Contractors and the Cost of War: Research into Economic and Cost-Effectiveness Arguments
MBA professional rept.
NAVAL POSTGRADUATE SCHOOL MONTEREY CA
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Since the end of the Cold War, the Department of Defense DoD has led unprecedented efforts in outsourcing and privatization. Empirically, private firms offer efficiency incentives and cost savings that are maximized in competitive markets. Recent contingency operations have underscored the importance of contractors, as evidenced by the number and magnitude of reconstruction contracts. In turn, utilizing private contractors has raised questions regarding their true cost-effectiveness. This research highlights the key features of the private military industry from an economic perspective. After revisiting DoDs initial objectives for outsourcing many of their traditionally inhouse roles, an assessment is made as to whether current efforts are based primarily on capability or finance-driven constraints. The economics of privatization are subsequently explored, with particular emphasis on current contracting efforts. The research will provide deeper insight to contract valuation, industry competitiveness, and cost effectiveness arguments. Despite the current controversy, a case is made that contractors are cost-effective given their inherent flexibility. The argument becomes stronger after considering the militarys relevant alternatives to using private military companies.
- Administration and Management
- Economics and Cost Analysis
- Military Operations, Strategy and Tactics