In Military Logistics, New Pentagon Leaders Must Balance Low Costs With Resiliency

Obtaining foreign help has always been a centerpiece of American national security strategy. In 1907, when President Theodore Roosevelt dispatched the U.S. Fleet on an audacious 14-month cruise around the world, the U.S. Navy, sailing in coal-powered ships, relied almost entirely upon foreign logistical support. Between 1907 and 1909, the U.S. government contracted one Austro-Hungarian, seven Norwegian and forty-one British coal-haulers to fuel the globe-trotting 16-battleship fleet.

That massive amount of foreign logistical assistance gave America a great geopolitical victory. But those foreign resources offered the U.S. government flexibility for a cost that, even then, was unacceptable. Within two years, the U.S. Navy had launched four massive colliers to reduce America’s perceived over-reliance upon foreign logistical support. 

Today, the U.S. provides the Navy at-sea refueling with a fleet of U.S. and allied replenishment ships, but the Department of Defense enjoys far less resilience at America’s many far-flung facilities, outposts, and refueling stations ashore. American land forces and U.S. ships refueling in ports are particularly at risk. The October 2000 bombing of the USS Cole (DDG 67) in the Yemeni port of Aden highlights the risks associated with non-U.S. managed refueling operations.

Forward Logistical Support Is Out Of Balance:

Contracts for logistics in support of America’s dispersed military depend upon non-U.S. companies. America’s footprint in Africa relies almost exclusively on foreign companies, based mostly in the Middle East. Defense Logistics Agency numbers suggest that 85% of fuel contracted to the U.S. military in Africa is supplied by foreign-owned entities, representing $327.4 million of $401.9 million in total estimated expenditures.

Foreign support may be helpful, offering a win for both American policy and the local host’s economy. But a deeper view suggests that an over-reliance upon foreign logistical support weakens national security and exposes American forces to real risk. Foreign entities have their own interests, and can, in times of trouble, be compelled to put their own national interests ahead of their customers.

Security is an issue, as well. As U.S. forces prepare for classified operations, their bulk logistics can end up being arranged on commercial email, telephone calls, open source bulletins, and often, queues of trucks. Logistics contracts often do not stipulate that the foreign-owned company supporting the U.S. government practice strong operational, cyber, and communications security on par with the operational forces. A worst-case scenario is when these companies make extra money by selling actionable intelligence on U.S. activities. 

On the other hand, foreign workers have often done yeoman service in supporting U.S. military interests. Retired Vice Admiral Mike Franken, a veteran of operations in Africa and the Middle East, mentioned via email a situation in the sixties when Egyptian contractors kept a Naval Medical Research facility in operation even when all other U.S. military personnel were expelled. Also, in 2012, during exceedingly sensitive operations in Djibouti, none of the nearly 1000 locally-based contractors and third-nation nationals working on the base exposed the operation’s preparations. Franken is highly supportive of ensuring overseas contracts employ local labor, but he is equally wary of foreign management of contracts due to a host of oversight issues. 

When the logistical support equation gets out of balance and no U.S.-owned contractors are available, the risks of over-dependency are enormous. Seven years ago, an investigation into corrupt practices at a seemingly irreplaceable foreign-owned logistical support agent, Glenn Defense Marine Asia, led to the sprawling “Fat Leonard” Scandal. As corrupt sailors were, as recently as this week, receiving hefty prison sentences, the U.S. Fleet has yet to put the investigation behind it.

Foreign support can be a management nightmare at every level. When a foreign company wins a lowest-cost-technically-acceptable bid, the U.S. loses almost all ability to monitor labor practices, subcontractor selection or obtain block-chain sensibility of the product. 

And, finally, there’s the economic peril. Awards to foreign-owned entities means no tax revenue returns to the United States, and with America struggling to rebuild a shattered economy, failure to support U.S. revenue generation may be politically unpalatable. 

The Tricky Work Of Balancing U.S. Military Contracting

Managing the use of foreign-owned contractors overseas is going to be a balancing act. An immediate solution is prescribed in the Federal Acquisition Regulations (FAR). The Under Secretary of Defense (Acquisition, Technology, and Logistics) could simply engage relevant U.S. government partners to more fully evaluate the domestic and foreign policy costs of large, long-term overseas support contracts, and then, when conditions warrant, approve a justification and approval for “other than full and open competition” due to overarching U.S. national security interests. Such collaborative, all-of-government engagement—bringing in the State Department and other relevant agencies—would limit the potential for foreign policy problems while enabling competent and compliant American-owned entities to provide more logistical support to the U.S. military overseas. 

An enduring solution rests with the U.S. Congress and the next Administration. Congress can easily help urge the Administration include appropriate language in the next National Defense Authorization Act (NDAA) requiring stronger justification before awarding non-American-owned entities contracts for a range of logistical tasks—particularly those logistical re-supply tasks that are long term, sensitive, and potentially enduring. 

This would, in some cases, be a heavy lift. As the threat of Great Power warfare receded, the U.S. has systematically de-emphasized U.S.-based logistical support services. But a demand for U.S. logistical support overseas would be a boon for domestic U.S. contractors—road builders, energy suppliers, and even environmental remediation companies. Just the act of getting U.S. flagged tankers full of JP-5 fuel from the U.S. to, say, someplace in Africa, would be disruptive, requiring new U.S. built ships, U.S. crews, fuel handlers, and bunkering. But the resulting economic activity would be worth every penny. 

The Trump Administration, in a little-heralded development, transformed the sleepy U.S. economic development organization formerly known as the Overseas Private Investment Corporation (OPIC) to an equity-holding entity, the U.S. International Development Finance Corporation (DFC), and subsequently endowed the DFC with $60 billion in underwriting. This attempt at countering a waning U.S. economic influence overseas is potentially a parallel effort to ensure the U.S. maintains a relevance in business matters overseas. Dictating some ‘American-only’ contract awards for logistics will help the DFC to establish businesses overseas, says Admiral Franken.

Like anything diplomatically sensitive, any shift to U.S.-owned support contractors would need to be deftly handled. If foreign partners who are already in place are too abruptly pushed aside, the resulting economic disruption and ill feelings can echo on for years. In Greenland this week, U.S. negotiators did damage control over a long-awarded support contract, assuaging hurt feelings by committing to hand a future Thule Air Base support contract to a locally owned, non-U.S. support contractor. The diplomatic maneuvering stemmed from events six years ago, when an American-owned and operated contractor won support work at this critical Arctic base. An irked Greenland has been fighting to get the support work back to the locals ever since.

Contracting Is Part Of The Battle:

A renewed focus on resiliency does not mean that all military logistics support should go to U.S. contractors. When operating forward, the U.S. military never has gone without some sort of reliance upon foreign or host-nation logistical support. Ever since the Korean War, when the United States used enormous numbers of foreign stevedores to offload military material in Pacific ports, the U.S. has relied upon foreign services and logistical support, particularly for surge and transient activities. This will always be the case. 

But as China enters the picture, and starts to develop overseas outposts, strong and creative management of America’s portfolio of overseas logistics and support contracts will prove critical. It is a real—and often neglected—front in the emerging competition between the “Great Powers”. Even in things as mundane as support contracting, the U.S. government will be competing for local support. Host-nation contracts pose a perfect way to differentiate between the two very different countries—with victories and defeats having wide ranging and potentially tough consequences. Contracting decisions will need to be vetted by the interagency, and scrutinized at a level the cost-conscious, back-office-hating Pentagon may not like.

Time is short. With tensions increasing throughout the globe, the United States is obligated to take a more active role in hardening the globe-spanning military supply chain. If not, America’s military risks being marooned, without logistical support, as former friends and suppliers prove fickle.