Table 4-1. Reported Reasons for Relying on System Contractors in Southwest Asia
Source: Congressional Budget Office based on information provided by Department of the Army.
Note: n.a. = not available.
a. The Southwest Asia theater includes Iraq, Kuwait, and Afghanistan.
b. Percentage measured cumulatively for all contractors deployed through January and February 2004, including those no longer in-theater.
c. Information is from January and February 2004.
d. Data are from calendar year 2003 (Patriot systems are no longer in-theater).
some instances, further clouding their status as noncom-batants.
Whether or not they carry their own weapons, contractor personnel may be entitled to protection provided by the Army units that they are supporting.14 The program
offices that CBO contacted generally agreed that system contractors needed some level of military protection, but they could not estimate how many soldiers had been as-signed or what the funding had been for that purpose.
Although contractor personnel are not in the military chain of command, contractors “shall comply with or-ders, directives, and instructions issued by the Combatant Commander relating to force protection, security, health, safety, or relations and interactions with local nationals.”
The military commander cannot directly control
individ-Need for Contractors as Identified by Program Officesc
15 97 Contractors have expertise required on this
complex system.
67 95 Brigade Support Battalion does not have
adequate resources to perform all maintenance tasks.
8 95 Contractors possess a higher level of technical
knowledge and expertise; they also provide continuity and access to proprietary data and test equipment.
10 71 System is fielded in small numbers, and it
is complex.
51 63 Civilians and contractors have traditionally
supported the system in the United States;
not enough military personnel are available.
25 84 Contractors perform troubleshooting and
depot-level repair, which are essential in maintaining operational readiness.
n.a. Contractors are used only when the problem is
beyond the capability of active-duty personnel.
System
Chemical Reconnaissance System
Patriot Missile Systemd
Army Battle Command
Number of Contractors
"Vast majority"
Stryker Vehicle
Apache Helicopter
Fox Nuclear, Biological, and
Defense Communications and Army Transmission System
Percentage of Contractors with Military Experienceb Abrams Tank
System
in Southwest Asia as of January and February 2004a
14. Ibid. According to the regulations, “The Combatant Commander will develop a security plan to provide protection, through mili-tary means, of Contractor personnel engaged in the theater of operations unless the terms of this contract place the responsibility with another party.”
ual contractor employees, but the government contract-ing officer (at the behest of the military commander) can order any particular employee to be removed from the theater.15
Contractors who deploy overseas are subject to the Uni-form Code of Military Justice if the Congress has de-clared war, and they may be subject to the UCMJ during an undeclared war if they are retired military personnel.
Any contractor committing a felony outside of sovereign U.S. territory can be tried under the Military Extraterri-torial Jurisdiction Act, but the law has seldom been in-voked and has limited effect. Finally, contractors commit-ting grave breaches of the Geneva Conventions can be tried under the War Crimes Act of 1996.
Relative Costs to the Government of Using System Con-tractors. CBO collected some data on the costs of de-ployed system contractors but did not conduct a detailed cost comparison for this option. PMs and PEOs often purchase system contractor support at a negotiated hourly rate. CBO estimated the hourly cost for the gov-ernment to purchase the services of a notional contrac-tor’s technical representative, including the elements of base salary and wages, benefits, pay premiums, overhead, and insurance. CBO did not make a comparable estimate for federal civilians, in part because the rates that contrac-tors bill the government include components—such as depreciated capital, building lease payments, managerial overhead, and some insurance—that are not readily mea-sured for federal workers.
The costs of using system contractors can vary widely de-pending on the expertise required, the system supported, the contractor’s responsibilities and cost structure, and other factors. According to data provided by PMs and the Defense Contract Audit Agency, the hourly rate (includ-ing benefits and overhead but exclud(includ-ing pay premiums and insurance associated with deployment) for a notional system contractor appears to range from $60 to $125. Of that amount, the base salaries and wages of system con-tractors range from $30 to $45 per hour, CBO estimates;
the remaining portion of the hourly rate pays for benefits, overhead, and other administrative expenses.
Most of the federal civilians with similar skills who have deployed during Operation Iraqi Freedom have been in grades GS-11 through GS-13. The base salary of the lowest-step GS-11 in 2004 was $21 per hour, and the highest-step GS-13 earned $39 per hour. Although the base salaries of contractors’ technical representatives and federal civilians with equivalent skills are similar, a com-prehensive analysis of the relative cost of the two labor types to the government would require an estimate of federal civilians’ fully burdened pay rates, including such elements as benefits, pay premiums, overhead, and insur-ance. Benefits and pay premiums could be estimated, but information is lacking on overhead costs (such as com-puters, office space, or a portion of supervisors’ salaries) associated with individual federal workers. And the fed-eral government self-insures against workers’ compensa-tion claims, meaning that funds would be made available to settle those claims when necessary but there is no fixed allocation of funds per federal worker.
The overseas deployment of system contractors intro-duces several additional cost elements that are not in-curred in the United States and are not included in the range of costs indicated above. Contractor personnel working overseas—particularly those in dangerous lo-cales—often receive pay premiums that augment their base salary. Those pay premiums usually approximate the foreign-post differential and danger-pay allowance set by the State Department for federal civilians working out-side the United States but may also include additional negotiated pay increases. The Defense Base Act (DBA) requires that DoD contractors purchase workers’ com-pensation insurance for employees working overseas.
(Other insurance costs are assumed to be included in overhead.) Traditionally, firms purchase their own DBA insurance coverage on the competitive market for each DoD contract. Current DBA insurance premiums in Iraq are about 10 percent to 20 percent of base salary.16 CBO estimates that combining pay premiums with DBA insur-ance for contractors deployed to Iraq or Kuwait results in a 40 percent to 100 percent surcharge to the base salary rate.
Accounting for premiums and insurance, CBO estimates the fully burdened contractor rate in Iraq or Kuwait at between about $70 and $170 per hour. That estimate
15. Ibid. According to the regulations, “The Contracting Officer may direct the Contractor, at its own expense, to remove and replace any contractor personnel who jeopardize or interfere with mission accomplishment or who fail to comply with or violate any applica-ble requirements [of DoD contracting regulations].”
16. Government Accountability Office, Defense Base Act Insurance:
Review Needed of Cost and Implementation Issues, GAO-05-280R (April 2005), p. 4.
does not include predeployment activities, transporta-tion, force protectransporta-tion, or other miscellaneous costs. Al-though difficult to estimate, those costs are not unique to contractors. Such miscellaneous costs would be common among system contractors and other sources of labor, such as federal civilians.
Costs incurred during deployment may not be the domi-nant factor in evaluating this option. Most system main-tenance occurs in the United States, not during overseas deployments. Thus, the life-cycle maintenance costs are largely determined by peacetime considerations. The de-cision of who maintains weapon systems during conflicts depends on who has been maintaining them during peacetime. That decision is generally determined by the Army’s broader acquisition strategy—including such fac-tors as the time frame for fielding the system and the rela-tive availability of skills—rather than by the relarela-tive cost of sending a limited number of people overseas to sup-port deployed forces.
Option 4: Establish a New Type of Personnel—Sponsored Reserves
This option would create a new military employment cat-egory known as sponsored reserves. These individuals would work for U.S. defense contractors during peace-time but would also be members of the military reserves and would deploy as activated reservists during contin-gency operations. The concept stems from a similar approach already in use in Great Britain.
The British Experience
In 1996, the British Parliament authorized the Ministry of Defense to institute a new form of reserve duty called sponsored reserves. The concept of sponsored reserves was established in British law as part of the Reserve Forces Act of 1996, which sought to increase the roles and missions of all reservists. The system allows contrac-tor personnel performing peacetime operations to be-come activated reservists when they deploy overseas. The system is similar to the U.S. concept of dual-status civil-ians (also called military techniccivil-ians) currently serving with Reserve and National Guard units. Those roughly 70,000 federal workers serve as civilians while their unit is at home; but when the unit deploys overseas, they be-come reservists serving on active duty.
The British MoD has implemented five sponsored reserve projects.17 The first project established the “Mobile Met
Unit,” which deploys to provide meteorological support to the Royal Air Force. That unit has been staffed with British government civilians since the 1960s, and those personnel were traditional reservists who volunteered to travel overseas to support the combat forces. Under the new arrangement, they can be activated more quickly and more easily, even in the absence of a broader general call-up. Deployments for this unit started more than four years ago.
Unlike that first project, which involved British govern-ment civilians, the remaining projects all employ contrac-tors. The second project uses sponsored reservists to crew six strategic sealift roll-on/roll-off vessels.18 Those ships operate as merchant ships during routine peacetime oper-ations but provide maritime support during peacetime exercises and wartime operations. The contract civilian crew members become military officers and enlisted per-sonnel upon activation.
The third project uses contractor personnel to provide ground support to British communications aircraft, the fourth project uses contractor personnel to drive and maintain a new generation of heavy equipment transport-ers, and the fifth project uses them to provide hydro-graphic systems engineers for a new generation of survey vessels.
The first three projects have already been used to support overseas operations. The first has been used for over four years, and the second and third have supported Opera-tion Iraqi Freedom and OperaOpera-tion Enduring Freedom.
The overall program is small, however: the five projects in total involve fewer than 350 sponsored reservists. The sealift project and the heavy equipment transport project are part of long-term service contracts (the sealift contract lasts 25 years) that allow the contractor to use those assets for commercial business at times when they are not needed by the British MoD.
In general, the British have used the concept of sponsored reserves as part of a new acquisition or program. (The exception is the meteorological support project.) The
17. Much of this information comes from Tom Allen, “Smart Acquisi-tion and the Sponsored Reserves,” Defence Management Journal, no. 23 (November 2003), pp. 40-42.
18. Roll-on/roll-off vessels are ships designed to carry vehicles, which can be rolled on at the port of embarkation and rolled off at the destination.
Table 4-2.