Defense Primer: Department of Defense Contractors

Defense Primer: Department of Defense Contractors

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Updated June 6, 2024
Defense Primer: Department of Defense Contractors
Throughout its history, the Department of Defense (DOD)
In FY2022, 49% of total DOD contract obligations were for
has relied on contractors to support a wide range of military
services and 51% of DOD contract obligations were for
operations. Within the defense policy community, the term
goods, or products.
contractor is commonly used in two different contexts. The
word can describe the private companies, academic
Contractors as Individuals
institutions, and other entities with which DOD contracts to
Individual DOD contractors fulfill a wide variety of
provide supplies, construction services, or other types of
organizational roles and functions, from logistics and
services. It can also describe individuals hired by DOD—
transportation to intelligence analysis and private security.
usually through private companies, which are also
considered contractors in the previous context—to perform
Reasons for DOD Using Individual Contractors
specific tasks. The term “contractor” does not refer to
After the Cold War, the U.S. military—in line with a
military servicemembers, civilian DOD career employees,
government-wide trend—embraced outsourcing, increasing
or civilian political appointees. Congress has exercised its
reliance on contractors instead of using military
legislative powers in the past to establish certain reporting
servicemembers or government civilians to perform certain
requirements regarding DOD contractors, and exercised
tasks. Proponents of this trend note that effective use of
oversight of DOD contractor activities.
contractors helps DOD by freeing up uniformed personnel
Contractors as Entities
to focus on military specific activities; providing
supplemental expertise in specialized fields, such as
In Fiscal Year (FY) 2022, DOD obligated more money on
linguistics or weapon systems maintenance; and providing a
federal contracts ($415 billion in current dollars) than all
surge capability to quickly deliver critical support functions
other government agencies combined spent on contracts.
tailored to specific military needs. They note that meeting
While DOD contracts with many entities, five companies
immediate personnel needs through surges in contractor use
(Boeing, General Dynamics, Lockheed Martin, Northrup
by the federal government is more cost-effective on a long-
Grumman, and Raytheon) typically received a majority of
term basis than adding staff. Critics of the trend counter that
departmental contract obligations each fiscal year (see
ineffective management and oversight of contractors can
Table 1). These companies frequently serve as prime
lead to wasteful spending of taxpayer dollars and impeded
contractors, or primes, a company that maintains a direct
operational outcomes. Some critics point out that
contractual relationship with the government. Primes in turn
contractors can also compromise the credibility and
subcontract to other companies that serve as subprime
effectiveness of the U.S. military and undermine operations,
contractors, or subprimes. For FY2022, another top
pointing to certain operations in Iraq and Afghanistan.
recipient of DOD contract funding was Pfizer Inc., with
which DOD has contracts to obtain antiviral oral
Tracking Numbers of Contractors DOD Employs
therapeutics and mRNA vaccines used to treat and prevent
DOD’s Inventory of Contracted Services (ICS, see 10
COVID-19. Some of these contracts were executed in
U.S.C. §4505(c)) is a required annual report to Congress
partnership with the Department of Health and Human
that provides information on certain categories of contractor
Services (HHS) as part of the national emergency response
hiring by individual DOD components (e.g., the military
to COVID-19.
departments and defense agencies). Under 10 U.S.C. §4505,
Table 1. Six Largest DOD Contractors by Obligations,
DOD is required to collect and report data to Congress for
FY2022
each purchase of services in excess of $3 million within
(in bil ions of current dol ars)
four service acquisition portfolio groups: logistics
management services, equipment related services,
Company
Obligations
knowledge-based services, and electronics and
Lockheed Martin Corporation
$46.2
communications services. These data are to be collected “in
Raytheon Technologies Corporation
$26.1
a manner comparable to the manpower data elements used
in inventories” of similar DOD civilian employee functions
General Dynamics Corporation
$21.6
.
After the data have been collected, relevant DOD agencies
Pfizer Inc.
$16.7
must provide a review that includes ensuring that the
The Boeing Company
$14.8
contracting activities in the report “do not include any
Northrop Grumman Corporation
$13.8
governmental functions,” and identify potential contracting
Source: SAM.gov Top 100 Contractors Report, FY2022.
activity that could be converted to civilian employee
Notes: Fifty percent of the Bel -Boeing Joint Project Office is
performance.
attributed to The Boeing Company. Raytheon is now known as RTX
These reports combine contract data DOD contracting
Corporation.
officials routinely enter into the Federal Procurement Data
System (FPDS) with data contractors report annually to the
government. Contractor-supplied data include the total
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link to page 2 Defense Primer: Department of Defense Contractors
number of direct labor hours expended on services
recommended repealing or modifying the underlying
performed under contract, as well as the number of
statutory requirement to obtain more relevant data and
employees associated with these services. The report has
analysis suitable for use by policymakers in Congress and
not included a total number of individual contractors—
DOD.
instead providing an estimate of contractor full-time
equivalents (FTEs) for direct labor, a measure referring to
Contractors’ Role in Overseas DOD Operations
the estimated numbers of labor hours contracted.
Operations over the past 30 years have highlighted the
central role that contractors play in supporting U.S.
According to the FY2023 ICS report, DOD contracted
servicemembers, both in terms of the number of contractors
about 972,000 total prime and subprime contractor FTEs
and the type of work being performed. During U.S. military
within the four defined service portfolios during that year
operations in Iraq and Afghanistan between 2001 and 2020,
(see Table 2). Of that number, the Department of the Army
contractors frequently accounted for 50% or more of the
contracted about 11%, the Department of the Navy about
total DOD presence in country.
59%, and the Department of the Air Force about 26%.
Since 2008, U.S. Central Command (USCENTCOM) has
Table 2. Selected Reported FY2023 DOD Component
published quarterly contractor census reports providing
Contractor FTEs
aggregated data on contractors employed through DOD-
Prime Contractors and Subcontractors for Contracts
funded contracts who are physically located within the
Required to be Reported Under 10 U.S.C. §4505, by DOD
USCENTCOM area of responsibility, which includes
Component
Afghanistan, Syria, and Iraq. Prior to August 2021, these
Reported
reports included data associated with DOD-funded
Funding Agency
FTEs
contractor personnel in Afghanistan. Following the August
2021 withdrawal of U.S. military forces from Afghanistan
Department of the Army
97,745
and the Taliban takeover of the country, USCENTCOM has
Department of the Navy
576,139
reported that no DOD-funded contractor personnel remain
in Afghanistan.
Department of the Air Force
254,861
During the second quarter of FY2024, USCENTCOM
Defense Advanced Research Projects Agency
547
reported approximately 21,000 contractor personnel
(DARPA)
working for DOD within its area of responsibility (AOR),
Defense Information Systems Agency (DISA)
9,875
with a reported 5,455 contractor personnel located in Iraq
and Syria. As of the second quarter of FY2024, about 48%
Defense Counterintelligence and Security Agency
3,400
of DOD’s reported individual contractors in the
(DCSA)
CENTCOM AOR were U.S. citizens. Approximately 47%
U.S. Special Operations Command (USSOCOM)
6,028 were third-country nationals, and roughly 1% were
local/host-country nationals.
Defense Health Agency (DHA)
5,001
In Iraq, armed and unarmed security contractors have been
Office of the Secretary of Defense (OSD)
5,108
employed to provide services such as protecting fixed
Missile Defense Agency (MDA)
3,705
locations; guarding traveling convoys; providing security
escorts; and training police and military personnel. The

number of security contractor employees working for DOD
Source: CRS analysis of DOD FY2023 Inventory of Contracted
in Iraq and Syria has fluctuated significantly over time and
Services.
is dependent on a variety of factors, including current force
Notes: FTE estimates in the ICS include contractor-provided data.
management levels in-country and U.S. operational needs.
Some DOD components, such as DIA, which may provide classified
contractor FTEs, are not included in these FTE estimates.
Relevant Statutes
Value of the ICS Report for Congress
10 U.S.C. Part V to Subtitle A: Acquisition.
In establishing the statutory requirement for the ICS report,
Congress sought in part to gain more oversight of certain
Other Resources
types of service contracts—particularly staff augmentation
Defense Pricing and Contracting, Inventory of Services Contracts,
services and services that are closely associated with
https://www.acq.osd.mil/asda/dpc/cp/policy/service-contract-
inherently governmental functions—and the associated
inventory.html.
labor. As such, the ICS does not serve as a complete
Office of the Assistant Secretary of Defense for Sustainment,
inventory of all DOD contractors.
CENTCOM Quarterly Contractor Census Reports,
https://www.acq.osd.mil/log/LOG_CSD/
Some observers have questioned the value of the ICS report
CENTCOM_reports.html.
in facilitating congressional oversight. A 2017 RAND
Corporation study described the ICS report as including

data that are “unprocessed, retrospective, and can largely be
found elsewhere,” assessing that this potentially limits the
Alexandra G. Neenan, Analyst in U.S. Defense
utility of the report to Congress and DOD. Other experts,
Infrastructure Policy
such as the Section 809 Advisory Panel, have
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Defense Primer: Department of Defense Contractors

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