Contracting Out Security

Private security companies (PSCs) currently receive a great deal of attention in the news media, in sensationalist reporting, and increasingly in scholarly books and articles. While the scholarly books and articles make significant contributions to our understanding of this global phenomenon, there are several impediments to analysis that must be recognized and overcome if analysis is to be improved. Three of these impediments are reviewed in this article. The author suggests that US government material is currently available to minimize impediments and offers a framework to make analytical sense of it. Since contracting out is based on contracts, and unless the complexities of awarding and managing contracts are understood, recommendations made to reform the process of contracting out security are unrealistic.     

Sovereign debt,deficits and defence spending: the case of Greece

Abstract

The outbreak of the sovereign debt crisis at the end of 2009 in Greece led to a severe recession, and constant economic problems. This paper investigates military expenditure among others as a potential factor to the growth of sovereign debt in Greece over the period 1960 until currently. Our empirical findings suggest that high deficits, inflation and military spending have been the primary causes of debt growth in Greece. The structural break models reveal a much higher effect of deficits and inflation in the post-1990 period while the threshold switching regression, based on the level of sovereign debt, indicate that for levels of debt-to-GDP ratio above 90% deficits, inflation and military expenditures had significantly more pronounced effects on government debt changes.     

消防部队经济效益审计改革探讨

分析并阐述了经济效益审计的形势、主要内容以及对经费使用的检查情况,并提出进一步节约开支,提高经费管理水平和经费使用效益的建设性的意见和建议。     

Inventory financing under Risk-Adjusted-Return-On-Capital criterion

Risk-Adjusted-Return-On-Capital (RAROC) is a loan-pricing criterion under which a bank sets the loan term such that a certain rate of return is achieved on the regulatory capital required by the Basel regulation. Some banks calculate the amount of regulatory capital for each loan under the standardized approach (“standardized banks,” the regulatory capital is proportional to the loan amount), and others under the internal rating-based (IRB) approach (“IRB banks,” the regulatory capital is related to the Value-at-Risk of the loan). This article examines the impact of the RAROC criterion on the bank's loan-pricing decision and the retailer's inventory decision. We find that among the loan terms that satisfy the bank's RAROC criterion, the one that benefits the retailer the most requires the bank to specify an inventory advance rate in addition to the interest rate. Under this loan term, the retailer's inventory level is more sensitive to his asset level when facing an IRB bank compared to a standardized bank. An IRB (standardized) loan leads to higher profit and inventory level for retailers with high (low) asset. For retailers with medium asset, an IRB loan results in a higher retailer profit but a lower consumer welfare. Calibrated numerical study reveals that the benefit of choosing standardized banks (relative to IRB banks) can be as high as 30% for industries with severe capital constraints, volatile demands, and low profit margins, highlighting the importance for retailers to carefully choose the type of banks to borrow from. When the interest rate is capped by regulation, retailers borrowing from a standardized bank are more likely to be influenced by the interest rate cap than those borrowing from an IRB bank. Under strong empire-building incentives (the bank will offer loan terms to maximize the size of the loan), retailers with medium initial asset level shift their preference from IRB banks to standardized banks.     

Rent seeking and defence expenditure

A plethora of arguments from the ‘public choice school’ suggest that public goods are ‘under‐supplied’ by comparison with public sector provision of more private goods. The implication is that rent seeking by the ‘military‐industrial complex’ serves, in some measure, to offset potential allocative inefficiency. In this paper a comparison of rent seeking by producers of public goods and producers of private goods identifies a bias that favours public good supply. The bias results from the different way in which collective demand for public goods and for private goods is expressed. The prospect of larger rents to the ‘military‐industrial complex’ implies greater rent‐seeking expenditures in this sector. The extent to which public goods (and, in particular, defence) are ‘under supplied’ is much exaggerated.     

Impediments to Fighting the Islamic State: Private Contractors and US Strategy

The United States has returned to Iraq, this time to combat the Islamic State. President Barack Obama’s strategy to ‘degrade, and ultimately destroy the terrorist group’ faces serious problems due to political obstacles in obtaining Congressional Authorization for the Use of Military Force (AUMF) and more importantly because of neglect of the crucial role of private contractors. Although the narrative has changed, and there is no public mention of contractors, they remain central to all that the Department of Defense does in the US and abroad. Suggestions are offered on how their performance can be improved to support President Obama’s strategy.     

The market and the military profession: competition and change in the case of Sweden

The rise of private military and security companies (PMSCs) challenges our notion of military professionals. PMSCs bring new claims to professional status and legitimacy outside military institutions and represent an increasing diffusion of - and competition over - military and security expertise. In light of this development, understanding the formation of professional identities in military and private security organisations is as an important undertaking. This paper contributes to this endeavour by analysing professional self-images in the Swedish Armed Forces and how these relate to PMSCs. The study is based on data collected from official documents, semi-structured interviews and a small-scale survey among senior military officers. Focusing on military understandings of PMSCs and contractors, the analysis provides much-needed insight into relational aspects of professional identity formation outside the US context. Furthermore, it points to discrepancies in organisational and group levels in understandings of commercial security actors, and paves the way for future research.     

Defence research and development: Encouraging private venture R&D with ‘option’ strategies*

Central to the changes in UK Ministry of Defence procurement policies over recent years has been the attempt to shift risk out of the public sector. In the context of research and development this has taken the form of encouraging private venture investment, so‐called PVR&D. Recognising that the scope for PVR&D is necessarily constrained by excessive risk and imperfect information, this paper explores the possible use of Option contracts as a means of expanding the opportunities for private venture funding.     

Reassessing private military and security company (PMSC) ‘competition‘ in civil war: lessons from Sierra Leone

ABSTRACT

This paper challenges recent claims that competitive market dynamics incentivize Private Military and Security Companies (PMSCs) to fully commit to providing effective services, thereby reducing the duration of civil war. Our assessment of a most-likely case scenario for this argument – Sierra Leone – reveals four critical problems. First, there is rarely direct competition, even if numerous companies are present. Second, the presence of multiple PMSCs usually represents a collaboration among subsidiaries providing distinct services, often under the same corporate umbrella. Third, data aggregation obfuscates the overlap of PMSC presence, inflating the amount of perceived competition. Finally, we raise concerns regarding how quantitative analyses can conflate conflict intensity with conflict termination.     

Private military contractors’ financial experiences and incentives

ABSTRACT

This article analyses findings from an original survey of 187 private military contractors on their incentives for working in the industry. Perceptions of contractors as “greedy, ruthless, and unscrupulous mercenaries” shape both public and military opinions of outsourcing and may impact U.S. military effectiveness, civil–military relations, and contractor identity. We find that contractors are motivated by a range of factors and that their financial experiences are not clearly more positive than that of state military troops. We recommend broad education of military and defense officials and the public in the U.S. and other relevant nations, regarding the true incentives of modern-day, Western contractors, in an effort to dispel misperceptions, increase effective utilisation of contractors, and beneficially shape PMC-military coordination. DoD may consider integrating such training into its current efforts to improve outsourcing, including its Joint OCS Planning and Execution Course, pre-deployment fora, and curricula of advanced military studies schools.