Growth of Corporate Power and Profiteering

Large defense contractors have played a central role in fighting the post-9/11 wars, as well as in arming and supplying coalition forces and the new Iraqi and Afghan governments.  Their involvement raises major economic and security concerns among critics.

The wars in Iraq and Afghanistan, along with an increase in the Pentagon’s budget, have led to an increase in total military contracts to nearly $400 billion, their highest levels since World War II. Private contracting has grown to such a level that, by 2011, there were more private contract employees involved in the wars in Iraq and Afghanistan than uniformed military personnel. Pentagon contracts awarded in the 2000s have been concentrated in the hands of just five contractors- Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics.  These five companies account for over one-third of all Pentagon contracts.

Halliburton’s contract to put out oil fires in Iraq and rebuild the country’s oil infrastructure generated controversy on several fronts. One of the major ones concerns the question of why Halliburton was awarded a no-bid, open-ended 7-year contract for their work in Iraq even before the war began. Critics have contested the Pentagon’s reasoning that the need was too urgent and Halliburton was the only company capable of doing this work. Another issue is the “revolving door” between Halliburton and Bush administration Vice President, Dick Cheney. Halliburton served as an all-purpose logistics support service under the Army’s Logistics Civil Augmentation Program (LOGCAP).  This program was developed at the behest of Dick Cheney in the early 1990s and Halliburton was awarded the first contract in 1995, by which time Cheney had become Halliburton’s CEO. Further, Halliburton made huge profits through this program, much of them generated through gross overcharging and inflating invoices to cover “fraudulent war risk surcharges.” [1] Halliburton has also been accused of breaching its government contract and KBR has been said to have been systematically “veiling its business practices in Iraq,” [2] thereby restricting the government’s oversight ability.

The Coast Guard employed Lockheed Martin and Northrop Grumman in 2002 to plan, supervise, and deliver several hundred new boats and aircraft in connection with the Guard’s expanded post-9/11 role. [3] For a number of years, the two companies used their procurement charge as an opportunity to steer work to their subsidiaries, and failed to get the best price or the best work.  The Coast Guard ignored frequent warnings from their own engineers about the new ships’ poor design and potentially unsafe condition.  Four years later, the shipbuilding was halted when the design was finally found to be flawed.

The growth of private contracting has increased not only in the military, but also in the CIA, NSA, and the Department of Homeland Security. The main contracts for the personal security agencies in Iraq come from the State Department, not the Pentagon. Contracting by intelligence agencies has increased to a point where private intelligence contract employees outnumber government employees in US intelligence operations. [4] The result of this burgeoning of private contracting of defense service, surveillance, and intelligence work is the growth of the military-industrial complex and its associated problems to unprecedented levels.

Since 2005 through the Pentagon’s Foreign Military Sales (FMS) program, defense contractors have played another significant role:  that of arms sales, rather than aid, to the Iraqi government.  Washington has offered over $35 billion in arms deals to Iraq since 2005.  This raises important economic and security concerns.  These sales put a budgetary strain on Iraq when it has yet to restore important services disrupted by the war.  Moreover, we cannot predict how Iraq will use this weaponry, either globally or within its own territory. (Text updated as of February 2013)

ARTICLE FOOTNOTES

[1] Glanz, James. "Company Executive Pleads Guilty to $1 Million Fraud in Iraq." The New York Times, February 17, 2006. 


[2] Glanz, James and Floyd Norris. “The Reach of War: Questions, Pledges, and Confrontations; Report Says Iraq Contractor Is Hiding Data From U.S.” The New York Times, October 28, 2006.

[3] Lipton, Eric. “Billions Later, Plan to Remake The Coast Guard Fleet Stumbles.” The New York Times, December 9, 2006.

[4] Shorrock, Tim. Spies for hire: the secret world of intelligence outsourcing. New York: Simon & Schuster, 2008.

[5]  “Contracts from Department of Defense (FY 2008), http://www.fedspending.org/fpds/fpds.php?sortp=r&maj_agency_cat=97&detail=-1&datype=T&reptype=r&database=fpds&fiscal_year=2008&submit=GO.

INFOGRAPHIC FOOTNOTES

[1] Glanz, James. "Company Executive Pleads Guilty to $1 Million Fraud in Iraq." The New York Times, February 17, 2006. . (accessed May 13, 2011).

[2] Glanz, James. "Iraq Contractor Inflated Costs, Lawsuit Alleges." The New York Times, September 9, 2006. http://www.nytimes.com/2006/09/09/world/middleeast/09contract.html?ref=halliburtoncompany (accessed May 13, 2011).

[3] Glanz, James. "Truckers Testify That Halliburton Put Lives at Risk.." The New York Times, September 19, 2006. http://www.nytimes.com/2006/09/19/world/middleeast/19halliburton_lede.html?ref=halliburtoncompany (accessed May 13, 2011).

[4] Glanz, James, and Floyd Noriss. "Report Says Iraq Contractor Is Hiding Data From U.S.." The New York Times, October 28, 2006. http://www.nytimes.com/2006/10/28/world/middleeast/28reconstruct.html?ref=halliburtoncompany (accessed May 13, 2011).

[5] Shenon, Philip. "Army Says It Will Withhold $19.6 Million From Halliburton, Citing Potential Contract Breach." The New York Times, February 8, 2007. http://www.nytimes.com/2007/02/08/washington/08waxman.html?ref=halliburtoncompany. (accessed May 13, 2011).