Corruption

Here is a piece I wrote last semester for an amazing professor, the only remaining question is why a Blackwater type does not exist for migrants. Any feedback is greatly appreciated.

During the last 20 years the world has witnessed an increase use of contracting out military activities to private firms. The collapse of the Soviet Union and the events of September 11th have only catalyzed the creation of markets for mercenaries; suggesting conventional warfare may not be the only remedy for a Defense Department. Contracting, or outsourcing, seems to breed a feeling of disconcertment for many; however, the logic is simple: the government isn’t capable of doing everything.  “There’s no doubt that demand for outsourced logistics has grown, and that private military contractors are bigger than ever.”[i]  Nevertheless, the selection of who is awarded specific defense-related contracts and attempting to identify perceived corruption, if any, is the subject of this paper. Reviewing the works of others – both scholars and investigative journalists – into the area of defense contracting and the repercussions of perceived corruption is the approach taken for analysis. Despite conflict of interest claims between public officials and those in the PMFs receiving contracts, the research up until this point has neglected to consider the possibility that in instances where perceived corruption has occurred, it may not necessarily had an overall negative effect.  More specifically, the remaining pages will explore three main areas of U.S. Defense contracting activities coupled with two case studies to determine if perceived corruption does more harm that actual good.

First, the perception of corruption in the procurement process of contracting to private military firms (PMF) from the U.S. Department of Defense (DOD) since the turn of the century. “A staggering 40 percent of Defense Department contracts are currently awarded on a noncompetitive basis, adding up to $300 billion in contracts over the last five years.”[ii]  I will attempt to identify any influences from those in the public sector, with those in private firms, which may have contributed to this.  Due to the classified material, access to certain negotiations may not be feasible. Second, case studies of the former security firm Blackwater and the military contract with Mina and Red Star will be looked into. “Prior to the Blackwater incident, oversight of security companies generated little notice in Washington. During congressional hearings on September 10 and 11, not a single lawmaker asked a question about the performance of these security contractors.”[iii]  Precisely how they were awarded, outcomes that followed using these private firms in conflict zones and any potential corrupt activities that followed is the subject of investigation. Furthermore, the aim here is to try and identify if their additions make a substantial difference in achieving military objectives despite whether or not corruption may have been a role. Lastly, if corrupt practices are discovered in the selection process, or in the implementation of an awarded contract, what legal precedents have been established to protect victims? Obviously, war crimes committed by combatants face military tribunals, but are contractors held to the same standards, and should they be if the person responsible for deciding whether the firm received the contract did so via corruption. “Not one private military contractor has been prosecuted or punished for a crime in Iraq (unlike the dozens of U.S. soldiers who have), despite the fact that more than 20,000 contractors have now spent almost two years there.”[iv] [Singer, 2005] During the next 20 years, this type of contracting is unlikely to decline; reinforcing the need for the strictest procedures of selection and monitoring to not be overlooked by all parties involved, as perceived corruption can have numerous negative repercussions in setting a strategic foreign policy agenda for the future.

Selecting those to serve

Every year the U.S. DOD receives the largest allocation of money from the federal budget, which is then distributed to firms awarded for their response to a request for proposal (RFP) through a formal announcement channel, but it’s who decides whom will receive those million and sometimes billion dollar contracts that is subject of speculation.  Typically, a Contracting Officer at the Pentagon is responsible for these activities; the same applies for Contracting Officers at the U.S. State Department. Via department websites, contracts are announced and awarded to the most qualified candidates. While the intent of this paper is not to identify every loophole in the procurement process, a couple of key steps in the process are worth noting.

The two most common methods used are sealed bidding and negotiation. “Sealed bidding is generally perceived as an impartial in the way of obtaining competitive bids. Negotiation leads to a discussion on estimated costs, deficiencies that can be corrected and consideration of delivery requirements.”[v]  A third, and frequently the subject of criticism, are the non-competitive contracts. “Nine of the ten top US defense contractors secure the majority of their contracts without full and open competition”[vi]  Ultimately, the Contracting Officer in charge and the type of contract warrants which method is then used; however, it is reasonable to assume that any form of bribery could be taken up in the latter, allowing influence to insert itself in the decision-making process. For instance, if negotiations are allowed to take place in which a high-ranking public official within an administration has a financial interest that can factor into the equation. “There have been instances in which Halliburton has received preferential treatment from Defense Department officials … DOD officials overruled objections from career contracting officers, waived requirements, and disregarded warnings from auditors.”[vii] [Barios, 2006 p.9]

The relationship with individuals inside private firms and those in the public sector as it relates to perceived corruption is the subject of intense scrutiny. Are there other factors at play, such as former financial contributions to political candidates who are then in turn elected to office? It would seem this influence could be felt throughout the procurement process, if so. Is there correlation to the former Vice President Dick Cheney’ firm Halliburton and it being the largest contractor currently in Iraq or merely coincidence? Private firms are not subject to congressional oversight before being awarded contracts to determine whether they are qualified or not. This would of course slow down the process that it was intended to speed up; nevertheless, are swiftness and efficiency giving way to quality and ethics? There are tradeoffs on both sides: speedy and timely delivery of services from market-like competition; lack of transparency and regulation on the other. Externalities exist on both sides of the argument. “Success is likely only if a contract is competed for on the open market, if the winning firm can specialize on the job and build in redundancies, if the client is able to provide oversight and management to guard its own interests, and if the contractor is properly motivated by the fear of being fired.”[viii]  Otherwise, improper selection by means of influence from a high-ranking public official can produce negative externalities difficult to mend.

It is important to consider that just because corruption is perceived does not mean that it actually exists. Moreover, it has become commonplace to ascertain that if a firm received billions of dollars to provide a service, especially directly or indirectly related to conflict, that foul play and a conflict of interest was involved; the level of transparency was not high enough, and all the adjectives like “war profiteering” surface to describe the activity as corrupt. If a defense contract was awarded to a firm that was well known by a high ranking public official (i.e., at  the Pentagon), and determined they were the most qualified, could we then safely infer they might actually know that firm was the most qualified – since most of them served in the military prior to their public office? What is the distinction between CACI and Blackwater – one less ex-Navy Seal?  Legal experts are swift to infer that a relationship does exist between a military presence with a large number of PMFs and corruption inside a conflict zone:

“The latest Transparency International corruption index is out, and it shows

that countries occupied by the United States, in which U.S. contract awards

have decisive importance to the economy, are two of the five most corrupt on

earth. These nations have, moreover, become dramatically more corrupt

since the U.S. took over. What is the relationship between having a large U.S.

military installation and military contracting on your territory and

corruption? The TI index points to a direct relationship.”[ix]

Just how much more corrupt a country, such as Iraq and Afghanistan, prior to both U.S.-led invasions is subject to speculation; moreover, to assume an increase in bribes and nepotism are occurring because of strong military presence, filled with corruptly awarded contractors, is a stretch and should not be grounds for causation. Nevertheless, observing further into those who were awarded allows a glimpse of what may, or may not be facilitating corruption in developing countries.

The gray areas of Blackwater and Mina Corp and Red Star

Following Halliburton and its connection to the former Vice President Dick Cheney, the firm Blackwater may be the firm receiving the most criticism, as Max Boot rightly describes, “American soldiers dislike them because they get paid a lot more for similar work. Iraqis dislike them because they have become a symbol of infringements on their sovereignty. And many American leftists dislike them because they are seen as war profiteers.”[x]

The firm, founded by former Navy SEAL Eric Prince now operates under the name Xe Services, was awarded millions in contracts for the Central Intelligence Agency. “Since 2001, the intelligence agency has awarded up to $600 million in classified contracts to Blackwater and its affiliates.”[xi]  Experts acknowledge the full capabilities of the organization to provide protection.” most are highly talented ex-soldiers.”[xii]  Despite this, perceived corruption into the acquisition of their contracts is suspect. According to a report[xiii] Prince made significant political contributions of $230,000 during the last decade. Whether, or not, this is a contributing factor at all is difficult to determine. Nevertheless, we can monitor their performance and attempt to extrapolate and identify through corrupt practices on the ground, what may have sprung from the source, based on the corruption breeds corruption logic. This is, difficult to measure; however, both in terms of variables and a sample. “The problem is that a few wrongdoers spoil the reputation of the rest.”[xiv]  What incentives are there to perform well with the knowledge that it was not justly awarded, or the “fear of being fired” (Singer)? The variable in this case is the mercenary and the legal nature of the job which will be discussed in detail later. Performance in this context may not be sufficient to determine if there was corruption at the source based on the high-level of uncertainty regarding accountability and legalities as it relates to PMFs.

More recently, the firm, Mina and Red Star, who provide fuel support for the Bagram Air Base in Afghanistan, is being targeted for unfair practices in their own bidding process. Nevertheless, “After poring over 250,000 pages of e-mails, contracts and other documents relating to the jet fuel deals, congressional investigators have not uncovered credible evidence of CIA skullduggery or corruption.”[xv] While on the contrary, the same congressional inquiry found mishaps in the contracting process. “The Pentagon and State Department ignored widespread Kyrgyz public perceptions of contract corruption engendered by a fundamental lack of transparency,” said Rep. John Tierney, a Massachusetts Democrat and chairman of the subcommittee that conducted the probe. “Supplying vast quantities of fuel is an extremely sensitive endeavor with significant political, diplomatic, and geopolitical ramifications. It is not merely a logistics matter.”[xvi]


[i] Singer, Peter. Outsourcing the Fight. Brookings Institution. June 2008.

[ii] Singer, Peter. Outsourcing War. Brookings Institution. March/April 2005.

[iii] Bruno, Greg. The Other Army in Iraq. Council on Foreign Relations. October 2007.

[iv] Singer, Peter. Outsourcing War. Brookings Institution. March/April 2005.

[v] Barrios, Ruben. Government Contracts and Contract Behavior. Journal of Business Ethics. 2006. P.2

[vi] Pyman, Mark. Wilson, Regina, Scott, Dominic. The Extent of Single Sourcing in Defense Procurement and its Relevance as a Corruption Risk: A First Look. Defense and Peace Economics. June 2009. P.224

[vii] Barrios, Ruben. Government Contracts and Contract Behavior. Journal of Business Ethics. 2006. P.9

[viii] Singer, Peter. Outsourcing War. Brookings Institution. March/April 2005.

[ix] Horton, Scott. Base Politics and Fuel Contracts: The United States-Kyrgyzstan Relationship in Flux. October 2010.

[x] Boot, Max. Accept the Blackwater Mercenaries. Council on Foreign Relations. Oct 2007.

[xi][xi] Risen, James and Mazzetti, Mark. 30 False Fronts Won Contracts for Blackwater. September 2010.

[xii] Singer, Peter. The Dark Truth About Blackwater. Brookings Institution. October 2007.

[xiii] Malcolm, Andrew. Top of the Ticket. Los Angeles Times. October 2007.

[xiv] Boot, Max. Accept the Blackwater Mercenaries. Council on Foreign Relations. Oct 2007.

[xv] Higgins, Andrew. Kyrgyz contracts fly under the radar. Washington Post. Nov 2010. P. 2

[xvi] Higgins, Andrew. Kyrgyz contracts fly under the radar. Washington Post. Nov 2010. P. 2

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