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Updated February 3, 2021
Defense Primer: Department of Defense Contractors
Throughout its history, the Department of Defense (DOD)
In FY2020, 51% of total DOD contract obligations were for
has relied on contractors to support a wide range of military
services, 41% for goods, and 8% for research and
operations. A defense contractor, as defined by the Code of
development (R&D).
Federal Regulations, is “any individual, firm, corporation,
partnership, association, or other legal non-Federal entity
Contractors as Individuals
that enters into a contract directly with the DOD to furnish
Individual DOD contractors fulfill a wide variety of
services, supplies, or construction” (see 32 C.F.R. 158.3,
organizational roles and functions from logistics and
“Definitions”). Within the defense policy community, the
transportation to intelligence analysis and private security.
term contractor is commonly used in two different
contexts. The word can describe the private companies with
Why Does DOD Use Individual Contractors?
which DOD contracts to provide goods and services. It can
Following the conclusion of the Cold War, the U.S.
also describe individuals hired by DOD—usually through
military—in line with a government-wide trend—embraced
private companies, which are also considered contractors in
outsourcing, increasing reliance on contractors instead of
the previous context—to perform specific tasks. The term
using military servicemembers or government civilians to
“contractor” does not refer to military servicemembers,
perform certain tasks.
civilian DOD career employees, or civilian political
appointees.
Some analysts have highlighted numerous benefits of using
contractors. These benefits include freeing up uniformed
Operations over the past 30 years have highlighted the
personnel to focus on military specific activities; providing
central role that contractors play in supporting U.S. troops,
supplemental expertise in specialized fields, such as
both in terms of the number of contractors and the type of
linguistics or weapon systems maintenance; and providing a
work being performed. During recent U.S. military
surge capability to quickly deliver critical support functions
operations in Iraq and Afghanistan, contractors frequently
tailored to specific military needs. Because a contractor can
accounted for 50% or more of the total DOD presence in-
be hired when a particular need arises and released when
country.
his or her services are no longer needed, some have argued
Contractors as Companies
that meeting immediate personnel needs through surges in
In Fiscal Year (FY) 2020, DOD obligated more money on
the use of contractors by the federal government is more
federal contracts ($420 billion in current dollars) than all
cost-effective on a long-term basis. Just as the effective use
other government agencies combined. While DOD
of contractors can augment military capabilities, the
contracts with many companies for all kinds of goods and
ineffective use of contractors can prevent troops from
services, its contract activities are dominated by five
receiving what they need, when they need it, and can lead
companies: Lockheed Martin, Boeing, Raytheon, General
to wasteful spending. Contractors can also compromise the
Dynamics, and Northrop Grumman (see Table 1). In
credibility and effectiveness of the U.S. military and
FY2019, these companies together received 31% of all of
undermine operations, as many analysts believe occurred
DOD’s contract obligations for the year. These five
during operations in Iraq and Afghanistan.
companies are often referred to as the primes, signifying
their frequent role as prime contractors who in turn
How Many Contractors Does DOD Employ?
subcontract to other companies.
DOD’s Inventory of Contracted Services (ICS, see 10
U.S.C. §2330a(c)) report is a required annual report to
Table 1. Five Largest DOD Contractors by
Congress that provides information on certain categories of
Obligations, FY2019
contractor hiring by individual DOD components (e.g., the
in bil ions of current dol ars
military departments and defense agencies).
Contracted
Company
Under 10 U.S.C. §2330a, DOD is required to collect and
Dollars
report data for each purchase of services in excess of $3
Lockheed Martin Corporation
$47.1
million within four service acquisition portfolio groups:
The Boeing Company
$26.3
logistics management services, equipment related services,
General Dynamics Corporation
$17.0
knowledge-based services, and electronics and
communications services. In the report, DOD must also
Raytheon Company
$16.0
provide the number of contractor employees associated
Northrop Grumman Corporation
$14.2
with these services. The report does not include a total
Source: beta.SAM.gov Top 100 Contractors Report, FY2019.
number of individual contractors—instead, it provides an
Note: Fifty percent of the Bell-Boeing Joint Project Office is
estimate of contractor full-time equivalents (FTEs) for
attributed to the Boeing Company.
direct labor, a measure referring to the estimated numbers
of man-hours contracted. According to the FY2017 ICS
report, the most recent available report with FTE estimates,
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Defense Primer: Department of Defense Contractors
DOD contracted about 464,500 FTEs within the four
individuals. Since 2008, U.S. Central Command
defined service portfolios during that year. Of that number,
(CENTCOM) has published quarterly contractor census
the Department of the Army contracted about 37%, the
reports, which provide aggregated data – including
Department of the Air Force about 28%, and the
elements such as mission category and nationality – on
Department of the Navy about 22%.
contractors employed through DOD-funded contracts who
are physically located within the CENTCOM area of
Table 2. Estimated FY2017 Contractor FTEs, by DOD
responsibility.
Component
During the fourth quarter of FY2020, CENTCOM reported
DOD Component
Reported FTEs
approximately 44,000 contractor personnel working for
Department of the Army
172,303
DOD within its area of responsibility, which includes
Afghanistan, Syria, and Iraq. A reported 22,562 contractor
Department of the Air Force
131,132
personnel were located in Afghanistan, while a reported
Department of the Navy
102,181
4,826 contractor personnel were located in Iraq and Syria.
U.S. Special Operations Command
9,656
In Afghanistan as of the fourth quarter of FY2020, about
35% of DOD’s 22,562 reported individual contractors were
Missile Defense Agency
7,609
U.S. citizens. Approximately 43% were third-country
Defense Logistics Agency
6,829
nationals and roughly 22% were local/host-country
nationals. In Iraq and Syria, about 53% of the reported
Defense Information Systems Agency
6,470
4,826 DOD contractors were U.S. citizens, with 34% third-
Office of the Secretary of Defense
5,964
country nationals and 13% local/host-country nationals.
Defense Health Affairs
5,696
In Iraq and Afghanistan, armed and unarmed private
U.S. Strategic Command
2,888
security contractors have been employed to provide
services such as protecting fixed locations; guarding
All other reported FTEs
13,728
traveling convoys; providing security escorts; and training
Source: DOD FY2017 Inventory of Contracted Services.
police and military personnel. The number of private
Notes: Some components (such as DIA) provided classified
security contractor employees working for DOD in Iraq and
contractor FTEs; these estimates are not included in summary totals.
Afghanistan has fluctuated significantly over time,
Other components (such as DCMA) did not report FTE estimates.
depending on various factors. As of the fourth quarter of
FY2020, DOD reported 4,164 private security contractors
Value of ICS Report
in Afghanistan, with 1,813 categorized as armed private
In establishing the statutory requirement for the ICS report,
security contractors. DOD reported 96 private security
Congress sought in part to gain more oversight of certain
contractor personnel in Iraq and Syria during the same
types of service contracts—particularly staff augmentation
period, none of whom were identified as armed private
services and services that are closely associated with
security contractors.
inherently governmental functions—and the associated
labor. However, some observers have questioned the value
Relevant Statutes
of the ICS report in facilitating congressional oversight. A
2017 RAND study described the ICS report as including
10 U.S.C. Part IV: Service, Supply, and Procurement.
data that are “unprocessed, retrospective, and can largely be
found elsewhere,” potentially limiting the utility of the
CRS Products
report to Congress and DOD. Other experts, such as the
CRS Report R43074, Department of Defense’s Use of
Section 809 Advisory Panel, have recommended repealing
Contractors to Support Military Operations: Background, Analysis,
or modifying the underlying statutory requirement to obtain
and Issues for Congress.
more relevant data and analysis suitable for use by
policymakers in Congress and DOD.
CRS Report R44116, Department of Defense Contractor and
Troop Levels in Afghanistan and Iraq: 2007-2018.
In its FY2018 ICS Report to Congress, DOD noted that it
was transitioning its system for gathering data on contractor
Other Resources
FTEs from a DOD-unique system to the federal
Defense Pricing and Contracting, Inventory of Services Contracts,
government-wide System for Award Management (SAM).
https://go.usa.gov/xd43S.
DOD indicated that it would not be able to provide FTE
Office of the Assistant Secretary of Defense for Sustainment,
estimates during this process, but anticipated the transition
CENTCOM Quarterly Contractor Census Reports,
would be complete in time to submit the FY2020 ICS
https://go.usa.gov/xd43h.
report.
What Role Do Contractors Play In Overseas DOD
Operations?
Heidi M. Peters, Analyst in U.S. Defense Acquisition
Overseas contingency operations in recent decades have
Policy
highlighted the role that contractors play in supporting the
U.S. military, both in terms of the number of contractor
IF10600
personnel and the type of work being performed by these
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Defense Primer: Department of Defense Contractors
Disclaimer
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