Several smart readers wrote me to criticize this note
as naive, saying that in essence, this was a business deal and these contractors should be able to walk away from a bad business deal at the cost of any purely contractual damages. That's one perspective, and it's a valid one. But I admit to being a little more moralistic than this, especially where contingency contracting is concerned. I think these contractors did a great disservice by backing out of contracts where they could reasonably foresee the risks involved.
However, there are two caveats that are important to note as a matter of goverment contract law:
- The great majority of clauses in a government contract are specified by the Federal Acquisitions Regulation
("FAR") and agency versions such as the Defense Federal Acquisition Regulation
("DFAR"). These terms are generally incorporated into every government contract, and they are not open to negotiation. A contractor would have very little ability to change these terms during negotiations with the government. Essentially, government contracts are a package deal, and you can't negotiate the terms the way you can a private document.
- The contractors' decision to scrap their contracts probably
took place in the context of a "change". (See
Notification of Contract Changes, 48 CFR 43.104
) I don't know this, but it's an educated guess. At some point after April 9, the contractors probably looked at Iraq and said that the security situation did not look as good as the Army promised when they agreed to the contract. That situation necessitated increased security and insurance, which increased the cost of the contract. The contractors probably argued that they deserved more money in order to cover these costs, and the Contracting Officer probably rebuked them. Rather than lose money in Iraq, the contractors decided to abandon the contracts, seeing execution as more risky than breach of contract. That may have been a wise business decision.Ultimately our soldiers are the ones left holding the bag.
But that does not reflect so much on these contractors as it does on our political leaders who have made the conscious decision to outsource so much of America's defense capability. Put simply, our military cannot go to war today without a legion of contractors in support -- to maintain everything from computers to helicopters to latrines. It should come as no surprise that the current Pentagon leadership wants to outsource
even more of the military's support missions -- possibly as many as 320,000 uniformed positions. As we consider this proposal, I think we should carefully weigh the risks, as demonstrated by the problem with getting contractors to go to war.Update II
: For more on the art and science of contingency contracting, see this webpage
hosted by the Army Materiel Command on the subject.Update III
: I've beat up on government contractors a little, and perhaps unfairly. The AP reports
today that an American civilian contractor was killed in Iraq by a remote-detonated explosive as he traveled in a convoy of trucks.
The contractor was employed by Kellogg Brown & Root, a subsidiary of Halliburton, a Houston-based oilfield-services and construction company. Halliburton, the former company of Vice President Dick Cheney, has major contracts for reconstruction in both Iraq and Afghanistan.
* * *
Kellogg Brown & Root has been doing work at the Baiji refinery and pipeline terminus about 30 miles north of Tikrit, the hometown of deposed dictator Saddam Hussein, about 125 miles north of Baghdad.
Clearly, there are risks to doing business in Iraq.