Wall St. And Business Wednesdays: The Military-Industrial-Complex Up Close. "New Numbers- The Price of Freedom in Iraq and Power in Washington" by Ceara Donnelley and William D. Hartung of The World Policy Institute

Introduction: A Privatized Occupation

Numbers dominate the recent headlines and sound bytes from Baghdad and the Pentagon.

147,000: the number of U.S. ground troops on Iraqi soil.

237: the number of U.S. service men and women killed since the beginning of ground operations.

99: the number of these deaths since May 1, the day Bush declared combat victory for the coalition.

9: the number of months since members of the 3rd Infantry Division have seen their families.

3: the number of times their homecoming has been delayed.

$3.9 billion: the number of U.S. dollars, estimated by Donald Rumsfeld, it costs per month to support U.S. efforts in Iraq.

$400 billion: the projected military budget recently approved by Congress for FY 2004.

The list goes on.

What many reports lack, despite all of these statistics, are the real details. When it comes to who is doing what in Iraq, the facts are less clear. Your average CNN-watching American may be able to report the latest on soldiers killed or Iraqis successfully "found, killed or captured," but you'd be hard pressed to find an average American who could tell you how the scene is really unfolding. How many Americans know who supplied the war, who is in charge of reconstruction, how much they are being paid for it, and how they were hired?

The answer is not quite so simple as a predictable response - "the military." Few know the real details: how the projects and personnel planning post-war Iraq come from private American corporations making world-class lemonade out of the sour situation in the Persian Gulf.

From providing the weapons and tanks that took us to Baghdad, to the personnel rebuilding dams and bridges or operating ports, to the pencils and lesson plans revamping the education system for young Iraqis, private American corporations are spearheading U.S. campaigns in Iraq and reaping the financial rewards of warfare.

Private corporations have played an unprecedented role in the Second Gulf War, and from the looks of just one more number - $680 million, the projected contract with Bechtel Group Inc. for its reconstructive work in Iraq - they will continue to do so.

Some of jobs undertaken by the Bechtels and the Halliburtons - such as rebuilding water and electrical systems for instance are necessary and important. Yet as a nation and a democracy we must ponder seriously whether such private corporations, with firm connections to our leadership, are necessarily the ones who should be handed these jobs. The privatization of the United States military is not a new controversy. P.W. Singer's new book Corporate Warriors: The Rise of the Privatized Military Industry (Ithaca, New York: Cornell University Press, 2003) offers insights into the questions that should be asked about the unprecedented levels of privatization of military planning, training, construction, and services that were pursued during the Clinton/Gore administration and have been accelerated under the Bush/Cheney administration. If the experience thus far in Iraq is any indication, we clearly have a long way to go before we establish the appropriate balance between profits and patriotism in the use of private corporations to implement our national security strategy.

From a taxpayers' perspective, the most important question is how many billions of dollars has our government paid private corporations to ensure a final victory in Operation Iraqi Freedom - whatever "victory" ultimately comes to mean?

What follows is a breakdown of the major corporations involved in Iraq from the incipient days of U.S. military action to the forthcoming years of rebuilding.


Long before the Bush Administration could sufficiently sell its case to the United Nations, Congress, and the American people, it was planning for war against Saddam and his Republican Guard. For companies like Raytheon, Boeing, and Lockheed Martin this meant a big boom in business in exchange for the big booms their weapons and bombs showered on Iraq months later. Though the ties that bind these companies to the Bush administration are not quite as controversial as those linking rebuilding and private military companies such as Halliburton and Bechtel, it is still clear, by tracing overlapping personnel, that far from being a relic of the Cold War, the military-industrial complex is alive and well and thriving in George W. Bush's Washington.

Lockheed Martin

The Pentagon's No. 1 contractor has certainly benefited from military action in Iraq. The company reports 80% of its business is with the U.S. Department of Defense and the U.S. federal government agencies. It is also the largest provider of information technology (IT) services, systems integration, and training to the U.S. government. Such business has grown substantially during the Bush tenure, especially in fiscal year 2002, as plans for war were formulated, expenditures in weapons and dollars calculated.

The company was awarded $17 billion in defense contracts in 2002, up from $14.7 billion in 2001. (2)

First quarter sales for 2003 were $7.1 billion, an 18% increase from the corresponding quarter in 2002.

In March of 2003, as the first bombs rained on Baghdad, the U.S. Air Force awarded Lockheed Martin a $106.6 million contract for Paveway II GBU-12 and - 16 Laser Guided Bomb (LGB) kits, as part of a $281 million contract characterized by "indefinite delivery, indefinite quantity" - a fancy term for an open-ended, cost-plus contract. The majority of the kits, also known as "smart bombs" (when fitted on warheads) were ordered to restock diminishing U.S. Navy inventories.

Also in March, the company received a $4 billion multi-year contract with the U.S. Air Force and the Marine Corps for the acquisition of C-130J Super Hercules Aircraft, to deliver the additional planes (the two departments combined already own 41) from 2003 to 2008.

Former Lockheed Martin Vice-President Bruce Jackson was a finance chair for the Bush for President campaign; Vice-Presidential spouse Lynne Cheney is a former board member of Lockheed Martin, and used to receive $120,000 per year from the company for attending a handful of semi-annual board meetings. (3)

Chris Williams, lobbyist for Johnston & Associates, is one of nine members of the Defense Policy Board to have ties to defense companies. His firms represent Lockheed Martin, Boeing, TRW and Northrop Grumman. (4)


Boeing is the Pentagon's No. 2 contractor as a supplier of war materials ranging from information technology to planes to the bombs that drop from them. The B-52, the aircraft made famous during the Korean War, remained the "workhorse" in Operation Iraqi Freedom. It has been upgraded to modern technological heights by "smart bombs" and precision-guided weapons like those produced by Lockheed Martin, as well as those devised by Boeing itself. In fact, Boeing's Joint Direct Attack Munitions (JDAMs) are the majority of the military's smart bomb arsenal, because they are cheap and effective: a $22,000 kit makes almost any bomb a precision munition.

In 2002, Boeing received $16.6 billion in Pentagon contracts - up from $13 billion in 2001, $12 billion in 2000.

While the Air Force originally ordered 87,000 JDAM kits, it expanded that order to more than 230,000 sometime before the March invasion. The going price was $378 million. (5)

The company recently won a $9.7 billion contract from the DoD to build 60 additional C-17 transport planes, praised as the only aircraft capable of lifting the Army's heavy tanks, in addition to Apache helicopters, Humvees, and Bradley fighting vehicles. In a deployment that began in January 2003, the C-17s were operating constantly delivering equipment to staging spots in the Persian Gulf.

Other recent contracts include $60.3 million for additional production of 120 Standoff Land Attack Missiles Expanded Response (SLAM-ER), $3.3 billion for the sale of 40 F-15K aircraft and weapons support for the Republic of Korea.

Richard Perle, former Chairman of the Defense Policy Board (now he is a mere member) is a managing partner at venture-capital company Trireme Partners, L.P., which invests in homeland security and defense companies. Half of the $45 million in capital thus far comes from Boeing. (6)

58% of the $1.5 million in Soft Money and PAC contributions Boeing made during the 2000 campaign went to the Republican candidates. When Bush was declared victor, Boeing gave $100,000 for the Inauguration.


The fourth largest defense contractor in the United States, Raytheon boasts involvement in over 4,000 weapons programs.

The defense electronics company is best known for the publicity garnered during the 1991 Gulf conflict by its Patriot Air Defense missile that intercepted Iraqi Scud missiles. Since 1991 the Pentagon has spent $3 billion improving the accuracy of the weapon, which studies subsequent to Desert Storm revealed to be far less than perfect.

Raytheon also manufactures the Tomahawk land attack missile, another familiar name in times of combat. Raytheon's website morbidly celebrates its popularity: "Over 300 Tomahawks were used in Operation Desert Storm alone. Since Desert Storm in 1991, more than 1,000 Tomahawks have been fired." Estimates of the weapon's use the second time around predicted that 800 would be fired in just the first hours of war. In addition to these two well-known weapons of war, Raytheon produces a wide range of popular missile systems, radar and surveillance systems, and bombs. As a major arms exporter to countries including Israel, Egypt, Saudi Arabia, Turkey, and South Korea, the company is likely to doubly benefit from the militarization of world politics as nations clamor to bolster defense systems.

Each Tomahawk missile costs between $600,000 and $1 million.

Raytheon's fourth quarter operating report of January 2003 reported a doubling in profits.

CEO Daniel Burnham is content with the course set by Bush and company, applauding the fact that "the market is higher today than we thought a year ago," and boasting that "We are perfectly aligned with the defense department's priorities."

The Navy recently contracted a $1.2 billion deal to develop future ships like the DDX destroyer, for which Raytheon integrates electronics.

The Air Force raised its request from $12.2 million to $80 million worth of 901 Javelin anti-tank missiles, co-produced by Raytheon and Lockheed Martin.

Since 1996, Raytheon has donated more than $3.3 million in soft money and PAC donations, which places it fourth in donations among major defense contractors in the 2002 midterm electoral campaigns.

Despite a traditional relationship with Massachusetts Democrats, Raytheon's contributions have increasingly leaned towards the Republican party culminating in a 58%/42% split, R/D, in the 2002 midterm Congressional elections. (7)

Alliant Techsystems

Lesser known than defense giants like Boeing, Lockheed Martin, and Raytheon, Alliant nonetheless may be the defense company that profits most consistently from the war in Iraq and for the wars for "regime change" that may be yet to come under the Bush administration's first-strike military doctrine. Alliant Tech supplies all of the Army's small arms munitions, used in rifles and machine guns, and approximately half of the medium-caliber rounds fired by tanks and antitank chain guns in attach helicopters. War strategies may change, favoring tanks over aircraft or vice versa, but soldiers will always need ammo and they will always need more ammo in times of combat. Alliant's recent 16% increase in sales reflects that bottom line.

Alliant's sales rose from $1.8 to $2.1 billion in FY 2002, a 16% increase.

Last year the Army awarded Alliant a $92 million dollar contract for 265 million rounds of small-caliber ammunition, notably including cartridges for M-16 rifles.

In February Alliant received another $113 million in contracts to make ammunition for the Abrams battle tank. (8)


P.W. Singer calls it the "service side" of war. Private military companies are on the rise as the purported defenders of freedom. During "Operation Iraqi Freedom," the United States deployed one private military worker for every ten soldiers - a tenfold increase since the 1991 Gulf War.

Between 1994 and 2002 the Pentagon entered into more than 3,000 contracts with private military companies of varying notoriety.(9) Worldwide, private military contractors are a $100 billion annual business. And with the war on terrorism being described as the "endless war," there will be more money to be made in the years ahead.

Many Americans now know the link between private military contractor Halliburton and Vice President Cheney, yet the morally ambiguous relationships between military-industrial giants and the Washington elite do not end there. Mainstream news reports have also focused on the role played by Bechtel, another corporation that enjoys close ties with the Republican administration and is reaping billions as it rebuilds Iraq.

Along with these familiar examples, we should add Dyncorp, MPRI, Vinnell, Logicon, AirScan: these names should become familiar because their employees are being paid to do the dirty work alongside U.S. soldiers in Iraq. One wonders whose salaries are higher.


Halliburton first made headlines in this war, when it won the very first rebuilding contract without bidding and before U.S. tanks even made it to Baghdad. In the shadow of Enron and seemingly ubiquitous corporate scandal, the relationship between Halliburton and its former CEO, Vice President Dick Cheney, raised a red flag.

In March 2003, Halliburton subsidiary Kellogg, Brown, and Root (KBR) was awarded the main contract to control oil fires and stabilize oil fields under U.S. command; no limit was placed on the duration or dollars involved in this venture.

Halliburton is not all about oil; its profit from the war on Iraq runs deeper than the oil wells. Cheney's former company provides a wide range of services and is correspondingly contracted to perform them in private bidding sessions that exclude most competitors.

Since September 11, the Bush administration has doled out over $2.2 billion in defense-related contracts to Cheney's former company. (10)

Halliburton's contract to secure and protect oil fields in Iraq, secretly awarded by the Army without any competitive bidding, could be worth up to $1 billion. (11)

From September 2002 to April 2003, Halliburton received over $443 million in defense related contracts to provide services ranging from logistical support to building enemy prisoner of war camps and refueling military tanks.

From 1999 to 2002 Halliburton donated $708,770 in soft money and PAC contributions, 95% of that total going to Republicans.

A recent Newsweek article reports that "while Defense secretary in the first Bush administration, Cheney awarded KBR the Army's first private contract to manage troop tent cities. During the Clinton years Halliburton lost that contract after KBR came under fire for allegedly overcharging the government. But after Cheney was elected, KBR was again awarded that Army contract and has rung up $1.15 billion so far on the 10-year deal." (12)

Due to a decision he made upon leaving Halliburton, Cheney still receives annual deferred compensation of roughly $180,000 from his former company.


Though contracts for rebuilding Iraq were awarded as soon as war was underway, if not sooner, as late as mid-April the big question was who would win the grand prize, the jackpot in the current round in bidding: a wide ranging $600 million reconstruction contract awarded by USAID to cover the cost of rebuilding critical infrastructure: airports, roads, water and power systems, schools and hospitals.

After a secretive bidding process, Bechtel Group of San Francisco was announced as the winner, sparking a flurry of attention from the media and those who know of Bechtel's intricate ties to the Bush Administration. As one New York Times article aptly put it: "Awarding the first major contract for reconstruction in Iraq to a politically connected American company under restricted business procedures sends a deplorable message to a skeptical world...the award of a contract worth up to $680 million to the Bechtel Group of San Francisco in a competition limited to a handful of American companies can only add to the impression that the United States seeks to profit from the war it waged." (13)

Bechtel was widely regarded as a highly capable contender for the $600 million plus contract, yet its ties to Washington are so intricately and firmly woven that it's nearly impossible not to imagine what kind of pressure was on the contracting decision.

As Secretary of State for Reagan (and former president of Bechtel), in 1983 George Schultz sent Donald Rumsfeld on a Middle East peace envoy to the city of Baghdad to meet with Saddam Hussein. Rumsfeld was instructed to ask for the leader's support in Bechtel's bid on construction of an oil pipeline from Iraq to the port of Aqaba. Twenty years later, Rumsfeld and his cohorts were in the position to once again launch Bechtel into a position of power in the Middle East, and they did so. (14)

Jack Sheehan, a senior Vice President at Bechtel, is a member of the Defense Policy Board. (15)

USAID administrator Andrew Natsios, the overseer of bidding contracts in Iraq, also has close ties to Bechtel; he headed Boston's massive "Big Dig" construction process, a disastrous $14 billion boondoggle the accounted for some of the biggest cost overruns in the history of American municipal public works. Bechtel is one the main contractors on the "Big Dig" project. (16)

Just two months before war, President Bush appointed multi-billionaire Riley Bechtel (the 104th richest man in the world thanks to his family's company) to his Export Council to advise the government on how to create markets for American companies overseas. (17)

From 1999 to 2001, Bechtel contributed $1.3 million to political campaigns; 58% went to Republican candidates. (18)


The celebratory images from the fall of Baghdad - giant Saddam statues falling, spontaneous exultation - were quickly replaced with grim reality of the consequences of destroying order in hopes of implementing a better one. Looting ran rampant: much needed medical equipment and supplies disappeared, precious and invaluable artifacts were stolen from museums. The U.S. military, already stretched thin and committed to the continuing task of stabilizing the region, stood by helplessly.

It was clear something had to be done. Enter Dyncorp: a multi-billion dollar military contractor providing personnel that fits the description offered by one Pentagon official to the New York Times: "something a little more corporate and more efficient with cleaner lines of authority and responsibility [than United Nations peace-keeping troops]."(19) Corpwatch.org reporter Prattap Chatterjee has accurately characterized this service as rent-a-cop; Dyncorp's website is still advertising lucrative positions to fill the Iraqi police force it has promised to build under contract to the U.S. government. Former servicemen, police officers, and prison guards line up.

The State Department awarded DynCorp a multi-million dollar contract in April to advise the Iraqi government on setting up effective law enforcement, judicial, and correctional facilities. The company estimates it will send 1,000 American law enforcement experts to Iraq to meet the task. DynCorp projects a return of up to $50 million for the first year of the contract.(20)

DynCorp contributed 74% of a total $276, 975 to the Republican party from 1999 to 2002. (21)

Dyncorp has a long history of alleged human rights violations and fraud. The most well known example appears to be just the tip of the iceberg. Two Dyncorp employees ran an underage sex slave ring in Bosnia while they were there under U.S. contract. The employees who exposed this crime were fired; the ones responsible were merely transferred.

More Contracts: Privatization Beyond Defense

The U.S. government has not only hired companies to dramatically supplant the duties of the occupying military. American taxpayers are also paying for the specialized rebuilding of other essentials in Iraq. To appreciate fully the cost of the war and its aftermath, these contracts are listed below with brief summaries of tasks for which they were awarded.(22)

$4.8 million to Stevedoring Services of America was awarded by USAID for "assessment and management" of the Umm Qasr port on southeastern Iraq.

$10 million to Abt Associates Inc. to reform the Iraqi Ministry of Health and to deliver health services and supplies in the interim.

$2.5 million to Skylink Air and Logistic Support (USA) Inc. to help reopen and manage Iraq's airports.

$7 million to International Resources Group was awarded for a 90-day period for the management of relief and rebuilding efforts.

$7.9 million to Research Triangle Institute (RTI) to promote Iraqi civic participation in the reconstruction process. RTI will provide technical assistance and training systems in the effort to improve internal administrative skills and understanding of municipal government and services.

$2 million over one year to Creative Associates International Inc. to address "immediate educational needs" of Iraq's primary and secondary schools. Contract provides for school supplies, training teachers, and developing testing methods to track student performance.

Iraqi Oil: Funding Reconstruction

The U.S. has just recently lined up long-term oil deals with 12 companies around the world in a hastened effort to gain revenue to pay for reconstruction. According to its senior American advisor, Philip Carroll, a former executive of oil giant Royal Dutch Shell, Iraq's State Oil Marketing Organization, plans to supply an average of 725,000 to 750,000 barrels of oil a day to U.S. firms like ExxonMobil, ChevronTexaco, ConocoPhilipps, Marathon and Valero Energy; as well as European giants like Shell, BP, Total, Repsol YPF; the Chinese firm Sinochem; Switzerland-based oil dealer Vitol and Japan's Mitsubishi.(23) The choices of oil contractors seem to be entirely political, with Carroll's former company on the list, along with National Security Advisor Condoleeza Rice's former firm, Chevron. The contract with BP is may be a partial payback for the United Kingdom's commitment of combat troops to the U.S.-led war against Hussein's regime; and the Japanese deal has been discussed as "bait" to lure the Japanese government into supplying personnel for security and policing functions in occupied Iraq. And, of course, while Washington's man from Royal Dutch Shell exercises veto power over the decisions of the new Iraqi oil ministry, the money for rebuilding Iraq's devastated oil producing infrastructure goes to Dick Cheney's former company, Halliburton, on a cost-plus basis.


As costs mount for the U.S.-led rebuilding and occupation of Iraq, the profits of companies like Lockheed Martin, Boeing, Raytheon, Bechtel, Halliburton, and Dyncorps are likely to rise substantially as a result of contracts steered their way by the Bush administration. Just last Friday, the New York Times reported yet another example of favoritism that benefited Halliburton (Neela Bannerjee, "Bechtel Ends Move for Work in Iraq, Seeing a Done Deal," August 8, 2003).

After responding to pressure from Rep. Henry Waxman (D-CA) and rival companies to re-bid the longer-term portion of Halliburton's multi-year, multi-billion dollar contract for rebuilding and operating Iraq's oil infrastructure, it now appears that the bidding process is a sham, like so much else about the Bush administration's privatized rebuilding effort in Iraq. After going through the process of recruiting bidders for the contract and holding an all day meeting in Dallas in mid-July with companies interested in competing with Halliburton for the Iraqi oil industry rebuilding contract, the Army Corps of Engineers quietly revised the specs for the new contract so that the vast majority of the $1 billion in work that was supposed to be up for competition was in essence handed back to Halliburton. The work schedules for the alleged $1 billion bid were fixed so that the majority of the work (or at least the majority of the contract dollars) would be issued during calendar year 2003. Given that the bidding process for the second phase of rebuilding Iraq's oil sector won't yield a winner until October 15, 2003, at the earliest, this essentially meant the Halliburton would get the majority of phase two work by default. This led Bechtel, a major potential competitor for the phase two work, to withdraw from the bidding, arguing that so much of the work had essentially been handed to Halliburton in a back-door deal with the Army Corps that was not revealed during the initial rounds of bidding, that the notion of a true "competition" for the Army Corps' second phase contract was basically a sham.

It is clear that there needs to be more accountability - both to the people of Iraq and the American taxpayers – about how the privatized rebuilding process in Iraq is going to proceed. Contracts should be opened to true competitive bidding, involving not only U.S. firms but competent companies from allied nations. The decisions about which tasks are appropriate for private corporations, as opposed to U.S. government entities or non-profit, non-governmental organizations, should be made openly and transparently, with appropriate Congressional oversight and public input. Rebuilding contracts should be short-term, limited profit arrangements that do not pre-empt the ability of a future democratic government in Iraq to choose its own contractors and structure its own industries as the Iraqi people - not Washington bureaucrats or politically-wired companies like Bechtel and Halliburton - see fit. Companies which are profiting from the rebuilding of Iraq should take a pledge not to make contributions towards the 2004 presidential and Congressional campaigns, to avoid the unseemly appearance of payback, as if firms that have been rewarded by the Bush administration with contracts in Iraq are funneling a percentage of their profits back to Republican candidates. Ideally, if President Bush wants to set an appropriate moral tone, he should agree not to accept contributions for his re-election campaign from any company involved in the rebuilding of Iraq.

At the height of World War II, Senator Harry Truman of Missouri made a name for himself by uncovering profiteering and fraud by companies involved in providing supplied for the war effort. Given the high political and economic stakes in Iraq, a comparable investigation is in order now. Rep. Henry Waxman (D-CA) has been asking all of the right questions in his role as the ranking Democrat on the House Committee on Government Reform, but he needs to be joined by prominent colleagues of both parties, and in the Senate as well as the House, in digging up answers about the cost, effectiveness, and propriety of rebuilding Iraq via the secretive, privatized process that the Bush administration and the Pentagon have been pushing thus far. (24)

William Hartung is the World Policy Institute's President's Fellow. He can be contacted via e-mail at: hartung@newschool.edu


1. Ceara Donnelley was a research intern at the World Policy Institute during the summer of 2003. William D. Hartung directs the Institute's arms project.

2. "War in Iraq: We foot the billing, Corporations make a killing," www.citizanworks.org


4."Advisors of Influence: Nine Members of the Defense Policy Board Have Ties to Defense Contractors," report by the Center for Public Integrity, www.publici.org


6.For more details on Boeing's role in Iraq and its connections to Washington, see ATRC's April 4 update: www.worldpolicy.org/projects/arms/updates

7. For additional information on Raytheon, see ATRC's March 24 update: www.worldpolicy.org/projects/arms/updates

8. Amy Cortese, "Quiet, but Central, Role for Ammunition Maker," New York Tines, March 23. 2003. Page 3.4.

9. P.W. Singer, "Have Guns, Will Travel," New York Times, July 21, 2003. Pg. A 15

10. Michael Scherer, "The World According to Halliburton," www.motherjones.com

11.Keith Naughton and Michael Hirsch, "Fanning the flames: Cheney's Halliburton ties," Newsweek, Apr 7, 2003

12. Ibid.

13. "And the Winner is Bechtel," The New York Times, April 19, 2003, pg. A 12

14. Pratap Chatterjee, "Bechtel's Friends in High Places," Special to Corpwatch, April 24, 2003. www.corpwatch.org

15. "Advisors of Influence," www.publici.org

16. Chatterjee, April 24, 2003.

17. Ibid.

18. "Rebuilding Iraq - The Contractors," www.opensecrets.org

19. As reported by Pratap Chatterjee, "Dyncorp Rent-a-Cops May Head to Post-Saddam Iraq," Special to Corpwatch, April 9, 2003. www.corpwatch.org

20. "Rebuilding Iraq - The Contractors" www.opensecrets.com

21. Ibid.

22. All statistics provided by the USAID fact sheet on reconstruction contracts for Iraq: www.usaid.gov/press/factsheets/2003/fs030620.html

23. Chip Cummins, "Iraq Lines Up Long-Tern Oil Deals," Wall Street Journal, July 29, 2003. pg.A2.; company identification provided by Agence France Presse, July 31, 2003.

24. To see Waxman's excellent series of letters to the Army Corps of Engineers and other key Bush administration policy makers, go to the web site of the House Committee on Government Reform, www.house.gov/reform, and find the site for the minority caucus.


Wednesday, August 13, 2003