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1 [1] (February 10, 2017)

handle is hein.crs/crsmthmbbzz0001 and id is 1 raw text is: , ,'Congressional Research Service Ifo r Ig th ,egstivedebate snce 1914 Defense Primer: DOD Contractors February 10, 2017 Throughout its history, the Department of Defense (DOD) has relied on contractors. A defense contractor, as defined by the Code of Federal Regulations, is any individual, firm, corporation, partnership, association, or other legal non-Federal entity that enters into a contract directly with the DOD to furnish services, supplies, or construction (see 32 C.F.R. 158.3, Definitions). Within the defense policy community, the term contractor is commonly used in two different contexts. The word can describe the private companies with which DOD contracts to provide goods and services. It can also describe individuals hired by DOD-usually through private companies, which are also considered contractors in the previous context-to perform specific tasks. The term contractor does not refer to military servicemembers, DOD career employees, or political appointees. Contractors as Companies DOD contracts with many companies for all kinds of goods and services, but its contracting is dominated by five companies. In FY2015, these companies were the only five to individually receive more than $9 billion in DOD contracts and together received 28% of all of DOD's contracted dollars for the year. The five companies are often referred to as the primes, signifying their role as prime contractors who in turn subcontract to other companies. They are shown in Table 1. Table I. Five Largest DOD Contractors As measured by contracted dollars in FY20 15 Contracted Company Dollars Lockheed Martin Corporation $29.4 The Boeing Company $15.6 Raytheon Company $12.4 General Dynamics Corporation $11.8 Northrop Grumman Corporation $9.5 Source: FPDS Top 100 Contractors Report. Note: Fifty percent of the Bell Boeing Joint Project Office is attributed to the Boeing Company. Nevertheless, DOD also contracted with more than 50,000 companies in FY2015 besides the primes, a number that does not include subcontracts let by the primes themselves. Thirty companies received more than $1 billion directly in DOD contracts, and another 200 received more than $100 million in DOD contracts. The remaining companies received just less than 30% of funds DOD contracted in FY2015. The primes dominate contracts for both products and services, largely because they also service the products they provide to DOD. Health care providers are the largest of the companies whose contracts are more than 90% services, followed by those firms that provide professional services, from research to management support. The bulk of contractors-more than 70%-provide products, and these include the smallest companies by contracted dollars, which tend to provide specific manufactured goods. Contractors as Individuals The rest of this primer focuses on the roles of individual people contracted to support DOD. Individual DOD contractors fulfill a wide variety of organizational functions, from intelligence analysis or software development to landscaping or food service. Why does DOD use individual contractors? Going back to Revolutionary times, the U.S. military has relied on individual contractors, including on the battlefield. In the 1990s, the US military-in line with a government- wide trend-embraced privatization, increasing reliance on contractors rather than in-house personnel to provide many services. The benefits of using contractors include freeing up uniformed personnel to focus on duties only uniformed personnel can perform; providing expertise in specialized fields, such as linguistics or weapon systems maintenance; and providing a surge capability (quickly delivering critical support capabilities tailored to specific military needs). Because contractors can be hired when a particular need arises and released when their services are no longer needed, contractors can be less expensive in the long run than maintaining a permanent in-house capability. How many contractors does DOD employ? DOD's Inventory of Contracted Services (ICS, required annually by Section 807 of the FY2008 National Defense Authorization Act) provides information on contractor hiring by individual DOD components (e.g., the military departments and defense agencies). ICS documents do not report a total number of contractors, but rather a number of full-time equivalents (FTEs-a measure referring to the estimated numbers of man-hours contracted). According to the FY2014 ICS Report to Congress, DOD contracted about 641,000 FTEs that year. Of these, the Department of the Army contracted about 37%, the Navy about 29%, and the Air Force about 19%. www.crs.gov 1 7-5700

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