July 15, 2010 | Testimony on National Security and Defense
Testimony before the
Committee on the Budget
United States Senate
July 15, 2010
Responsible Contracting: Modernizing the Business of Government for National Security
My name is Dr. James Jay Carafano. I am the Deputy Director of the Kathryn and Shelby Cullom Davis Institute for International Studies and the Director of Douglas and Sarah Allison Center for Foreign Policy Studies at The Heritage Foundation. The views I express in this testimony are my own, and should not be construed as representing any official position of The Heritage Foundation.
Thank you for the opportunity to appear before the committee today and address this vital subject. In my testimony I would like to (1) explain why getting contracting right is vital to the future security, freedom, and prosperity of the nation; (2) describe the vision for what government contracting for national security should look like; (3) identify what I believe are some of the key obstacles to achieving the vision; and (4) suggest the next steps in overcoming the systematic problems that plague modernizing government contracting processes.
My responsibilities at The Heritage Foundation include supervising all the foundation’s research on public policy concerning foreign policy and national security. In recent years, the impact of government contracting on matters related to national security, primarily concerning defense acquisition but also in support for expeditionary operations, has been a subject of special interest for Heritage.
Getting contracting right is a fundamental responsibility of good governance—essential to the practice of limited government and fiscal responsibility. It is particularly important in regard to contracting in support of national security activities. Our men and women in uniform who enter harm’s way to protect our liberties and freedom deserve the best support we can give them.
Since defense contracting represents a significant category of discretionary spending, it is especially vital that Washington get this part of federal spending right. Furthermore, I believe many of the attributes of good national security contracting are applicable to other government business practices.
The research team at Heritage that I represent is uniquely qualified to examine this issue. Our analysts have observed contracting and military operations worldwide, from bases in Afghanistan to factory floors here in the United States. They have conducted substantive research on most aspects of defense and homeland security. Heritage analysts also serve on a variety of government advisory efforts, including the Board on Army Science and Technology, the U.S.-China Economic and Security Review Commission, the Congressional Advisory Panel on Department of Defense Capabilities for Support of Civil Authorities After Certain Incidents, the Quadrennial Homeland Security Review Advisory Committee, and the Quadrennial Defense Review Independent Panel. Our research programs are non-partisan, dedicated to developing policy proposals that will keep the nation safe, free, and prosperous. The results of all our research are publicly available on the Heritage Web site at www.heritage.org.
The Past and Future of Contracting for National Security
The capacity to conduct effective contracting is a potential key competitive advantage for the modern nation-state. The emergent role of contractors in all aspects of national security on and off the battlefield reflects a deeper and deeply significant transition in the nature of armed conflict, a significant rebalancing of the roles the private and public sectors play in war. This change is the most significant upheaval in the nature of warfare since the rise of the nation-state in the 17th century. It represents a transformation started long before the invasion of Iraq and, absent a dramatic change in the evolution of the global marketplace, the role of the private sector in public wars will continue to increase, regardless of the course of American domestic politics. At the same time, dealing with the challenge of harnessing the growing capacity of the marketplace to supply combat capabilities creates new and daunting responsibilities for government that cannot be addressed by business-as-usual practices. Government will have to change to keep up.
Before the emergence of the modern nation-state, the public sector had authority but little power to mobilize resources for warfare. This led to what are now commonly and often pejoratively known as mercenaries, or “soldiers who fought for profit and not in the cause of their native land or lord.” Monarchs throughout Europe employed mercenaries to fight wars, improve logistical support, and wield the power of the private sector to better advance their strategic interests.
The expansion of the private sector’s role in conflict helped initiate the transformation to the second great age of war when the public sphere came to dominate military operations. States took over the business of violence, turning wars from a largely private enterprise into an almost (albeit not) exclusively public operation.
Today, the world has entered a new age in warfare which is rebalancing the relationship between the public and private spheres. Globalization and the evolution of the private sector dramatically affect combat. Just as globalization appears to be an unstoppable force, the reliance on the private sector in war is also probably irreversible. Unlike the public sector, the private sector is bred for efficiency: Left to its own devices, it will always find the means to provide services faster, cheaper, and more effectively than will governments. With the assets of a modern, liberal society—a well-established judicial system, legitimate legislative branch, independent press, active community of public interest groups, and enabled citizenry—the United States is well positioned to effectively balance the public and private spheres in supporting national security.
Working through the legal, ethical, and practical issues surrounding military contracting will improve America’s ability to prepare for this third age of combat. The private sector’s increasing role in public wars can be a good thing for American security if the United States can learn to create a strong partnership between each sector that enforces accountability and uses America’s competitive edge to its advantage.
A Vision for the Future
To turn government contracting from a liability into a competitive advantage requires a transformation in Washington’s businesses practices. It will be easy to know when government. gets contracting right.
That is what contracting in the 21st century ought to look like. Turning that vision into a reality starts by abandoning unrealistic expectations and deeply flawed assumptions.
Obstacles to Overcome
It would be naïve to conclude anything but that the subject of government contracting has become over-politicized. Contracting controversies during “wartime,” from the American Revolution to the Cold War, are a constant theme in American history. Separating fact from fiction is important. Parsing unsubstantiated allegations, prejudices, political judgments, and unfounded assumptions from real problems is part of meeting the challenge of harnessing the private sector for public wars, keeping the United States competitive, and overcoming anti-competitive practices that could well hamstring America’s ability to effectively prepare for and fight future conflicts.
Some criticisms that are considered “common knowledge” have become real obstacles to reform and have to be set aside. They include:
Washington will never get contracting right if it sticks to believing untruths that will lead to the kinds of “reforms” that make government contracting worse rather than better.
Modest Proposals for Moving Forward
Government contracting is massive and multifaceted. It is unrealistic to believe that there are “silver-bullet” solutions that will significantly improve performance across the entire government enterprise. As with most complex, non-linear problems, the best solutions will probably focus on decentralization and putting decisions in the hands of responsible officials who have the skills, knowledge, attributes, and capabilities to do the right thing.
Building the right federal enterprise for the conduct of contracting might start with the following initiatives.
Learning Lessons, Looking Forward
There are good lessons to be learned from failure. In respect to government contracting, no experience has more to tell than the recent U.S. experience in wartime contracting. In the end, the single greatest shortfall in contracting practices in Iraq and Afghanistan was that Washington lacked the capacity to oversee the unexpected massive volume of contracts it handed out. As the Special Inspector General for Iraq Reconstruction noted, “the shortage of personnel (and the widespread lack of required skill and experience among those available) affected all facets of reconstruction assistance.” With the value of hindsight it is clear that fixing that problem would have resolved the majority of serious difficulties encountered in managing contracts. Even the most partisan critics would have had a hard time finding something to complain about. All the controversy might have been avoided if the military were a better customer. But it was not and will not be in the future either if we learn the wrong lessons—continuing to hamstring not just expeditionary contracting, but government acquisition and service contracting across the federal enterprise with more ineffective oversight and excessive rules that make little sense.
Getting the job done right hardly sounds as compelling a challenge as battling an evil military-industrial complex or unmasking a political conspiracy, but nevertheless it is the heart of the problem. If Washington seriously wants to deal with the real problems of government contracting then they will have to start to deal with the real problems that cause them.
Thank you for the opportunity to participate in this hearing and I look forward to answering your questions.
 James Jay Carafano, Private Sector, Public Wars: Contractors in Combat—Afghanistan, Iraq, and Future Conflicts (Westport, Conn.: Praeger. 2008), pp. 11-12.
 Michael Mallet, “Mercenaries,” in Medieval Warfare (Oxford: Oxford University Press, 1999), p. 209.
 James Jay Carafano and Eric Sayers, “Defense Spending Fraud, Waste, and Abuse: Hype, Reality, and Real Solutions” Heritage Foundation Backgrounder No. 2212, November 20, 2008, at www.heritage.org/Research/Reports/2008/11/Defense-Spending-Fraud-Waste-and-Abuse-Hype-Reality-and-Real-Solutions.
 Baker Spring, “Congressional Restraint Is Key to Successful Defense Acquisition Reform,” Heritage Foundation Backgrounder No. 1885, October 19, 2005, at www.heritage.org/Research/Reports/2005/10/Congressional-Restraint-Is-Key-to-Successful-Defense-Acquisition-Reform.
 Ibid. See also, Carafano, Private Sector, pp. 81-82.
 See, for example, the discussion of the A-76 process in Carafano, Private Sector, pp. 72-78.
 Spring, “Congressional Restraint Is Key to Successful Defense Acquisition Reform.”
 Gregory D. Kutz, “Defense Management: Widespread DCAA Audit Problems Leave Billions of Taxpayer Dollars Vulnerable to Fraud, Waste, Abuse, and Mismanagement,” Government Accountability Office, GAO-10-163T, October 15, 2009; Defense Business Board, “Independent Review Panel Report on Defense Contracting Audit Agency,” Report FY09-1, October 2008, at www.dbb.defense.gov/pdf/Independent_Review_Panal_Report_of_the_Defense_Contract_Audit_Agency_(Final_Report).pdf (July 7, 2010).
 Frank Camm and Victoria A. Greenfield, How Should the Army Use Contractors on the Battlefield? Assessing Comparative Risk in Sourcing Decisions (Santa Monica, Calif.: RAND Corporation, 2005), p. 11, at www.rand.org/pubs/monographs/2005/RAND_MG296.pdf (April 17, 2009).
 Commission on Wartime Contracting, “Lowest-Priced Security Not Good Enough for War-Zone Embassies,” CWC Special Report No. 2., October 1. 2009, at www.wartimecontracting.gov/docs/CWC_SR2-2009-10-01.pdf (April 7, 2010).
Commission on Army Acquisition and Program Management in Expeditionary Operations, “Urgent Reform Required: Army Expeditionary Contracting,” October 2007, www.army.mil/docs/gansler_commission_report_final_071031.pdf (April 7, 2010).
 Carafano, Private Sector, pp. 200-201.
 Special Inspector General for Iraq Reconstruction, Hard Lessons: The Iraq Reconstruction Experience. (Washington, D.C.: US Independent Agencies and Commissions, 2009), p. 25.