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Updated December 17, 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”).
transportation to intelligence analysis and private security.
Within the defense policy community, the term contractor
Why Does DOD Use Individual Contractors?
is commonly used in two different contexts. The word can
Following the conclusion of the Cold War, the U.S.
describe the private companies with which DOD contracts
military—in line with a government-wide trend—embraced
to provide goods and services. It can also describe
outsourcing, increasing reliance on contractors instead of
individuals hired by DOD—usually through private
using military servicemembers or government civilians to
companies, which are also considered contractors in the
perform certain tasks.
previous context—to perform specific tasks. The term
“contractor” does not refer to military servicemembers,
Some analysts have highlighted numerous benefits of using
civilian DOD career employees, or civilian political
contractors. These benefits include freeing up uniformed
appointees.
personnel to focus on military specific activities; providing
Operations over the past 30 years have highlighted the
supplemental expertise in specialized fields, such as
central role that contractors play in supporting U.S. troops,
linguistics or weapon systems maintenance; and providing a
both in terms of the number of contractors and the type of
surge capability to quickly deliver critical support functions
work being performed. During recent U.S. military
tailored to specific military needs. Because a contractor can
operations in Iraq and Afghanistan, contractors frequently
be hired when a particular need arises and released when
accounted for 50% or more of the total DOD presence in-
his or her services are no longer needed, some have argued
country.
that meeting immediate personnel needs through surges in
Contractors as Companies
the use of contractors by the federal government is more
cost-effective on a long-term basis. Just as the effective use
In Fiscal Year (FY) 2020, DOD obligated more money on
of contractors can augment military capabilities, the
federal contracts ($420 billion in current dollars) than all
ineffective use of contractors can prevent troops from
other government agencies combined. While DOD
receiving what they need, when they need it, and can lead
contracts with many companies for all kinds of goods and
to wasteful spending. Contractors can also compromise the
services, its contract activities are dominated by five
credibility and effectiveness of the U.S. military and
companies: Lockheed Martin, Boeing, Raytheon, General
undermine operations, as many analysts believe occurred
Dynamics, and Northrop Grumman (see Table 1). In
during operations in Iraq and Afghanistan.
FY2020, these companies together received 54% of all of
DOD’s contract obligations for the year. These five
How Many Contractors Does DOD Employ?
companies are often referred to as the primes, signifying
DOD’s Inventory of Contracted Services (ICS, see 10
their frequent role as prime contractors who in turn
U.S.C. §2330a(c)) is a required annual report to Congress
subcontract to other companies.
that provides information on certain categories of contractor
Table 1. Five Largest DOD Contractors by
hiring by individual DOD components (e.g., the military
Obligations, FY2020
departments and defense agencies).
in bil ions of current dol ars
Under 10 U.S.C. §2330a, DOD is required to collect and
Contracted
report data for each purchase of services in excess of $3
Company
Dollars
million within four service acquisition portfolio groups:
logistics management services, equipment related services,
Lockheed Martin Corporation
$75.2
knowledge-based services, and electronics and
The Boeing Company
$27.4
communications services. In the report, DOD must also
General Dynamics Corporation
$21.8
provide the number of contractor employees associated
Raytheon Company
$21.7
with these services. The report historically has not included
Northrop Grumman Corporation
$12.3
a total number of individual contractors—instead, it has
provided an estimate of contractor full-time equivalents
Source: beta.SAM.gov Top 100 Contractors Report, FY2020.
(FTEs) for direct labor, a measure referring to the estimated
Note: Fifty percent of the Bell-Boeing Joint Project Office is
numbers of man-hours contracted. According to the
attributed to the Boeing Company.
FY2017 ICS report, the most recent available report with
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Defense Primer: Department of Defense Contractors
FTE estimates, DOD contracted about 464,500 FTEs within
personnel and the type of work being performed by these
the four defined service portfolios during that year. Of that
individuals. Since 2008, U.S. Central Command
number, the Department of the Army contracted about 37%,
(CENTCOM) has published quarterly contractor census
the Department of the Air Force about 28%, and the
reports, which provide aggregated data – including
Department of the Navy about 22%.
elements such as mission category and nationality – on
contractors employed through DOD-funded contracts who
Table 2. Estimated FY2017 Contractor FTEs, by DOD
are physically located within the CENTCOM area of
Component
responsibility, which includes Afghanistan, Syria, and Iraq.
DOD Component
Reported FTEs
Prior to August 2021, these reports included data associated
Department of the Army
172,303
with DOD-funded contractor personnel in Afghanistan.
Following the Taliban takeover and withdrawal of U.S.
Department of the Air Force
131,132
military forces from Afghanistan in August 2021,
CENTCOM reports that no DOD-funded contractor
Department of the Navy
102,181
personnel remain in Afghanistan.
U.S. Special Operations Command
9,656
During the fourth quarter of FY2021, CENTCOM reported
Missile Defense Agency
7,609
approximately 20,000 contractor personnel working for
DOD within its area of responsibility, with a reported 4,487
Defense Logistics Agency
6,829
contractor personnel located in Iraq and Syria. As of the
Defense Information Systems Agency
6,470
fourth quarter of FY2021, about 58% of DOD’s reported
individual contractors in Iraq and Syria were U.S. citizens.
Office of the Secretary of Defense
5,964
Approximately 34% were third-country nationals, and
Defense Health Affairs
5,696
roughly 8% were local/host-country nationals.
U.S. Strategic Command
2,888
In Iraq, armed and unarmed security contractors have been
employed to provide services such as protecting fixed
All other reported FTEs
13,728
locations; guarding traveling convoys; providing security
Source: DOD FY2017 Inventory of Contracted Services.
escorts; and training police and military personnel. The
Notes: Some components (such as DIA) provided classified
number of security contractor employees working for DOD
contractor FTEs; these estimates are not included in summary totals.
in Iraq and Syria 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
FY2021, DOD reported 117 security contractor personnel
Value of ICS Report
in Iraq and Syria, none of whom were identified as armed
In establishing the statutory requirement for the ICS report,
security contractors.
Congress sought in part to gain more oversight of certain
types of service contracts—particularly staff augmentation
Relevant Statutes
services and services that are closely associated with
inherently governmental functions—and the associated
10 U.S.C. Part IV: Service, Supply, and Procurement.
labor.
CRS Products
However, some observers have questioned the value of the
CRS Report R43074, Department of Defense’s Use of
ICS report in facilitating congressional oversight. A 2017
Contractors to Support Military Operations: Background, Analysis,
RAND study described the ICS report as including data that
and Issues for Congress.
are “unprocessed, retrospective, and can largely be found
elsewhere,” potentially limiting the utility of the report to
CRS Report R44116, Department of Defense Contractor and
Congress and DOD. Other experts, such as the Section 809
Troop Levels in Afghanistan and Iraq: 2007-2020.
Advisory Panel, have recommended repealing or modifying
CRS Report R46879, U.S. Military Withdrawal and Taliban
the underlying statutory requirement to obtain more
Takeover in Afghanistan: Frequently Asked Questions.
relevant data and analysis suitable for use by policymakers
in Congress and DOD.
Other Resources
Defense Pricing and Contracting, Inventory of Services Contracts,
In its FY2018 ICS Report to Congress, DOD noted that it
https://go.usa.gov/xd43S.
was transitioning its system for gathering data on contractor
FTEs from a DOD-unique system to the federal
Office of the Assistant Secretary of Defense for Sustainment,
government-wide System for Award Management (SAM),
CENTCOM Quarterly Contractor Census Reports,
with updated FTE estimates unavailable during this process.
https://go.usa.gov/xd43h.
The transition is ongoing.
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
IF10600
U.S. military, both in terms of the number of contractor
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Defense Primer: Department of Defense Contractors
Disclaimer
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