Corporate Finance Over the Last

Corporate Finance

Over the last several years, various private security contractors have been increasingly utilized, by a number of corporations and government entities. Where, their roles and responsibilities have been evolving, because of the changing nature of threats that is being faced. One place where this can clearly be seen is in Iraq and Afghanistan, as the number of private security contracts being utilized in both countries currently stands at 18,000. Where, the roles and responsibilities have varied dramatically as most will: protect convoys, provide security for various military / private corporations and protect high ranking government / corporate officials. This is significant, because the use of private security contractors has become a part of supporting various corporate and government objectives around the world. However, the problem is that many private security contractors are often viewed as above the law. Where, they conduct their various activities with near impunity in a theater of operations. Evidence of this can be seen with the 2007 incident involving Blackwater Security killing 17 civilians in Iraq and the Armor Group (the contractor that protects the U.S. embassy) engaging in various hazing rituals. (Whitelaw, 2010) As a result, many different critics have begun to question the use of private security contractors by: corporations and governments. To fully understand the role of private security contractors requires examining: if these companies are war profiteers and if they will be able to sustain their finances, while providing services that they may not be necessary in the future. To determine this, well will look at: the market for private security contractors, key companies in the industry, the differences in working with government vs. private corporations, if these companies are profiting at the expense of the tax payers and possible roles that these organizations will play in the future. Together, these different elements will provide the greatest insights, as to how the role of private security contractors is changing the way corporations and governments view the issue of security, in numerous countries around the world.

The market for security contractors

The use of private security contractors has been a part of government policy going back to the days of the American Revolution. Where, the U.S. Army would rely on the services, of private citizens; in providing a number of different support roles, as a part of completing their operational mission. For the most part this arrangement would be limited, with private citizens and corporations helping to support the military in a rather limited way. Then, after the downfall of the Soviet Union, this relationship would change, as the military would face a changing role in their operations and the way various activities were conducted. As they would be forced to deal with: smaller budgets and fewer personnel, to conduct different operations around the world. This would create a vacuum between the needs of the military and the realities of the nation. When you combine this with the fact that the U.S. military would decline by 700 thousand personnel during this time, is it easy to see how private security contractors would play a more important role. Where, they could hire former military personnel and address the obvious short falls that the military was facing. As these companies could provide; an effective solution for the different challenges. After the 911 terrorist attacks, the military began to use private contractors beyond the need of support, as they would be used to address various threats that were faced to soft targets. This is when terrorists would often attack: the different civilian, corporate and government infrastructure. The fact that the military did not have enough personnel to address these different challenges; meant that private security contractors would begin to play a more important role, after Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom (the initial invasions of Iraq / Afghanistan). (Crofford, 2006) This is important, because the different cut backs and shortages of personnel; would mean that the use of private security contractors would become very common.

Key companies in the industry

When you look at the total number of private security contractors, is it is clear, that the majority have similar kinds of focus, yet offer various specialized services. A few of the most notable contractors include: Global Strategies Group, Golan, Blackwater, Armor Group, International Security / Defense Systems, MVM and MPRI. The overall mission of the contractors will change, depending upon the objective of the organization. For example, MVM started out as a small private security contractor. However, over the years its role and missions have continued to evolve, with the company offering a variety of service including: security, translation and logistical services. When you compare this with other contractors such as: Golan, it is obvious that they are focused on more specific security services. With the company offering former counter terrorism and special operations personnel, to conduct a variety of security related services. This is significant, because it shows how the overall role of private security is continuing to evolve, among some of the major players in the industry. As the shortage of key civilian and military personnel, are creating various opportunities for these companies to fill numerous gaps. At which point, the overall nature of the relationship between: the security contactor / government / private business will change, as these services will become a part of daily life in many countries. ("PMC's," n.d.)

The differences in working with government vs. corporations

When private security corporations are working with a variety of governments, they will face increased amounts of scrutiny in regards to: their actions and activities. This is because the use of private security contractors has often been compared with mercenaries (who have impunity from the law). Where, the military and the governments that are hiring them; have limited to no responsibility in addressing various issues they create. The reason why, is because private security contractors are considered to be non-combatants. This means that they are not subject to various procedures and standards; that soldiers along with employees (who are hired directly by the government) must go through. As a result, private security contractors will coordinate less with military and government officials. This increases the chances of friendly fire and the possibility that civilians, could indirectly become caught up in the cross fire. A good example of the carefree attitude that many of these different contractors have, can be seen by looking no further than a study that was conducted by Rand Corporation. Where, they found that 50% of the diplomatic personnel reported private security contractors having a lack of sensitivity to the country they are in and their culture. Out of this number, 38% of respondents said that they felt private security contractors have no respect for local or international law. (Dunnigan, 2010) This is important, because it shows how private security contractors have less accountability when working with government. As they are needed by: the military (to complete its mission) and various government personnel (for protection). Where, the government's dependency on them, has allowed their personnel to be more aggressive, because there are no standards and accountability.

In the case of corporations, the role of private security contractors is more limited. Where, they will focus on providing protective services of different corporate executives and securing numerous properties / interests of company. This means, that the organizations will provide services that will protect the security of different company assets (such as: protecting certain properties from intruders). However, the use of private security contractors have been continuing to evolve, as many corporations will often hire them for damage control or to prevent access to certain areas that could be embarrassing. A good example of this occurred with BP, during the Gulf of Mexico oil spill. What happened was, the company wanted to prevent reporters and environmentalists from having access to oily beaches. To prevent this from occurring, they would hire Blackwater Security, to block entry of unauthorized individuals, from having access to these beaches. (Rawnesely, 2010) This is significant, because it shows how numerous corporations have begun using private security contractors beyond their intended purposes. Where, they are being utilized to help companies keep embarrassing incidents away from the public. This is important, because it shows how the use of private security contractors are continuing to evolve, where they are increasingly being used as hired muscle to keep people in line (during a number of challenging events).

Are these companies profiting at the expense of the tax payers?

The various abuses that are occurring at the hands of some private security contractors, have to lead to calls that they are fleecing the American tax payer. As their impunity from prosecution and their aggressive actions, shows that they are making money off various tragedies. Yet, when you look further beneath this statement, it is clear that private security contactors do provided a valuable service that many in: the military, private business and government feel is worth the costs. This is because many of the personnel that are hired by these companies, have often served distinguished careers in a number of elite units within the military. To include: Rangers, Special Forces, Delta Force, Special Air Service, Special Boat Service and Navy SEALs. (Dunnigan, 2010) As a result, many people within the U.S. military and the government will often discuss the valuable services that these companies are providing. Where, private security contractors can bring a wide range of experience with them, in dealing with a host of possible security challenges that could be faced within a theater of operations.

However, the main reason why both government and military personal have such favorable views of private security contractors, is because they are professionals and are effective at achieving their objectives. What is happening, is the personnel that private security firms can introduce to a conflict, can help prevent a situation from going to bad to worse. Where, a possible insurgent or terrorist attack that could send most people running; will cause these individuals to remain at their positions. What makes the private security companies so respected; is that they do not back down in face of adversity or challenges. Instead, they will maintain their positions and will continue to secure the perimeter in the face of numerically superior odds. This is important, because one of the biggest challenges that U.S. forces have been facing, is encouraging the military and police units that they are training to engage the enemy. When the private security companies can be able to maintain their positions and will secure the perimeter no matter what, this improves security on the ground. Where, the insurgents or terrorists can not use a small attack, as a way to create instability. A good example of this occurred in Al Kut (during 2003) and Najaf (during 2004). What happened was, private security contractors would come under heavy fire during insurgent attacks on their bases. To prevent the enemy from gaining control, the expertise of these contractors, would help them to fend off several different waves of possible enemy attacks. Given the proximity of where both incidents occurred (the Sunni Triangle), this would serve as a litmus test for gauging the resolve and strength of private security contractors. (Dunnigan, 2010) At which point, these styles of attacks would become less, as the professionalism and knowledge would show, how cunning private security firms are dealing with host of security situations. As a result, a number of military and government officials describe the services that these companies are providing as valuable. Evidence of this can be seen with a survey that was conducted by Rand. Where, they found that 62% of military personnel and 75% of diplomats; describe the various services that are being provided by these companies as valuable. (Dunnigan, 2010) This is significant, because it shows that in certain aspects, private security contractors are not fleecing the tax payer. Instead, they are providing a service that is helping to protect government officials and military personnel from a variety of attacks. Therefore, one could effectively argue that private security contractors are serving their intended purposes. Where, they are using their different skills and tactics, to achieve this objective as effectively as possible.

However, the fact that many private security contractors have a certain amount of impunity means that their actions cause those of the government and the military to be viewed in a negative light. A good example of this can be seen with, a 2006 GAO study which said, "These companies are profiting at the expense of the tax payers. The perception that DOD and other government agencies are deploying [private security contractors] who abuse and mistreat people can fan anti-American sentiment and strengthen insurgents, even when no abuses are taking place." (Whitelaw, 2010) This is important, because it shows how the use of private security contractors can cause the civilian population, to view the events that have taken place (from their actions) in a negative light. Where, many people will often see them as an extension of a government that does not follow various rules and regulations. At which point, the chances improve dramatically that this could assist, in increasing the resentment of local officials and the general public. This helps to increase instability, with any kind of negative events being replayed over and over again. Over the course of time, these events will help to make the security situation inside the country worse. As the actions of private security contractors will cause resentment and discontent to rise dramatically. A good example of this can be seen in Afghanistan, where the government announced recently that they are going to be banning, all private security firms by next year. The reason why is because, the government wants all responsibilities of private security contactors transferred to the military and police. This is because there are number of Afghan and American private security operators working in the country. Even though the industry is regulated, the reality is that many Afghan companies are known for engaging in various tactics that are considered to be: aggressive and disproportionate (when you compare them with the actual event). This has caused many of the activities of various companies, to begin to undermine some of the objectives of the government and military officials. As these tactics are often viewed, as an extension of the Afghan Army and police (this is affecting the government's efforts to defeat the Taliban). This is important, because it shows how the actions of American contractors are helping to increase the negative perceptions of government and organizations that are using them. Where, they are seen as nothing more than the mercenaries who will shoot and kill innocent people, without cause. ("Afghanistan Private Security Contractors Banned," 2010)

What all of this shows, is that private security companies do provide a significant benefits to tax payers. As they help to protect important government officials and they are securing vital military / private interests. Yet, the aggressive nature of these companies and the shoot first ask questions later type of attitude, is making the situation worse. Where, these organizations are viewed as nothing more than roving hit squads. Over the course of time, this can eat away at the government's effort to win the hearts and minds of the population. As this is causing many people to be see private security contractors, as no better than the terrorists. Once this occurs, it can cause the security challenges inside a country to become more difficult. In many ways, one could argue that the complicated arrangement is what makes this issue so challenging, with these companies known for providing highly trained services. Yet, the way some of these different tactics are applied and how they achieve their mission, can make the situation worse. As a result, private security companies are a benefit to the tax payers, by helping them achieve various security objectives. Yet, they are also a burden as their actions can cause the costs to increase, with helping, to push people, to join the insurgency or terrorist organizations.

The possible roles that these organizations will play in the future

When you look at the overall role that these organizations will play in the future, it is clear that they will have an increasingly important part, in helping to support and augment the mission of various government / corporate interests. What is happening is the reduction of U.S. forces in Iraq and Afghanistan has been causing, the overall number of private security contractors to increase. This is because roles and duties of private security contractors are changing, as they are required to play an increasingly important part in security operations overseas. With more providing security and addressing various duties, that were once limited to military personnel. According to Steve Schooner, a professor of Government Contracting at George Washington University Law School, the risks of war are shifting to private contractors, as the number of deaths has been continually rising. This because the troop draw downs are creating shift in the security situation, as the military is turning over a number of responsibilities to private contractors. At which point, the number of private security contractor deaths and casualties will begin to consistently increase. Evidence of this can be seen by looking no further than U.S. contractor deaths, as they have begun to climb by 25% over the last few years. This is because, a shift is occurring in the number of contractors that are exposed to a variety of hostile situations in these countries. Commenting about what was occurring Schooner said, "It's extremely likely that a generation ago, each one of these contractors' deaths would have been a military death. As troop deaths have fallen, contractor deaths have risen. It's not a pretty picture." This is significant, because it shows the changing roles that are occurring in the private security industry. Where, an increasing number of governments and corporations are relying on their services to augment changes in the security situation. As a result, one can infer that the future of private security contractors will continue to play a vital role for both: government and business. Where, they are being utilized to address various support and security needs in numerous ways. Over the course of time, this role will continue to keep evolving, as the use of these organizations will become more common in the future.