Contractors Cost Same as Military: CBO

Few will disagree that there have been abuses, thefts and conspiracies arising from the extensive use of contractors during the Iraq war, but the Congressional Budget Office has performed an extensive study that largely puts the lie to the broad charge that contractors are somehow evil money-grubbers who take huge salaries and provide little value to the US taxpayer.

First, the study notes that the use of contractors is larger in this conflict than it has been in most previous ones, but it carefully makes the point “the ratio of about one contractor employee for every member of the U.S. armed forces in the Iraq theater is at least 2.5 times higher than that ratio during any other major U.S. conflict, although it is roughly comparable with the ratio during operations in the Balkans in the 1990s.”

The most politically charged finding by CBO is that “the costs of a private security contract are comparable with those of a U.S. military unit performing similar functions.” In addition, contractors allow the military to slim down after a conflict because “the private security contract would not have to be renewed, whereas the military unit would remain in the force structure.” And force structure is very expensive.

This could make it more difficult for those Democrats who have claimed that Halliburton and other companies have been getting rich simply because the Bush administration wanted to pour cash into their pockets. Add the moral argument that security contractors — as opposed to those who cook meals, haul freight or provide other base services — were paid exorbitant fees and were effectively “mercenaries” (with all the baggage that term took on during the Cold War in Africa) and many were reviled by Blackwater and other security firms. The CBO cites one influential study by
Joseph Stiglitz and Linda Bilmes that private security guards “were earning up to $1,222 a day; this amounts to $445,000 a year. By contrast, an Army sergeant was earning $140 to $190 a day in pay and benefits, a total of $51,100 to $69,350 a year.” But the CBO says simply: “Those figures, however, are not appropriate for comparing the cost-effectiveness of contracting the security function or performing it using military personnel.” And it concludes that the costs are roughly comparable, as noted earlier.

The report buoyed the folks at the Professional Services Council, which focuses on acquisition policies and represents 300 companies. The CBO report “debunks much of the mythology around the cost and role of contractors supporting the current military, reconstruction and economic development efforts in Iraq,” said Alan Chvotkin, PSC’s executive vice president.

Of course, it will be interesting to see how many lawmakers actually pay attention to the facts laid out by CBO. They aren’t as much fun as what has become the conventional wisdom.