In a recent campaign speech, President Bush proclaimed that "America must never outsource America's national security." Once again, the gap between rhetoric and reality is yawning.

While Bush was trying to make a point about U.S. relations with the international community, the fact is that the United States has indeed outsourced major portions of its effort in the war in Iraq. More important, it has done so in an ad hoc manner, without public awareness or discussion.

The private military industry is such a new phenomenon that most in Congress remain unaware of it. In turn, the issue is highly susceptible to partisan rancor, mainly because of the identity and political practices of some of the firms. For instance, simply mention the name Halliburton in a congressional hearing and the battle line is already drawn. Unfortunately, this ends rather than begins the inquiry, even though questions about the private military industry cut to the heart of national security and our soldiers' welfare.

In the wake of the shock over Fallujah, this may change. A group of senators led by former West Pointer Jack Reed, D-R.I., has requested that the Pentagon begin the basic accounting task of tallying the number of armed non-Iraqi private military personnel on the ground. They have also requested that the Pentagon begin to adopt written guidelines, with legal justifications, for the rules of engagement the firms must follow, as well as how they will be coordinated with U.S. and sovereign Iraqi forces. Defense Secretary Donald Rumsfeld has not yet responded.

Those are good first steps, but they do not go far enough. To put it in economic terms, privatization always comes with both positive and negative externalities. The onus is not on the contracting firm, but on the client, in this case the U.S. government, to guard its own interests and make sure the job is done right. We must set up the processes needed to maximize the positives and minimize the negatives.

A clear examination is needed to bring higher standards and greater clarity into our current and future military outsourcing decisions. This need goes beyond tracking the armed personnel. It includes a basic accounting of the broader realm of contractor forces, public transparency of contractor casualties, and an examination of what is being spent. The U.S. budget on the service side of war has tripled in the last decade. We need far better financial scrutiny of contract competitions, awards and oversight to ensure that money is being saved through outsourcing (no formal study has yet proven this). Serious thinking must take account of such fundamental military questions as command and control, rights and responsibilities for both the good and the bad times, legal status, and the establishment of industry standards on recruiting, procedures and intelligence.

We should also take a step back and examine the overall trend, rather than continue to breathlessly outsource. Just because we can turn something over to the private market does not always mean we should. Two basic questions must always be asked before handing over any public function, most particularly to private military firms: Is the function being privatized in symmetry with national security and the public interest? If so, how will this privatization save money and promote efficiency? Unfortunately, our CEO-filled defense leadership has forgotten Economics 101 and brushed aside basic issues of public accountability. Instead, it has outsourced first and not even bothered to ask questions later.

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