are not directly employed by the firms, but are rather hired as "freelance consultants". The contracts are usually short-term and responsibility for any risks taken - and for paying taxes - rests with the individual.

    One of the concerns over PMCs, especially among people in the regular military, is whether they will stay the course, ie, not walk away from the job even in the midst of combat. Thus far the evidence suggests they largely have stayed on, though there have been some disturbing reports.

    For example, last summer Newhouse News reported that US troops in Iraq suffered through months of unnecessarily poor living conditions because some civilian contractors hired by the army for logistics support failed to show up. Although the article didn't name a specific PMC, it was obvious that it was talking about KBR, given that the company is by far the biggest services contractor in Iraq.

    Others say this is largely an urban myth and that any no-shows are primarily locals who don't show up or are late because of trouble getting through gate security.

    It may be that a number of people have declined contracts because the companies offering them the jobs have not been able to demonstrate an adequate support structure to back them up (something the military has no difficulty in providing). And this is hardly surprising when these companies are being battered over the head to be as cost-competitive as possible.

    Still, the problem is likely more serious than that. The US General Accounting Office issued a report in 2003 that said:

    DOD [Department of Defense] uses contractors to conserve scarce skills, to ensure that they will be available for future deployments. Despite requirements established in DOD guidance (Instruction 3020.37), DOD and the services have not identified those contractors that provide mission essential services and where appropriate developed backup plans to ensure that essential contractor-provided services will continue if the contractor for any reason becomes unavailable. Service officials told us that, in the past, contractors have usually been able to fulfill their contractual obligations and, if they were unable to do so, officials could replace them with other contractor staff or military personnel. However, we found that this may not always be the case. DOD's agencywide and servicewide guidance and policies for using and overseeing contractors that support deployed US forces overseas are inconsistent and sometimes incomplete. Of the four services, only the army has developed substantial guidance for dealing with contractors. DOD's acquisition regulations do not require any specific contract in deployment locations for contract workers. Of 183 contractor employees planning to deploy with an army division to Iraq, for example, some did not have deployment clauses in their contracts. This omission can lead to increased contract costs as well as delays in getting contractors into the field.
    According to news reports, some PMCs guarding foreign contractors in Iraq are demanding the right to carry more powerful weapons after the deaths of a number of bodyguards during a series of major battles with Iraqi insurgents. Such a move would add to concerns about the accountability and regulation of private military companies in Iraq as well as illustrating the "gray zone" between their formal role as bodyguards and the realities of operating during an insurgency, when the whole country can become a combat zone.

    Last October the British government granted permission for the export of submachine-guns and pistols for use by private security firms in Iraq.

    US Army regulations allow contractors performing combat support services to carry weapons when required by their combatant commander. But the regulations, which took effect in November, address only contractors working directly for the US military.

    According to proposed DOD regulations, military commanders in places such as Iraq and Afghanistan will be given broad new powers over contractors, including the ability to arm them. Published on March 23 in the Federal Register, the draft regulations have been in the making for nearly a year. One provision requires deployed contractors to follow combatant commanders' orders. Those orders would supersede any existing contract terms or directions from a contracting officer.

    In times of emergency, the ranking military commander in the immediate area of operations may direct the contractor or employee to undertake any action as long as those actions do not require the employee to engage in armed conflict with an enemy force.

    The draft regulation also proposes banning contract personnel from carrying privately owned weapons unless authorized by a military commander, and from wearing military uniforms. The policy allows the combatant commander to issue weapons and ammunition to contractor employees.

    Other requirements of the new regulations insist that contractors and contractor personnel:
  • Be familiar with host nation laws, international treaties and licensing requirements. Comply with combatant commanders orders relating to military operations, force protection and health and safety; and replace any personnel who fail to comply with these provisions.
  • Submit information on contractor employees for entry into military databases.
  • Make sure all required security and background checks are completed.
  • Meet all medical screening and requirements.
  • Have a plan for replacing employees no longer available for work in the war zone for any reason, including injury or death.

    Though the numbers of PMCs and personnel in Iraq may fall in the future, one thing is clear. US forces may start withdrawing after the June 30 handoff date to an Iraqi transitional government, but PMCs will still be there.

    David Isenberg, a senior analyst with the Washington-based British American Security Information Council (BASIC), has a wide background in arms control and national security issues. The views expressed are his own.

    (Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact for information on our sales and syndication policies.)

  • May 20, 2004

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    (Dec 20, '03)

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    (Aug 14, '03)


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