CBO: Scale of contract operations in Iraq is unprecedented

One out of every $5 the U.S. government has spent on the war in Iraq has gone to contractors, and the ratio of contract workers to troops is higher than in any previous major armed conflict, according to a report released on Tuesday.

The study by the Congressional Budget Office found that from 2003 through 2007, the Defense Department and other federal agencies awarded about $85 billion in Iraq contracts, representing about 20 percent of total spending on Iraq operations. Iraq contract spending is expected to reach $100 billion by the end of the Bush administration.

The chairman of the Senate Budget Committee, which requested the report, expressed sticker shock.

"The Bush administration's move to outsource large portions of the Iraq war effort sets a dangerous precedent," said Sen. Kent Conrad, D-N.D. "The increasing use of private contractors restricts accountability and oversight, opens the door to corruption and abuse, and in some instances, may significantly increase the cost to American taxpayers."

Most of the contracts have been for logistical support, construction, oil and food. The most expensive is the Army's Logistics Civil Augmentation umbrella support services contract, which supplies troops with a range of services, including meals, mail, laundry and sanitation.

From 2003 through 2007, the Army obligated $22 billion for LOGCAP services. The current LOGCAP contract is held by three contractors and has a $50 billion ceiling.

CBO's tally did not include contracts performed outside of the theater, such as the manufacture of major weapons systems or mine-resistant ambush-protected vehicles -- even if that equipment was eventually sent to Iraq.

The report presents the most comprehensive accounting to date of the role contractors have played in the war. The budget office estimated that there are now more than 190,000 contractors in Iraq.

CBO did not discuss the implications of such a buildup in wartime contractors or the degree to which the contracts could have been subject to waste, fraud or abuse.

But, at a press conference on Tuesday, CBO Director Peter Orszag noted that U.S. troops already are spending far more time in the theater and less time at home than the military would prefer. Without private contractors, he said, soldiers "would be running at an even less sustainable rate."

Orszag noted, however, that the scale of the contractor deployment in the Iraq conflict is virtually unprecedented. The report found that there is roughly one contractor on the ground in Iraq for every member of the military. That rate is 55 times higher than in the 1990 Gulf War, seven times higher than World War II and five times higher than in Vietnam.

The only other major military operation that ranks close to Iraq in the use of private contractors was the conflict in the Balkans in the 1990s, in which there also was a 1-to-1 ratio. But that was a much smaller operation, involving at most 20,000 U.S. troops at any given time.

"In general, the U.S. government has placed greater emphasis in recent decades on outsourcing activities to the private sector that are not inherently governmental," the report stated. "The government's policy is to subject services identified as commercial to the forces of competition. In addition, the ratio of contractor personnel to military personnel reflects the United States' attempt to reconstruct Iraq while military activities are under way, rather than delaying rebuilding until hostilities have ended."

The Defense Department did not respond to a request for comment about the report.

Slightly more than 20 percent of the 190,000 contractors currently working in Iraq are U.S. citizens, CBO found. Meanwhile, nearly 37 percent of the contracting workforce is Iraqi nationals while more than 42 percent come from third-party countries.

These third-country nationals, Conrad said, fall into an ambiguous gray area, where their legal status remains undefined and where accountability and oversight by the U.S. military is increasingly difficult.

"The record number of private contractors in Iraq raises a host of serious concerns," Conrad said. "There are billions of taxpayer dollars being funneled to both American and foreign companies, often through no-bid contracts. Ongoing Pentagon audits have revealed that vast sums of this money have been misspent or improperly recorded."

CBO also was able for the first time to quantify the number of private security contractors that are working in Iraq and how their cost compares to that of guards from the U.S. military.

There are 25,000 to 30,000 private guards in Iraq, the report stated. Thirty percent to 40 percent of them work directly for the U.S. government as prime contractors and the rest work for the Iraqi government, other coalition governments or corporations. About three-quarters of the private security guards are armed with weapons, CBO said.

The budget office estimated that that the U.S. government has spent from $3 billion to $4 billion on the private guards since 2003. That cost was comparable, and in some cases, less, than if the work had been performed by the military.

"That analysis indicates that the costs of the private contractor did not differ greatly from the costs of having a comparable military unit performing similar functions," the report stated. "During peacetime, however, the military unit would remain in the force structure and continue to accrue costs at a peacetime rate, whereas the private security contract would not have to be renewed."

Alan Chvotkin, vice president of the Professional Services Council, a trade group representing contractors, said the report did not include any surprising figures, and CBO deserved credit for presenting clear and unbiased data and for clarifying some contested points about the cost and preponderance of contractors.

"This is a welcome report in that gets the facts out there," Chvotkin said. "And it unmistakably debunked a number of these great myths about Iraq that many people want to believe."