Home / Our news and views / With the rapidly expanding market for private and military security companies, their use raises a host of sensitive issues for governments

With the rapidly expanding market for private and military security companies, their use raises a host of sensitive issues for governments


BRUSSELS – As state security budgets come under pressure, a recent study on the subject says countries are increasingly farming this function out to private military and security companies (PMSCs). The net effect is to transform security into a private sector commodity, it argues.

Completed in late July, the 75-page study was carried out by the Centre for European Studies (CES), based here. The centre is the policy wing of the European People’s Party (EPP), one of the cross-border political groupings within the European Parliament.

CES gives a broad definition to the PMSC sector, consisting of private agencies that perform a wide range of tasks, from supporting combat operations to language interpretation. The new study does not aim to prove that the implications of outsourcing are either good or bad, but instead emphasises how and when states should contract out security services by identifying the main problems and issuing a set of recommendations.

The key issues highlighted include poor contract management by state authorities, over involvement of security suppliers in policy formulation and lack of international regulations, leading to the risk of impunity of PSMC behaviour.

The reliance on PSMCs is a self-feeding cycle, says CES. The PSMCs are growing as states redirect budgetary resources away from their militaries which, in turn, forces them to rely on the expertise of private security companies. As a result, the same companies who play a large role in the assessment of imminent threats and formulation of security policy can end up implementing those same security policies.

The study opines that private security service providers now have “too much influence” in the determination of security policies, enabling them to influence the growth in demand for their services. It argues that states need to determine their ‘inherently governmental functions’ and to limit the market’s access to policy formulation.

CES also points to problems of contract management and supervision – functions it says are often poorly carried out by contracting states, which leaves the latter vulnerable to fraud such as overcharging. This flows from insufficient numbers of suitably trained government contract officers to supervise implementation of the PSMCs’ work.

In one example cited in the study, contracting personnel with little engineering background in Afghanistan were often sent to assess construction projects but, due to poor knowledge and lack of training, were unable to determine whether the work conformed to technical specifications, thus undermining contractual audits.

Another major shortcoming the study underlines is the type of contracts a state grants. States often give no-bid contracts to PMSCs, failing to use the competition between companies to work to their advantage. Thus, CES recommends that states should always request competitive bids and aim to obtain more than one offer.

A further problem is the ‘cost plus’ contract basis. In this type of contract, the contractors are paid for all of the costs incurred as well as their profit margin. When private companies compete for contracts they often bid low, knowing that if they get the contracts they can later exceed the cost of the services. A failure to properly supervise such contracts can mean failing to achieve the primary aim of outsourcing security, which is to save money.

Finally, the study strongly argues that states should increase the accountability of private security suppliers by implementing a regulatory framework based on international law. Not only do the national courts of contracting countries not have jurisdiction over the territory of other states where PMSCs operate, but the latters’ employees often have a status of immunity where they work. Furthermore, in instances where local authorities may be investigating charges of human rights violations by PMSC employees, private security service suppliers are usually unwilling to assist them.

Despite the drawbacks of PMSCs, the study notes that a combination of public and private security would be beneficial under the right circumstances. Ultimately, however, it argues that it is “vital” that countries reverse their downward trend regarding security resources, while more closely scrutinizing PMSCs’ activity.

     THE UPSHOT: While many of the CES study’s findings are obvious – i.e., favour competitive bidding over single-supplier bids, avoid cost-plus contracts, etc. – these arguments are worth repeating over and over again. As the financial crisis bites ever deeper into national budgets, common sense would suggest that the PMSC sector will continue to grow.
One of the problems of proper contractual oversight for PMSCs is linked to expediency. If a government wants a PMSC to be on “stand-by” status to deploy at a moment’s notice (as any public military-security rapid reaction force would have to do), that entails a cost which the government would have to cover. But in these tight budgetary times, paying a PMSC to do nothing until called upon is difficult to justify. Result? Governments will likely turn to PMSCs at the last minute to deal with whatever crisis has just unfolded. That does not allow for well thought out oversight strategies.
Perhaps the study’s most important plea is for regulation. However, this is a very prickly issue. The 27 EU nations have refused to collectively address the issue while, on the wider stage, there is binding international convention to govern the behaviour or legal status of PMSCs. There are voluntary agreements and “understandings”, but no hard and fast rules.
The PMSC sector looks fated to “enjoy” its ambiguous status for some time to come…

About Sophie Donoghue

Sophie Donoghue was deputy editor and policy analyst at SECURITY EUROPE during 2012-2013 and now freelances for the publication from London. She can be reached at: sd@seceur.info

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