Defense Contractors and International Development – What’s Going on Here?

Last week, it was announced that DynCorp – a major private security firm – had acquired Casals Associates, an international development company. Last year, L-3, the sixth largest defense contractor in the US, bought International Resources Group, which “provides specialized management, policy and training support to U.S. government agencies and international development organizations.” Why are defense and security contractors buying into international development this way? And what does it mean for American foreign assistance?

1) Support for the Status Quo

Neither DynCorp nor L-3 would have bought development companies if they didn’t think there was money to be made. They assume that the US will maintain foreign assistance budgets at a level that will support international development contractors – both Casals and IRG got almost all of their contracts from the US government. They also assume that the US will continue to provide development assistance through partners who implement specific projects, not through, say, bilateral budget support or support local NGOs.

They now have a vested interested in making sure that those assumptions remain true. Considering the size and lobbying power of both L-3 and Casals Associates, we can now safely assume that any reform to US foreign assistance won’t change the way that assistance is implemented on the ground. USAID’s role, or that of the State Department, may change, but the basic system of set funding for specific projects by US firms is unlikely to be affected.

2) Enter the Big Money, and the Big Influence

Right now, USAID issues tenders and awards contracts based on what USAID thinks is best and the funding it receives from Congress. What its contractors think is pretty much irrelevant. In the defense industry, the relationship is a lot more complex. Defense contractors lobby for increased military spending, and have the clout for that lobbying to succeed. International development hasn’t been that kind of big business. That may well change. What happens when it’s the CEO of DynCorp asking for increasing funding for international development, not Jeffrey Sachs?

More food for thought: the most profitable programs in development work for the implementers are placing technical advisors and major construction projects. Those are also the least effective kinds of interventions. When big companies are lobbying for increased development funding, what will they focus on – the effective or the lucrative?

3) Benefitting from the End of Humanitarian Space?

If DynCorp is protecting Afghan president Hamid Karzai, it cannot be seen as a neutral actor in Afghanistan. Any projects implemented by DynCorp or its subsidiaries will be associated with Karzai. As the links between DynCorp and Casals become apparent, or between L-3 and IRG, it is going to contribute to the perception that all development aid is part of US security strategy. Both terrorists and host communities will come assume that every NGO or contractor has a security link.

If we’re talking about Afghanistan, that doesn’t really matter. The Taliban has already declared that development work is a target in Afghanistan; they’re not targeting a specific NGO or company – they are targeting the work. In that context, DynCorp is at no more risk than any other development group.

In addition to eroding the line between security contractors and development groups, L-3 and DynCorp actually benefit from the end of humanitarian space. If development work itself is a target and nobody is seen as impartial, then L-3 and DynCorp actually become better competitors for development finds. A reputation for neutrality would not be a competitive advantage in implementing development programs, or in getting funding. Save the Children, after all, cannot provide its own security. In Iraq, as much as 50% of development funds go to security for project staff. Keeping security in house will probably make it cheaper.

4) The End of Love and Fairy Dust

We all like the idea of international development as a special case, done exclusively by caring people for altruistic reasons. But that hasn’t been the case for a long time. There were big companies doing development work long before defense contractors got into it. Abt Associates grossed $264 million last year. People have been wringing their hands over Chemonics since 1993 – their 2008 revenue was $340 million. And World Vision’s 2009 revenue was over a billion dollars. Those might not be Lockheed Martin numbers, but they are big, big organizations.

I think, in the end, these acquisitions don’t so much change the development landscape as acknowledge a hard truth: development has become an industry like any other. International development is no longer the province of altruists and humanitarians. Some of the players in this industry are NGOs, others are for-profit companies. There is big money in it for both, and all the distortions that go along with it.

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