Department of Defense Trends in
Overseas Contract Obligations
Moshe Schwartz
Specialist in Defense Acquisition
Joyprada Swain
Research Associate
May 16, 2011
Congressional Research Service
7-5700
www.crs.gov
R41820
CRS Report for Congress
P
repared for Members and Committees of Congress
Department of Defense Trends in Overseas Contract Obligations
Summary
The Department of Defense (DOD) has long relied on contractors to support military operations.
Contractors provide the U.S. military with weapons, food, uniforms, and logistic services, and
without contractor support, the U.S. would currently be unable to arm and field an effective
fighting force. DOD spends more on federal contracts than all other federal agencies combined.
Understanding the costs associated with contractor support of overseas military operations could
provide Congress more data upon which to weigh the relative costs and benefits of different
military operations, including contingency operations and maintaining bases around the world.
The federal government tracks contract obligations through the Federal Procurement Data
System-Next Generation. Obligations occur when agencies enter into contracts, employ
personnel, or otherwise legally commit to spending money. Outlays occur when obligations are
liquidated. This report examines (1) DOD’s overseas contract obligations in the larger context of
U.S. government and DOD contract spending, and (2) how those contract obligations are used to
support DOD operations in different regions.
Total DOD Contract Obligations
From FY1999 to FY2008, DOD contract obligations increased from $165 billion (in FY2010
dollars) to $414 billion (in FY2010 dollars). Contract obligations also consumed an increasing
share of total DOD obligations, increasing from 50% of total obligations in FY2003 to 60% in
FY2008. In FY2009 and FY2010, DOD contract obligations decreased. In FY2010, DOD
obligated $366 billion to contracts (54% of total DOD obligations).
DOD Contract Obligations Performed Overseas
DOD obligated $45 billion for contracts performed overseas in FY2010. Although much of these
funds were to support operations in Afghanistan and Iraq, a significant portion—$18 billion, or
40%—was spent to support DOD operations in other parts of the world.
DOD contract obligations for work performed overseas went primarily to the region that falls
under the jurisdiction of U.S. Central Command (61% of total), which includes the Iraq and
Afghanistan areas of operation. DOD contractors working abroad performed their remaining
work in the geographic regions that fall under U.S. European Command (21%), U.S. Pacific
Command (7%), U.S. Northern Command (7%), U.S. Southern Command (1%), and U.S. African
Command (1%). Combined, Central Command and European Command represent over 80% of
all overseas contract obligations and approximately 85% of all U.S. troops deployed overseas.
Comparison of DOD, State, and USAID Overseas Contract Obligations
Some analysts argue that the United States needs to strengthen its use of soft power to achieve
foreign policy objectives. Such a whole-of-government approach brings together the resources of,
among others, DOD, the Department of State, USAID—and government contractors. Over the
past 12 fiscal years, DOD’s share of total federal government obligations for contracts performed
abroad has trended down from a high of 90% in FY1999 to 73% in FY2010. Over the same
period, combined Department of State and U.S. Agency for International Development contract
obligations increased from 4% to 11% of all U.S. government overseas obligations.
Congressional Research Service
Department of Defense Trends in Overseas Contract Obligations
Contents
Introduction ................................................................................................................................ 1
Total DOD Contract Obligations ................................................................................................. 1
DOD Contract Obligations Performed Overseas .......................................................................... 3
Where DOD Obligates Contract Dollars................................................................................ 5
Operations in Afghanistan and Iraq ....................................................................................... 7
Whole-of-Government Approach .......................................................................................... 8
Figures
Figure 1. Contract Obligations by Agency ................................................................................... 2
Figure 2. DOD Contract Obligations ........................................................................................... 3
Figure 3. Percentage of DOD Contract Obligations Performed Outside the United States ............ 4
Figure 4. DOD Contract Obligations for Work Performed in Combatant Commands Areas
of Responsibility ...................................................................................................................... 6
Figure 5. DOD’s Proportion of Total U.S. Government Contract Work
Performed Overseas ................................................................................................................. 9
Tables
Table 1. Value of Obligations for Contracts Performed in Combatant Commands Areas of
Responsibility .......................................................................................................................... 6
Table 2. Top 10 Foreign Countries............................................................................................... 7
Contacts
Author Contact Information ........................................................................................................ 9
Congressional Research Service
Department of Defense Trends in Overseas Contract Obligations
Introduction
The Department of Defense (DOD) has long relied on contractors to support overseas military
operations. Contractors provide the U.S. military with weapons, food, uniforms, and logistic
services, and without contractor support, the United States would currently be unable to arm and
field an effective fighting force. In FY2010, DOD obligated $45 billion for contracts performed
overseas. Although much of these funds were obligated to fund operations in Afghanistan and
Iraq, a significant portion—$18 billion, or 40%—was spent to support DOD operations in other
parts of the world. Most of the overseas contract obligations related to supporting U.S. troops
stationed abroad.
Congress has long recognized the critical role contractors play in supporting overseas military
operations and has grappled with the role of contractors in supporting overseas operations and the
costs associated with DOD’s reliance on contractors. Understanding the costs associated with
contractor support of overseas military operations could provide Congress more data upon which
to weigh the relative costs and benefits of different military operations, including contingency
operations and maintaining permanent bases around the world. This report examines (1) DOD’s
overseas contract obligations in the larger context of U.S. government and DOD contract
spending, and (2) how those contract obligations are used to support DOD operations in different
regions.
Total DOD Contract Obligations
When Congress appropriates money, it provides budget authority—the authority to enter into
obligations. Obligations occur when agencies enter into contracts, submit purchase orders,
employ personnel, or otherwise legally commit to spending money. Outlays occur when
obligations are liquidated (primarily through the issuance of checks, electronic fund transfers, or
the disbursement of cash).1
How is government contract data tracked?
The contract data in this report come from the Federal Procurement Data System—Next Generation (FPDS-NG), a
central database of U.S. government-wide procurement. FPDS-NG generally reports information on contracts that
exceed $3,000 in obligations. FPDS-NG does not include data from judicial branch agencies, the Government
Accountability Office (GAO), the Congressional Budget Office (CBO), or select executive branch agencies, such as
the Central Intelligence Agency and National Security Agency. GAO, CBO, and the Special Inspector General for Iraq
Reconstruction have all raised concerns over the accuracy and reliability of the data contained in the database. Given
these concerns, data from FPDS-NG is used in this report only to identify broad trends and rough estimations. FPDS-
NG began operating on October 1, 2003, and contains data from 1978 to the present.
1 CRS Report 98-721, Introduction to the Federal Budget Process, coordinated by Bill Heniff Jr., p. 2. GAO defines an
obligation as “a definite commitment that creates a legal liability of the government for the payment of goods and
services ordered or received, or a legal duty on the part of the United States that could mature into a legal liability by
virtue of actions on the part of the other party beyond the control of the United States. Payment may be made
immediately or in the future. An agency incurs an obligation, for example, when it places an order, signs a contract,
awards a grant, purchases a service, or takes other actions that require the government to make payments to the public
or from one government account to another.” U.S. Government Accountability Office, A Glossary of Terms Used in the
Federal Budget Process, GAO-05-734SP, September 1, 2005.
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Department of Defense Trends in Overseas Contract Obligations
In FY2010, the U.S. government obligated $535 billion for contracts for the acquisition of goods,
services, and research and development.2 The $535 billion obligated on contracts is equal to 15%
of the entire FY2010 U.S. budget of nearly $3.6 trillion. As noted in Figure 1, DOD obligated
more money on federal contracts than all other government agencies combined, $366 billion,
equal to 11% of the entire U.S. budget.
Figure 1. Contract Obligations by Agency
FY2010
Source: USASpending.gov, March 2, 2011. USASpending.gov derives its data from FPDS-NG. Figure by CRS
Graphics.
From FY1999 to FY2008, adjusted for inflation, DOD contract obligations increased from $165
billion (in FY2011 dollars) to $414 billion (in FY2011 dollars) (see Figure 2). Contract
obligations also consumed an increasing share of total DOD obligations, increasing from 50% of
total obligations in FY2003 to 60% in FY2008.3
2 The U.S. Government obligated more money on services (51%) than on goods (37%) and research and development
(11%) combined (numbers do not equal 100% due to rounding). Calculations are based on total contract dollars in
FY2010 from Federal Procurement Data System—Next Generation, February 24, 2011, and the Budget of the United
States Government: Fiscal Year 2012.
3 For purposes of this report, total obligations are defined as total direct obligations. See Department of Defense,
Budget for Fiscal Year 2005-FY2010, Financial Summary Tables. Deflators for converting into constant dollars derived
from Office of the Under Secretary of Defense (Comptroller), Department of Defense, National Defense Budget
Estimates for FY2011, “Department of Defense Deflators – TOA ‘Total Non-Pay,’” p. 46, March 2010.
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Department of Defense Trends in Overseas Contract Obligations
Figure 2. DOD Contract Obligations
FY1999-FY2010 (in millions)
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
9
0
1
02
03
04
05
6
07
8
9
0
199
200
200
20
20
20
20
200
20
200
200
201
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
Source: Federal Procurement Data System—Next Generation, January 3, 2011.
Notes: Deflators for converting into constant dol ars derived from Office of the Under Secretary of Defense
(Comptrol er), Department of Defense, National Defense Budget Estimates for FY2011, “Department of Defense
Deflators – TOA, ‘Total Non-Pay,’” p. 46, March 2010.
As shown above, in FY2009 and FY2010 DOD decreased the amount of obligations that went to
contractors. In FY2010, out of total direct obligations of $681 billion, DOD obligated $366
billion (54%) to contracts, compared to $414 billion (60%) in FY2008.4 DOD’s overall decreased
reliance on overseas contractors is not a result of a policy to use fewer contractors in Afghanistan
and Iraq. Contract obligations to support operations in Afghanistan and Iraq have remained
relatively stable over the past two years.5
DOD Contract Obligations Performed Overseas
DOD relies on contractors to support operations worldwide, including contingency operations in
Afghanistan and Iraq, permanently garrisoned troops overseas, and ships docking at foreign ports.
4 DOD obligations in FY2010 broke down as follows: 45% on goods, 43% on services, and 12% on research and
development. Contract obligation data drawn from FPDS-NG, January 3, 2011, for FY1999 through FY2010. See
Department of Defense, Budget for Fiscal Year 2012, Financial Summary Tables, for total direct obligations.
5 Contract obligations in the Afghanistan and Iraq areas of operation decreased from $29 billion in FY2008 to $27
billion in FY2010.
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Department of Defense Trends in Overseas Contract Obligations
What is place of performance?
FPDS-NG defines place of performance as “the location of the principal plant or place of business where the items
will be produced, supplied from stock, or where the service will be performed.”6 Foreign place of performance is
defined here as work produced, supplied, or performed primarily outside of the United States or its territories.
Because FPDS-NG only al ows for one country to be listed as the place of performance, contracts listed as being
performed in one country can also involve substantial performance in other countries.
In FY2010, DOD obligated more than $45 billion or 12% of its total contract obligations for work
performed outside of the United States (see Figure 3).7 Operations in Afghanistan and Iraq
accounted for approximately 60% of all contract obligations ($27 billion) for work performed
outside of the United States.8 Excluding operations in Afghanistan and Iraq, overseas obligations
would represent approximately 5% to 6% of all DOD contract obligations.9
Figure 3. Percentage of DOD Contract Obligations
Performed Outside the United States
14%
12%
10%
8%
6%
4%
2%
0%
0
1
3
0
1999
200
200
2002
200
004
005
006
2007
008
2009
201
FY
FY
FY
FY
FY
FY2
FY2
FY2
FY
FY2
FY
FY
Source: FPDS-NG, January 3, 2011, for FY1999 through FY2010.
6 General Services Administration, Federal Procurement Data System-Next Generation (FPDS-NG) Data Element
Dictionary, version 1.4, February 15, 2011.
7 FPDS-NG, January 3, 2010, for FY1999 through FY2010.
8 Based on Congressional Budget Office (CBO) methodology, the Iraqi theater includes Iraq, Bahrain, Jordan, Kuwait,
Oman, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates. See Congressional Budget Office, Contractors’
Support of U.S. Operations in Iraq, August 2008, p. 3. For purposes of this analysis, the Afghan theater includes
Afghanistan, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan.
9 Projection based on the level of overseas obligations prior to the onset of operations in Afghanistan and Iraq and by
comparing current overseas obligations, less Afghanistan and Iraq, to overall current obligations.
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Department of Defense Trends in Overseas Contract Obligations
Where DOD Obligates Contract Dollars
DOD divides its missions and geographic responsibilities among six unified combatant
commands, including the U.S. Northern Command (NORTHCOM), U.S. African Command
(AFRICOM), U.S. Central Command (CENTCOM), U.S. European Command (EUCOM), U.S.
Pacific Command (PACCOM), and U.S. Southern Command (SOUTHCOM).10 These commands
do not control all DOD contracting activity that occurs within their respective geographic areas of
responsibility. Transportation Command (TRANSCOM) may contract with a private company to
provide transportation services in the Central Command area. For purposes of this report, DOD
contract obligations are categorized by the place of performance, not the DOD component that
signed the contract or obligated the money. For example, all contract obligations for work in the
geographic location that falls under the responsibility of CENTCOM will be allocated to
CENTCOM.
In FY2010, most of DOD’s contract work (88%) was performed in NORTHCOM. While
NORTHCOM also includes the Bahamas, Canada, and Mexico, the majority of this money is
spent within the United States and its territories.11 DOD obligated 8% of its contract work to
CENTCOM, followed by 3% in EUCOM and 1% in PACCOM.12
The Unified Combatant Commands where DOD obligates contract dollars reflects DOD’s
military operations and overseas permanent garrisoned U.S. troops. DOD contract obligations for
work performed overseas went primarily to CENTCOM (61%), which includes the Iraq and
Afghanistan areas of responsibility. DOD contractors performed their remaining work abroad in
EUCOM (21%), PACCOM (7%), NORTHCOM (7%), SOUTHCOM (1%), and AFRICOM (1%)
(see Figure 4 and Table 1). CENTCOM and EUCOM combined represent over 80% of all
overseas contract obligations and approximately 85% of troops deployed overseas.13
10 Department of Defense, Unified Command Plan, December 17, 2008.
11 In FY2010, DOD obligated 99% of its contract work in NORTHCOM to the United States and its territories. Some
countries do not fall under the geographical jurisdiction of any of the Unified Combatant Commands.
12 Percentages based on data from FPDS-NG, January 4, 2011, for FY1999 through FY2010. Each Unified Combatant
Command lists the countries that comprise its areas of responsibility on its respective website.
13 Based on data provided by the Defense Manpower Data Center, as of September 30, 2010. For number of troops in
South Korea, see CRS Report R41481, U.S.-South Korea Relations, coordinated by Mark E. Manyin.
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Department of Defense Trends in Overseas Contract Obligations
Figure 4. DOD Contract Obligations for Work Performed
in Combatant Commands Areas of Responsibility
FY2010
Source: FPDS-NG, January 3, 2011, for FY2010. Figure by CRS Graphics.
Table 1. Value of Obligations for Contracts Performed
in Combatant Commands Areas of Responsibility
FY2010
Unified Combatant Command
Amount
CENTCOM $27,618,890,372
EUCOM $9,652,423,800
PACCOM $3,381,097,568
NORTHCOM $3,095,378,614
AFRICOM $526,775,708
SOUTHCOM $490,057,648
Source: FPDS-NG, January 3, 2011, for FY2010.
Notes: Total does not equal 100% because approximately 2% of DOD contact obligations are for contracts
performed in countries that do not fall under any of the Unified Combatant Commands.
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Department of Defense Trends in Overseas Contract Obligations
Of the top 10 countries where DOD contractors perform work abroad, 4 are in CENTCOM, 3 are
in EUCOM, 2 are in PACCOM, and 1 is in NORTHCOM (see Table 2).
Table 2. Top 10 Foreign Countries
By Contract Place of Performance, FY2010
Unified Combatant
Rank Country
Amount Command
1
Afghanistan
$11,388,984,141
CENTCOM
2
Iraq
$6,951,316,839
CENTCOM
3
Kuwait
$4,491,779,115
CENTCOM
4
Canada
$2,979,078,000
NORTHCOM
5
Germany
$2,455,331,525
EUCOM
6
United
Arab
Emirates
$2,368,843,593
CENTCOM
7
United
Kingdom
$2,311,271,319
EUCOM
8
Sweden
$2,089,727,880
EUCOM
9
Japan
$1,832,346,842
PACCOM
10
South
Korea
$1,240,436,061
PACCOM
Source: FPDS-NG, January 3, 2011, for FY2010.
Recently, Congress has focused on DOD’s construction and fuel contracts, as a result of
operations in Afghanistan and Iraq. In FY2010, DOD obligated $24.8 billion (7% of overseas
contract obligations) for construction, of which approximately $2.7 billion was for construction in
Afghanistan and Iraq.14 In FY2010, DOD obligated $12.4 billion (3% of overseas contract
obligations) for fuel, of which approximately $4.8 billion was for fuel in Afghanistan and Iraq
areas of responsibility.15
Operations in Afghanistan and Iraq
As discussed above, 60% of all DOD overseas contract obligations in FY2010 were for work
performed in the Afghanistan and Iraq areas of operation. Contractors provide a wide variety of
services and products to support DOD operations in Afghanistan and Iraq, including base support,
construction, security, training of local security forces, and transportation. While many of these
contracts are for work in Afghanistan and Iraq, a number are for work to be performed in
surrounding countries within the U.S. Central Command (CENTCOM).
14 For more background on military construction, see CRS Report R41653, Military Construction: Analysis of the
President’s FY2012 Appropriations Request, by Daniel H. Else.
15 The FPDS-NG category for fuel also includes obligations for oils and lubricants. For more background on DOD’s
fuel expenditures, see CRS Report R40459, Department of Defense Fuel Spending, Supply, Acquisition, and Policy, by
Anthony Andrews. According to the Defense Logistics Agency, DOD $14.5 billion dollars for energy. This figure
includes expenses for petroleum, natural gas, aerospace energy, federal excise tax, transportation, facilities, DLA
Energy operations and headquarters. In addition, the figures includes over one billion in increased inventory on hand at
the end of the fiscal year. See Defense Logistics Agency, Defense Logistics Agency Energy, Fact Book Fiscal Year
2010, pp. 20, 22-23, http://www.energy.dla.mil.
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Department of Defense Trends in Overseas Contract Obligations
DOD reports on the breakdown of the type of services that contractors provide in Iraq, but it does
not provide a similar breakdown for Afghanistan. As of December 2010, base support functions
(such as maintaining the grounds, running dining facilities, and performing laundry services) and
security combined to represent almost 80% of DOD contractor personnel in Iraq.
As the services required by DOD change during the course of operations, the percentages and
numbers of contractors providing different types of services also change. For example, from June
2008 to December 2010, contractors providing base support and construction services in Iraq
declined by 53% and 97%, respectively, whereas the number of contractors providing security
actually increased by 39%. The drop in the number of contractor personnel performing base
support and construction is a reflection of DOD’s shrinking footprint and winding down of
reconstruction activities in Iraq.
Whole-of-Government Approach
In FY2009, DOD had a base budget of $515.4 billion,16 more than 13 times the combined budgets
of the Department of State, the U.S. Agency for International Development (USAID), and other
foreign affairs agencies.17 In addition, DOD had a total workforce of more than 2.4 million,
nearly 70 times the combined workforce of the Department of State and USAID.18 A number of
analysts have argued that as a result of its larger budget and workforce, DOD often undertakes
traditionally civilian missions because other agencies do not have the necessary resources to
fulfill those missions. Senate Foreign Relations Committee Majority, Discussion Paper on
Peacekeeping, Majority Staff, April 8, 2010, states, “The civilian capacity of the U.S.
Government to prevent conflict and conduct post-conflict stabilization and reconstruction is beset
by fragmentation, gaps in coverage, lack of resources and training, coordination problems,
unclear delineations of authority and responsibility, and policy inconsistency.” These analysts
have argued that to achieve its foreign policy goals, the United States needs to take a more whole-
of-government approach that brings together the resources of, among others, DOD, the
Department of State, USAID—and government contractors. Secretary of Defense Robert Gates
echoed this approach when he argued for strengthening the use of soft power in national security
through increased non-defense spending. As Secretary Gates stated:
What is clear to me is that there is a need for a dramatic increase in spending on the civilian
instruments of national security—diplomacy, strategic communications, foreign assistance,
civic action, and economic reconstruction and development ... We must focus our energies
beyond the guns and steel of the military, beyond just our brave soldiers, sailors, Marines,
and airmen. We must also focus our energies on the other elements of national power that
will be so crucial in the coming years.19
16 Based on the Budget for the U.S. Government, Fiscal Year 2009. This figure excludes supplemental war funding.
17 Statistic based on foreign operations budget request for FY2009, which includes Department of State, USAID, and
other foreign affairs agencies and offices, such as the Millennium Challenge Corporation, Peace Corps, Inter-American
Foundation, and the African Development Foundation. Offices with the Department of Treasury and Department of
Agriculture also receive funding from this request. Finally, several multilateral economic assistance organizations such
as the African and Asian Development Banks are also included in this request.
18 DOD workforce includes active military, reserves, and civilians. Reserves are generally not full-time employees.
National Guard is not included in the total. Department of State workforce includes foreign service officers, civil
service, and foreign service nationals. Based on Full Time Employee (FTE) equivalents. Contractors are excluded from
all counts.
19 Remarks delivered by Secretary of Defense Robert M. Gates at Manhattan, KS, November 26, 2007.
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Department of Defense Trends in Overseas Contract Obligations
Contract obligations since FY 2000 indicate a shift toward a more whole-of-government approach
to achieving foreign policy objectives. DOD’s share of total government obligations for contracts
performed abroad has trended down from a high of 87% in FY2000 to 73% in FY2010. Over the
same period, combined Department of State and USAID contract obligations increased from 5%
to 16% of all U.S. government overseas obligations (see Figure 5).
Figure 5. DOD’s Proportion of Total U.S. Government Contract Work
Performed Overseas
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
DOD
State
USAID
Source: DOD data from FPDS-NG, January 4, 2011. Department of State and USAID data from FPDS-NG on
March 16, 2011.
Notes:. USAID was established as an independent agency in 1961, but receives overall foreign policy guidance
from the Secretary of State.
Author Contact Information
Moshe Schwartz
Joyprada Swain
Specialist in Defense Acquisition
Research Associate
mschwartz@crs.loc.gov, 7-1463
Congressional Research Service
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