Introduction
The killing of Osama Bin Laden has strengthened the United States' position in the fight against Al Qaeda, prompting some Congressional members to advocate for troop withdrawal from Afghanistan However, history shows that even with such calls, U.S military presence, along with civilian contractors, is likely to persist, as evidenced by the prolonged involvement in Iraq post-Saddam Hussein’s fall in 2003 Eleven years later, Iraq's rebuilding efforts are still ongoing, and similar initiatives in Afghanistan are already in progress, suggesting that these endeavors will continue for the foreseeable future.
1 See Siobhan Hughes, 27 Senators Call For Sizable Troop
Withdrawal From Afghanistan, Wall St J., June 15, 2011, http://online.wsj.com/article/BT-CO-20110615-712044.html.
2 Need citation See Michael Kamber, Iraq, THE NEW YORK TIMES, available at http://topics.nytimes.com/top/news/ international/countriesandterritories/iraq/index.html.
5 Need citation See Afghanistan, THE NEW YORK TIMES, available at http://topics.nytimes.com/top/news/international/countriesandterr itories/afghanistan/index.html.
As U.S soldiers prepare to withdraw from the Middle East, senior military officials reaffirm their commitment to supporting veterans, many of whom return with permanent injuries due to advancements in lifesaving equipment like Kevlar vests Additionally, a significant number of returning soldiers face mental health challenges, increasing their risk of suicide, a persistent issue linked to prolonged deployments Fortunately, the universal government health care system provides wounded warriors access to top-tier medical professionals However, a lesser-known group, America’s contractor veterans, also endures the toll of war injuries, highlighting the need for broader recognition and support for all those who serve.
6 Need citation See e.g., Mission Statement, U.S Dep’t of
Veterans Affairs, available at http://www.va.gov/landing2
7 Need citation See e.g., Dan Froomkin, How Many U.S Soldiers
Were Wounded in Iraq? Guess Again, THE HUFFINGTON POST available at http://www.huffingtonpost.com/dan-froomkin/iraq-soldiers- wounded_b_1176276.html
8 Need citation See Charles Hoge, Combat Duty in Iraq and
Afghanistan, Mental Health Problems, and Barriers to Care, 351
9 Need citation See Information on Veterans Health
Administration, U.S Dep’t of Veterans Affairs, available at http://www.va.gov/health/aboutVHA.asp.
Deployed contractors are returning home in unprecedented numbers, facing similar injuries and mental health issues as soldiers, including post-traumatic stress disorder Despite their critical roles alongside the military in high-risk environments, support networks for contractors are largely absent, leaving them without the necessary care that active-duty service members receive This oversight is often attributed to a dismissive attitude among some Americans who view contractors as expendable, believing their primary value lies in the completion of their contracts However, injured contractors are now beginning to raise their concerns with Congress and government officials, highlighting the urgent need for recognition and support.
10 Need citation See James Risen, After Iraq, Contractors Face
Mental Health Issues, N.Y TIMES , Jul 4, 2007, http://www.nytimes.com/2007/07/04/health/psychology/04cnd- contractors.html.
12 Need citation Aaron Walter, “Do Americans View Contractors in
Iraq as “Expendable Profiteers?” THE DEFENSE ACT BLOG ( Mar 7,
2008), http://defensebaseactblog.com/2008/03/07/do-americans- view-contractors-in-iraq-as-expendable-profiteers/.
13 Need citationId. are now beginning to debate the potentially broad and long-term consequences of discounting these contractor veterans 14
The national healthcare debate highlights the financial strain of treating uninsured or underinsured patients in emergency rooms, which has significantly driven up healthcare costs However, finding affordable solutions to expand coverage remains a politically contentious issue.
Healthy Americans tend to be more productive and place less strain on the healthcare system and the economy However, critics of universal healthcare contend that the government cannot financially support health coverage for all citizens This debate raises a crucial question about the government's moral responsibility to assist those unable to care for themselves While one might expect less contention regarding support for veterans returning from war, who generally garner more political sympathy, Congress remains focused on the broader national healthcare discussion.
14 See After Injury, the Battle Begins: Evaluating Workers’
Compensation for Civilian Contractors in War Zones: Hearing
Before the H Comm on Oversight and Gov’t Reform, 111th Cong
(2009), available at http://www.access.gpo.gov/cgi- bin/getdoc.cgi?dbname1_house_hearings&docid=f:65546.pdf http://www.gpo.gov/fdsys/pkg/CHRG-111hhrg65546/pdf/CHRG-
111hhrg65546.pdf [hereinafter House Hearing on Defense Base Act].
15 See generally Patient Protection and Affordable Care Act, Pub
L 111-148, 124 Stat 119 (codified as amended in scattered sections of 42 U.S.C.).
16 Need citationJoe Messerli,”Should the Government Provide Free
Universal Healthcare to all Americans?” BALANCEDPOLITICS , http://www.balancedpolitics.org/universal_health_care.htm. rising cost of the insurance that contractors use to protect their employees 17
This article urges Congress to address significant issues within the Defense Base Act (DBA) insurance system, beyond just fiscal reforms Recent legislation mandates the Secretary of Defense to develop a new acquisition strategy for DBA insurance, which should not only focus on costs but also consider important non-cost benefits Many injured contractors returning from Iraq and Afghanistan face denial of medical treatment reimbursements from their DBA insurance carriers, particularly those with combat-related mental health issues It is imperative for Congress to uphold its duty to support contractor veterans and their families by carefully evaluating the new DBA acquisition strategy.
17 Need citation See House Hearing on Defense Base Act, supra note 14.
19 See Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub L No 110-417 §843, 122 Stat 4540 (2008).42 U.S.C § 1655 (2008).
21 Need citationHouse Hearing on Defense Base Act, supra note 14.
This article is structured into four sections: the first part outlines the challenges faced by injured contractors upon their return from war; the second part examines how the existing regulatory framework for contractor insurance exacerbates these issues; and the third part provides practical recommendations to address these concerns.
Congress and the Department of Defense (DoD) are set to adopt a new Defense Base Act (DBA) acquisition strategy The current open-market insurance approach is deemed insufficient, prompting the recommendation for Congress to establish a multiple provider system for DBA insurance This strategy effectively addresses concerns related to costs and claims processing in the short term and can be implemented quickly without significant legal changes Additionally, Congress should initiate steps toward government self-insurance, which would provide even greater savings and benefits for injured contractors.
Contractor Death Toll Exceeds That of U.S Military in Iraq and Afghanistan
While the sacrifices of military personnel are widely recognized, the significant contributions of contractors often go unnoticed Many Americans acknowledge the lives lost among service members in Iraq and Afghanistan but remain unaware of the contractor death toll Contracting plays a crucial role in enabling the U.S military to fulfill its mission while adhering to personnel limits.
Congress 23 The current wars would not be sustainable relying on these military members alone.
The military's growing dependence on contractors in recent conflicts has highlighted concerns regarding the treatment of injured contractors returning from service Traditionally, contractors have supplemented the military by handling tasks deemed not "inherently governmental," but the distinction between governmental and non-governmental functions is increasingly unclear Non-inherent tasks often include base support roles such as grounds maintenance, dining facility operations, and laundry services Additionally, contractors provide critical security services, exemplified by companies like Xe Services, formerly known as Blackwater Worldwide In 2010, base support and security services accounted for approximately 80% of the work performed by DoD contractors in Iraq, further complicating the military's resource allocation amid prolonged engagements.
23 See Ike Skelton National Defense Authorization Act for Fiscal Year 2011, Pub L No 111-383, 124 Stat 4137 (2011).
24 See FAR Subpart 7.5 (2011) Inherently governmental refers to employment functions that are typically performed by military or federal civilian employees rather than contract employees.
25 See MOSHE SCHWARTZ, CONG RES SERV., R40764, DEPARTMENT OF DEFENSE
CONTRACTORS IN IRAQ AND AFGHANISTAN: BACKGROUND AND ANALYSIS 8 (2010), available at http://assets.opencrs.com/rpts/R40764_20100702.pdf.
26 See Mark Mazzetti and Emily B Hager, Secret Desert Force
Setup By Blackwater’s Founder, N.Y Times, May 14, 2011, http://www.nytimes.com/2011/05/15/world/middleeast/15prince.html? ref=blackwaterusa.
The distinction between inherently governmental functions and those performed by contractors has become increasingly unclear, especially as contractors take on roles traditionally held by military personnel, such as security duties With a growing number of contractors deployed in hazardous locations, the risks they face have significantly escalated Consequently, the government now faces the challenge of effectively managing the returning contractor workforce, which frequently experiences similar physical and mental health issues as military veterans.
Professor Steven L Schooner has extensively researched contractor fatalities, revealing alarming statistics that highlight the dangers faced by contractors supporting the military Notably, between January and June of 2010, more military contractors lost their lives than uniformed service members, drawing critical attention to this pressing issue.
Afghanistan and Iraq 30 There were reportedly 250 contractor
Steven L Schooner serves as the Co-Director of the Government Procurement Law Program at George Washington University Law School and holds the title of Nash & Cibinic Professor of Government Contract Law His latest work focuses on the significant issue of government contractor fatalities, highlighted in his publication, "Why Contractor Fatalities Matter."
PARAMETERS, Aug 2008, at 78; Steven L Schooner & Collin D Swan,
Contractors and the Ultimate Sacrifice, SERV CONTRACTOR., Sept
2010, at 16; Steven L Schooner & Collin D Swan, Dead
Contractors: The Un-Examined Effect of Surrogates on the
Public’s Casualty Sensitivity, J NAT’L SEC LAW & POL’Y
30 See Rogene Fisher Jacquette, Contractor Deaths in Iraq and
In recent years, contractor casualties in Iraq and Afghanistan have surpassed military fatalities, with contractor deaths rising from five percent to over 50% of the annual death toll between 2003 and 2010 As of March 2011, approximately 155,000 private contractors were employed by the Department of Defense, outnumbering uniformed personnel, which totaled around 145,000 This trend highlights a significant increase in the reliance on contractors, who now comprise about 52% of the workforce in Iraq Additionally, the number of contractor injuries reported has been three times higher than military injuries since operations began in 2001, indicating a concerning upward trajectory in contingency contracting casualties.
Afghanistan 35 and on average have outnumbered military personnel
FRONT LINES (Sept 23, 2010, 2:27 PM), http://atwar.blogs.nytimes.com/2010/09/23/contractor-deaths-in- iraq-and-afghanistan-outnumber-service-member-deaths/? scp=1&sq=contractor%20deaths%20outnumber&st=cse.
31 Need citation (probably same as previous)
32 See Steven L Schooner & Collin D Swan, Contractors and the
Ultimate Sacrifice, SERVICE CONTRACTOR, Sept 2010, at 16, 17.
34 MOSHE SCHWARTZ, CONG RES SERV., R40764, DEPARTMENT OF DEFENSE
CONTRACTORS IN IRAQ AND AFGHANISTAN: BACKGROUND AND ANALYSIS (2011), available at http://www.fas.org/sgp/crs/natsec/R40764.pdf The number of contractor and military personnel in Iraq and
Afghanistan has decreased from 207,600 contractors and 175,000 military since July 2010 Schwartz, supra note Error: Reference source not found, at 8.
35 MOSHE SCHWARTZ, CONG RES SERV., R40764, DEPARTMENT OF DEFENSE
The use of contractors in Iraq and Afghanistan has significantly bolstered military operations over the past two years, contributing to their overall success However, this increased reliance on private contractors has also incurred notable costs, highlighting a complex relationship between military effectiveness and contractor dependency For an in-depth analysis, refer to the report "Contractors in Iraq and Afghanistan: Background and Analysis" (2011) available at http://www.fas.org/sgp/crs/natsec/R40764.pdf.
Professor Schooner’s articles shed light on the lack of transparency in government contracting, highlighting the overlooked risks faced by contractors, including a troubling rise in fatalities and injuries Despite the alarming trend in contractor injuries, which could have significant long-term effects, few organizations have monitored or supported injured contractor veterans Insurance companies have largely managed employee injuries, leading to increased profits for carriers and widespread claim denials for injured workers The current regulatory framework offers limited remedies, preventing the Government from effectively managing costs or improving care for contractors, who continue to face unprecedented dangers in the field.
36 See James Glanz, Contractors Outnumber U.S Troops in
Afghanistan, N.Y Times, Sept 1, 2009, http://www.nytimes.com/2009/09/02/world/asia/02contractors.html.
39 See infra part xxxxxx. numbers, insurance carriers are seeing unprecedented increases in revenue and profit 40
Contractor Veterans Encounter Difficulties After Overseas Employment
Problems With The Current Regulatory Scheme
Advocacy for injured contractors has largely relied on volunteer efforts, with individuals like Jana Crowder playing a pivotal role Crowder runs a dedicated website for wounded contractors and organizes a support group in Tennessee, providing assistance to veterans returning from Iraq, despite not being a health professional.
Day: Iraq Contractors Convene in Tennessee, NATIONAL PUBLIC RADIO (Feb 12, 2007), http://www.npr.org/templates/story/story.php? storyIds64190 Crowder’s website is available at CIVILIAN
CONTRACTORS IN IRAQ & AFGHANISTAN AMERICAN CONTRACTORS IN IRAQ , http://www.americancontractorsiniraq.com/ (last visited July 8, 2011).
Starting in 2007, The Los Angeles Times, ABC News, and ProPublica highlighted the challenges faced by injured contractors returning from Iraq and Afghanistan Their reports reveal troubling accounts, such as that of Preston Wheeler, a truck driver who experienced significant hardships.
In Iraq, Kellog, Brown, and Root (KBR) employees faced significant challenges, as exemplified by Mr Preston, who witnessed a co-worker's murder in 2005 and took two years to find a support group to address his emotional struggles Similarly, Robert Rho, another KBR employee, sustained injuries and battled with his insurance provider for years to secure his benefits Additionally, a third contractor had to escalate his situation to Tennessee Senator Lamar Alexander to finally obtain his Defense Base Act (DBA) entitlements.
In Tennessee, contractors gathered to discuss pressing issues, highlighting the tragic case of Wade Dill, a veteran who took a pest extermination job in Afghanistan to fund his daughter's college education Mr Dill faced unimaginable trauma when tasked with cleaning up the aftermath of a soldier's suicide, which profoundly affected his mental health This experience ultimately led to his resignation and marital separation Tragically, on July 16, 2006, he was found dead in a hotel room near his home, leaving behind a heartbreaking note that read, “I did exist and I loved you.”
The Longshore and Harbor Workers’ Compensation Act, the Defense Base Act, and the War
Defense Base Act, and the War Hazard Compensation Act
Congress is now debating alternatives to the regulatory scheme that protects contractors overseas, 79 but the merits of these alternatives must be weighed against current regulations
Barbara Dill filed a workers' compensation claim with KBR's insurance provider, AIG, asserting that her husband's death was linked to PTSD resulting from his service in Iraq Expert witness Dr Seaman highlighted that the combination of physical separation and work-related stress led to emotional distance and erratic behaviors, ultimately culminating in suicide While three experts acknowledged Mr Dill's PTSD, AIG's expert attributed it to marital issues, claiming it was unrelated to his employment stress Despite the Department of Labor's recommendation for AIG to pay the claim, the insurer refused, forcing Ms Dill to appeal through the DOL's dispute resolution system, a lengthy process that can take years Ultimately, she won her appeal in 2011, five years after her husband's death.
Contractors Convene in Tennessee, National Public Radio (Feb 12,
2007), http://www.npr.org/templates/story/story.php? storyIds64190; See also T Christian Miller, The War’s Quiet
On February 25, 2010, The Daily Beast reported on a significant scandal involving the decision regarding death benefit awards, highlighting the case of Dill v Service Employees International, Inc The Administrative Law Judge's decision and order, issued on January 21, 2011, in Case No 2008-LDA-00259, provided crucial insights into the matter For further details, the full decision can be accessed through the Department of Labor's official website.
79 See After Injury, the Battle Begins: Evaluating Workers’
Compensation for Civilian Contractors in War Zones: Hearing
Before the H Comm on Oversight and Gov’t Reform, 111th Cong 19
(2009) (statement of Seth D Harris, Deputy Secretary, Department of Labor), available at http://www.access.gpo.gov/cgi- categories of employees who perform work for the Government 80
In some cases, the Government provides these benefits directly, with funds appropriated by Congress 81 In other cases, the
Government regulations require contractors to offer specific benefits to their employees, which are typically categorized into four types: military personnel, civil service employees, non-appropriated fund instrumentality (NFI) staff, and contractor employees.
All U.S military members are entitled to various pay and benefits, including compensation for injuries, medical expenses, and life insurance coverage This entitlement applies to almost any injury or death occurring while a member is in active status, regardless of whether the incident happened during military duties Funding for these military benefits is sourced from official government allocations.
80 See History of OWCP, U.S DEPARTMENT OF LABOR, OFFICE OF WORKERS’
COMPENSATION PROGRAMS, http://www.dol.gov/owcp/owcphist.htm (last visited Jan 14, 2012) (discussing various workers’ compensation programs administered by Federal Government).Need citation
81 See, e.g., Federal Employees Workers’ Compensation Act, 5
82 See, e.g., Longshore and Harbor Workers’ Compensation Act, 33 U.S.C § 904 (2006).Need citation
83 Need citation See 5 U.S.C § 8101 (2006) (civil service); 5 U.S.C § 8171(a) (2006) (NFI); 42 U.S.C § 1651(a) (2006)
85 See 10 U.S.C § 1074(a)(2) (2006). congressional appropriations to DoD, which oversees the Military
Civilian employees, known as civil servants, are employed by the Government and are entitled to compensation for work-related injuries under Title 5, Chapter 81, of the United States Code The Federal Employees’ Compensation Act (FECA) funds these benefits, which include comprehensive coverage for disability and death, death gratuities related to service with the Armed Forces, and necessary medical services.
Compensation for injuries or fatalities involving NFI employees and contractors is not funded by appropriated funds Instead, Congress has mandated through various amendments that NFIs and contractors offer benefits under the Longshore and Harbor Workers’ Compensation Act (LHWCA), which was established in 1927 and is administered accordingly.
86 See RICHARD A BEST, JR., CONG RR ESEARCH SS ERV., IB93103, MILITARY
MEDICAL CARE SERVICES: Q QUESTIONS AND AA NSWERS (2005), available at http://www.fas.org/sgp/crs/misc/IB93103.pdf.
87 See Compensation for Work Injuries, 5 U.S.C §§ 8101-8152
The U.S Treasury fund serves as a central repository for congressional appropriations aimed at compensating eligible federal employees, along with covering their benefits and related expenses, according to the U.S Department of Labor's Division of Federal Employees.
COMPENSATION, PROCEDURAL MANUAL, available at http://www.dol.gov/owcp/dfec/procedure-manual.htm.
The Longshore and Harbor Workers’ Compensation Act (LHWCA), governed by the Office of Workers’ Compensation Programs (OWCP) under the Department of Labor (DOL), was initially designed to offer compensation for maritime employees who suffered disabilities or fatalities due to injuries on navigable waters in the United States Over time, the Act has been amended to extend coverage to workers involved in various public works projects Consequently, employers are mandated to provide coverage for eligible employees engaged in government-related work in specified regions.
The Longshore and Harbor Workers' Compensation Act (LHWCA) offers a range of benefits tailored to various situations, including medical services, necessary supplies, and the option to choose a physician The statute also outlines disability and death benefits based on the nature of the injury, whether it is permanent or temporary, and the level of disability, whether partial or total Generally, injured workers are entitled to receive two-thirds of their average weekly wages for the duration of their recovery.
92 Division of Longshore and Harbor Workers' Compensation, DOL.GOV, http://www.dol.gov/owcp/dlhwc/LS-560pam.htm (last visited Jan
95 See Longshore and Harbor Workers’ Compensation Act, § 904.
96 Longshore and Harbor Workers’ Compensation Act § 907(a)-(b).
97 Longshore and Harbor Workers’ Compensation Act § 908 Specific injuries are listed with particularity in the statute, such as:
Compensation for the loss of multiple phalanges in a digit is equivalent to that for the complete loss of the digit, while the loss of the first phalange warrants half of the total compensation for the entire digit The Longshore and Harbor Workers' Compensation Act (LHWCA) serves as the foundational framework for delivering workers' compensation benefits to government workers who are not directly employed by the Government.
Workers’ compensation for contractors functions similarly to traditional coverage, as the Davis-Bacon Act (DBA) mandates government contractors to provide their employees with Longshore and Harbor Workers' Compensation Act (LHWCA) benefits Enacted in 1941, the DBA was a response to a significant rise in civilian contractor utilization during World War I and World War II, aiming to clarify and ensure adequate compensation for workers.
98 Longshore and Harbor Workers’ Compensation Act § 908.
The Department of Defense (DoD) utilizes Nonappropriated Fund Instrumentalities (NFIs) to support morale, welfare, and recreation (MWR) programs for the Armed Forces These NFIs, typically managed by civilian employees within the Armed Forces' services sector, operate various facilities such as post exchanges, child day-care centers, and recreational venues NFI employees often work alongside deployed forces, whether stationed domestically or abroad Importantly, they are protected under the Longshore and Harbor Workers' Compensation Act (LHWCA) for any work-related injuries, a provision established by the Nonappropriated Fund Instrumentalities Act.
(NFIA) Under NFIA, benefits are paid for with revenues generated by the NFIs rather than appropriated funds See also
Who Are NAF Employees?, Dep’t of Def Civilian Personnel Mgmt
NAF employees are defined in various legal contexts, including the Johnson v U.S case, which highlights their unique status For a comprehensive understanding, refer to the document available at the CPMS website Additionally, James M Mesnard's article on exclusivity under the Act provides further insights into the implications for NAF employees.
See also Nonappropriated Fund Instrumentalities Act, 5 U.S.C §
The Defense Base Act (DBA), originally designed to limit government and defense contractor liability while protecting civilian laborers, has evolved significantly since its inception Initially focused on contractors at military bases, the DBA has been amended to extend coverage to contractors involved in public work projects, irrespective of their location It mandates that businesses provide compensation for injuries or fatalities occurring to employees working at military, air, or naval bases, as well as on U.S.-occupied lands and public works outside the continental United States The statute broadly defines "public work" to encompass any construction, alteration, removal, or repair projects for the benefit of the U.S or its allies, including service contracts and related ancillary work Today, nearly all U.S contractors engaged in building projects are subject to the DBA’s provisions.
The article by Kerry J Anzalone, titled "The Defense Base Act—A Growth Industry?", explores the implications and developments surrounding the Defense Base Act within the context of benefits and compensation for workers It provides an in-depth analysis of how this legislation has evolved and its impact on the longshore industry For further details, the full text is available online at the Department of Labor's website.
103 Need citationSee, e.g., War Hazards Compensation Act, 42
105 Defense Base Act,Id § 1651(b)(1) In Casey v Chapman
DBA Insurance Concerns: Rising Costs and Denial of Claims
Policy Changes Could Alleviate Existing Problems
The acquisition process requires reform, but before implementing statutory changes, Congress should explore policy adjustments to address cost concerns First, the Department of Defense (DoD) should evaluate the advantages of investing in reasonable DBA insurance Second, if the expenses of sustaining a healthy contractor workforce are excessive, Congress must assess the necessity of civilian contractors in war zones Lastly, if contractors are essential in these areas, enforcing existing regulations could help lower DBA insurance costs.
221 See Supplemental Information on Defense Base Act Insurance
Costs: Hearing Before the H Comm On Oversight and Gov Reform,
110 Cong 15 (2008) (memorandum from Majority Staff of H Comm th
On Oversight and Gov Reform).Need citation
222 See Greta S Milligan, The Defense Base Act: An Outdated Law and Its Current Implications, 86 U DET MERCY L REV 407, 416-17(2009).Need citation
Insuring contractors in war zones presents significant costs, and while Congress aims to lower DBA insurance expenses, caution is necessary to avoid undermining key objectives Firstly, the current quality of mental health service claims is already concerning, and further cost reductions could worsen these issues Secondly, contractors are legally obligated to ensure the health and safety of their employees, and since the Government reimburses insurance premiums, it should be vigilant about the distribution of benefits If insurance companies deny claims while generating excessive profits, the Government may inadvertently contribute to DBA violations Lastly, the Government must ensure a safe working environment to align contractor operations with its objectives, as contractor employees act as agents of the Government Inadequate reimbursement for care can lead to financial strain on their families.
223 See U.S GOV’T ACCOUNTABILITY OFFICE , GAO-05-280R, DEFENSE BASE ACT
INSURANCE: REVIEW NEEDED OF COST AND IMPLEMENTATION ISSUES 3-4 (2005), available at http://www.gao.gov/new.items/d05280r.pdf.Need citation
224 See Goldman, How Iraq Contractors Deal with Trauma.Need citation
225 See Defense Base Act, 42 U.S.C § 1651(a)(4) (2011).Need citation security is at risk 226 A contractor in this position will always put his or her own objectives over the objectives of the
Before implementing more affordable methods for securing DBA benefits, Congress must acknowledge that DBA insurance comes with significant costs, and opting for lower insurance premiums may not serve the best interests of the Government.
If Congress prioritizes cost, as indicated by the NDAA for 2009, the Government should reconsider its reliance on civilians in war zones It is essential to avoid sending civilians into these areas unless the associated safety costs are adequately addressed Regardless of the acquisition strategy, insuring contractors against risks in war zones is inherently expensive If Congress concludes that these costs are unsustainable, the responsibility for such tasks should revert to the U.S military Traditionally, the military would undertake hazardous operations; however, due to personnel limitations set by Congress, much of this risk has shifted to contractors.
It is simply not acceptable that Congress take any action that threatens the safety of contractors after they have borne the
226 See AGENCY FOR HEALTHCARE RESEARCH AND QUALITY, DEPARTMENT OF HEALTH AND
HUMAN SERVICES , Pub No 09-P011, MENTAL HEALTH: RESEARCH FINDINGS 5 (2009).Need citation
227 See CONG BUDGET OFFICE, LOGISTICS SUPPORT FOR DEPLOYED MILITARY FORCES 2-5 (2005), available at http://www.cbo.gov/ftpdocs/67xx/doc6794/10-20-
The Department of Defense (DoD) has established citation responsibilities to ensure proper accountability in military logistics support Prioritizing cost concerns over equipping warfighters adequately is unacceptable, regardless of their status as enlisted personnel, commissioned officers, or contractors with the U.S military.
A new acquisition strategy alone will not resolve existing issues or reduce costs unless current regulations are properly enforced Enhancing the enforcement of existing regulations offers a cost-effective solution that requires no new implementation Under the Longshore and Harbor Workers' Compensation Act (LHWCA), criminal penalties are already in place for contractors who neglect to obtain Defense Base Act (DBA) insurance.
The Department of Labor (DOL) has the power to impose fines on contractors who fail to comply with regulations, while the Department of Justice (DOJ) can prosecute and imprison those who neglect their responsibilities Despite these available remedies, fines are rarely imposed, and there have been no prosecutions for non-compliance with Defense Base Act (DBA) insurance requirements Increased enforcement of these measures could enhance contractor compliance and emphasize the critical importance of maintaining DBA insurance.
Another mechanism already in place that could be used to monitor DBA compliance is the CO’s responsibility determination
228 Longshore and Harbor Workers’ Compensation Act, 33 U.S.C §§ 938(a) (2006).
230 Longshore and Harbor Workers’ Compensation Act, 33 U.S.C §§ 938(a) (2006).
231 Miller, supra note Error: Reference source not found.
The Federal Acquisition Regulation (FAR) requires that no contract can be awarded without a Contracting Officer (CO) making a positive determination of responsibility This determination generally assesses a contractor's financial stability, but it also stipulates that contractors must be fully qualified and eligible for an award Given that the absence of Defense Base Act (DBA) insurance can lead to criminal penalties, this clause may empower COs to deem contractors irresponsible if they fail to obtain the necessary DBA insurance.
The broad language of the clause suggests that responsibility determination can be utilized to ensure contractor employees meet physical capability requirements for their roles Given the military's stringent physical standards, it is logical for civilian contractors who work closely with the military to also be physically prepared for operational hazards By enforcing fitness standards for contractors, there are potential benefits for both insurance carriers and the Government, including a healthier claimant pool that could lead to reduced claims and lower costs per claim Additionally, clearer liability may arise from having claimants with fewer pre-existing conditions, ultimately decreasing litigation expenses.
234 Need citation performing their jobs would likely make insuring these workers less risky and less costly.
While enforcing existing regulations could enhance efficiency, the scope of these remedies is somewhat restricted The Government can only impose sanctions or penalties as permitted under the DBA and related statutes Although these sanctions are substantial, they primarily focus on compliance failures, such as a contractor's failure to secure insurance, and do not directly tackle issues related to cost and performance Additionally, since the Government lacks a direct contractual relationship with insurance carriers, its options for addressing carrier misconduct are confined to those specified by statute.
Employers often face challenges when their employees' claims are denied by insurance carriers, yet they lack motivation to pursue remedies for breach of contract As a result, without intervention from either the Government or the employer, claimants find themselves navigating procedural remedies against insurance carriers independently.
The Department of Defense (DoD) must acknowledge the financial implications of ensuring contractor safety abroad; if these expenses become excessive, it may be necessary to consider withdrawing civilians from frontline positions.
If contractors are needed in war zones, then the Government should make a more valiant effort to enforce current regulations.
While a new acquisition strategy is needed, enforcement of current regulations will improve efficiency, provide better care for contractors, and may even slow the rising number of contractor casualties.
Single-Provider Insurance Versus Open-Market Insurance: A 40 Year Debate
Maintaining the Current Open-Market System
In compliance with the 2009 NDAA mandate, the Department of Defense (DoD) submitted a report to Congress in September 2009 outlining reform strategies for Defense Base Act (DBA) insurance This report aimed to present an acquisition strategy designed to reduce costs for both the Government and defense contractors It was expected to provide Congress with feedback on the US Army Corps of Engineers (USACE) single-provider test pilot program, as Congress had been awaiting DoD's recommendations on the potential implementation of this program across the Department Although the DoD requested a formal audit of the USACE program from the US Army Audit Agency (USAAA) prior to the 2008 House Committee hearings, the audit was not completed until August 2010, after the DoD had submitted its report.
288 Need citation (same as fn 40?) See DEP’T OF DEF., OFFICE OF THE
DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND TECH., supra note Error: Reference source not found, at 1.
289 Need citation (same) See id.
290 Need citation (same) Id at i.
291 See H Comm on Oversight and Gov’t Reform, 110th Cong., supra note Error: Reference source not found, at 40 (statement of
Richard Ginman, Deputy Director of Contingency Contracting and Acquisition Policy).
Most audit reports from the US Army Audit Agency (USAAA) can be accessed on their official website, http://www.hqda.army.mil/aaaweb/ However, as of the publication date of this article, the audit report for the US Army Corps of Engineers (USACE) pilot program has not yet been released.
Without the Army audit, DoD collected and presented its own data from industry and various Government agencies 293 They presented four basic alternative acquisition systems to Congress:
The article discusses four systems for managing insurance: a single-provider system, a multiple-provider system, an improved open-market system, and a government self-insurance system Private industry shows a clear preference for the current open-market strategy, believing that a single-provider system would not replicate the cost savings achieved by the US Army Corps of Engineers (USACE) The Department of Defense (DoD) concurs, recommending the continuation of the open-market strategy with enhancements Although DoD viewed the government self-insurance option positively, it ultimately deemed it unfeasible due to the lack of statutory authority and resources from both DoD and the Department of Labor (DOL) to implement such a system.
Making minor adjustments to the existing open-market strategy will not lead to cost reductions or fairer claims processing Even with the modifications proposed by the Department of Defense, the current system is likely to perpetuate its inefficiencies.
The Department of Defense (DoD) gathered data from various sources, including private industry participants such as brokers, insurers, and government contractors, as well as from government agencies.
294 Need citation (likely same as above)
296 Need citation (likely same as above)
297 Need citation (likely same as above)
The analysis highlights that excessive premiums for contractors and the government, along with processing challenges for injured contractors, necessitate a more effective solution A multiple-provider system emerges as the optimal choice, offering significant cost savings and essential monitoring and bonding of insurance carriers This system benefits all stakeholders, including insurance providers, by addressing the shortcomings of existing alternatives.
Single-Provider System: An Impracticable Alternative
In the past decade, several government agencies, including DOS, USAID, and USACE, have successfully transitioned to a single-provider insurance model for Defense Base Act (DBA) insurance This shift from an open-market system, where contractors had to secure DBA insurance independently, to a single-provider approach allows one insurance company to handle all DBA insurance needs for the agency This change has streamlined the process and enhanced efficiency in managing insurance requirements.
299 See Chris R Yukins, A Versatile Prism: Assessing Procurement
Law Through The Principal-Agent Model, 40 Pub Cont L.J 63
In 2010, Professor Yukins introduced the concepts of monitoring and bonding to explain principal-agent relationships within government contracts Monitoring refers to the oversight by a principal aimed at preventing an agent from straying from the principal's goals, while bonding involves implementing self-imposed contractual constraints, such as internal policies and procedures, to minimize such diversions In the realm of DBA insurance, the Government's objective is to enhance reimbursement services for injured contractors while reducing costs The success of this initiative relies on the Government's capacity to effectively monitor and bond insurance carriers through their contractual agreements.
The DOS Inspector General identified potential cost savings through a transition to a single-provider system for DBA insurance Consequently, the Department of State has awarded contracts to a single carrier, aligning with a successful strategy also adopted by USAID and, to a lesser extent, USACE.
A single-payer system for the Department of Defense (DoD) is impractical due to its inability to satisfy Congress's requirement for a competitive Defense Base Act (DBA) insurance market Congress emphasized the importance of maintaining a competitive insurance marketplace in its mandate to the DoD, outlining essential factors for adopting a new strategy While a single-provider insurance model could be awarded competitively, it would ultimately funnel all DoD business to one provider, making it unlikely that Congress would seriously entertain such a system.
No single insurance provider possesses the necessary infrastructure to effectively support an organization as vast as the Department of Defense (DoD) Although some carriers have previously insured large government entities, the unique scale and complexity of the DoD, which encompasses around 2.1 million military and civilian personnel, sets it apart.
The Defense Base Act (DBA) serves as the federally mandated workers' compensation system for government contractors working overseas, ensuring that they receive necessary support and protection For more detailed information, refer to the U.S Government Accountability Office and the Congressional Research Service report available at www.fas.org/sgp/crs/natsec/RL34670.pdf.
302 DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND
TECH., supra note Error: Reference source not found, at 7.
303 Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub L No 110-417 §843 (b)(5), 122 Stat 4540
In 2008, the Department of Defense (DoD) employed significantly more personnel than the Department of State (DOS) and USAID, with 304 employees compared to DOS's 60,000 and USAID's 2,200 The DoD encompasses various agencies, including the Defense Commissary Agency, Defense Financing and Accounting Service, Defense Logistics Agency, and Defense Information Systems Agency Given its vast scale, it is improbable that any single insurance carrier possesses the necessary administrative and financial resources to serve as the sole insurance provider for the DoD.
Providing DBA insurance for organizations with the Department of Defense (DoD) missions poses unique risks that are unlikely to be covered by a single insurance carrier Unlike the Department of State (DOS) and USAID, which operate globally without direct military involvement, the risks associated with insuring military contractors are significantly higher Although insurance carriers have gathered more claims data over the past decade, they remain cautious about entering the DBA insurance market This hesitance was evident in the DoD's report to Congress, where carriers expressed reluctance to compete for a single-provider contract.
304 U.S DEPARTMENT OF DEFENSE, http://www.defense.gov/about (last visited Jul 12, 2011).
305 U.S DEPARTMENT OF STATE, http://careers.state.gov/learn/what-we- do/mission (last visited Jul 12, 2011).
306 Ken Dilanian, Short-Staffed USAID Tries to Keep Pace, USA TODAY
(Feb 1, 2009), http://www.usatoday.com/news/washington/2009-02- 01-aid-inside_N.htm.
307 U.S DEPARTMENT OF DEFENSE, http://www.defense.gov/about (last visited Jul 12, 2011).
310 Need citation (likely same as next) DEP’T OF DEF., OFFICE OF THE
The Deputy Under Secretary of Defense for Acquisition and Technology reported that one of the largest Defense Base Act (DBA) carriers is open to the idea of bidding on a single-provider contract In contrast, two other insurance carriers have stated they will not participate in the competition.
Recent competition for DBA contracts has attracted fewer insurance carriers than in the past After initial success with an award to CIGNA Property and Casualty Insurance (CIGNA) in
1991, DOS solicited a similar follow-on multi-year contract in
In 2000, four insurance carriers, including CIGNA, AIU, Ace International, and CNA, submitted proposals for a contract, with CNA ultimately being awarded the agreement However, in 2008, when the Department of State (DOS) and USAID sought a single provider for Defense Base Act (DBA) insurance, CNA was the only company to respond to the solicitation.
In 2005, the Department of Defense's pilot program for the U.S Army Corps of Engineers (USACE) garnered only one bid, which came from CNA This raises significant concerns about whether a single-provider contract would generate sufficient competition to meet Congressional expectations.
311 DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND
TECH., supra note Error: Reference source not found, at 17 Id.
314 Need citation (likely same as previous) Id.
315 Need citation (likely same as previous) Id.
316 Id at 7 DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF
ACQUISITION AND TECH., supra note Error: Reference source not found, at 7.
317 U.S GOV’T ACCOUNTABILITY OFFICE , GAO-05-280R, DEFENSE BASE ACT
INSURANCE: REVIEW NEEDED OF COST AND IMPLEMENTATION ISSUES 15 (2005), available at http://www.gao.gov.new.items/d05280r.pdf See
Congressional Research Service, The Defense Base Act (DBA): The Federally
Mandated Workers' Compensation System for Overseas Government Contractors, 12 available at www.fas.org/sgp/crs/natsec/RL34670.pdf
Multiple-Provider System: Taking Control of DBA Insurance
During the House Committee hearings in June 2008, the
The committee received testimony from General Fay, the executive vice-president of CNA, which has been the exclusive insurance provider for the Department of State (DOS) since 2001 and for USAID since 2005 Drawing on his extensive experience in public service and his role at CNA, General Fay provided valuable insights during the hearing.
General Fay recommended DoD adopt, with modifications, a single- provider program similar to those utilized by DOS and USAID 320
To compensate for the problems associated with insuring an organization of DoD’s size, he recommended separating DoD into divisions, each with its own single-provider of DBA insurance 321
Dividing the Department of Defense (DoD) into smaller, homogenous divisions by department or agency allows for more manageable support from single providers while also mitigating risk volatility This network of multiple providers presents significant benefits for both the industry and government.
318 Need citation (likely same as fn 320) House Hearing on
Defense Base Act, supra note 14.
319 Need citation (likely same as fn 320) Id.
320 See After Injury, the Battle Begins: Evaluating Workers’
Compensation for Civilian Contractors in War Zones: Hearing
Before the H Comm on Oversight and Gov’t Reform, 111th Cong
(2009), available at http://www.access.gpo.gov/cgi- bin/getdoc.cgi?dbname1_house_hearings&docid=f:65546.pdfId (statement of General George Fay, Executive Vice-President of CNA).
321 Need citation (likely same)Id.
A multiple-provider system would create privity of contract between insurance carriers and the Government, giving the
The government seeks to enhance oversight of the Defense Base Act (DBA) insurance process to prevent manipulation that harms both claimants and the government itself Currently, contractors obtain DBA insurance from the open market, creating a contractual relationship solely between them and the insurance providers This arrangement diminishes contractors' motivation to negotiate for better rates, as their expenses are ultimately covered by the government.
The government's ability to monitor claims processing is severely limited due to its lack of authority over the claims process Although the Department of Labor (DOL) provides some oversight in disputes, it cannot override insurance carriers' decisions As a result, when conflicts arise between claimants and carriers, the outcomes are unpredictable Claimants often receive no support from their employers, who may either dispute the claims themselves or show little interest in challenging the insurance companies Consequently, claimants must navigate a complex administrative dispute process to seek relief This open-market system is prone to abuse and offers minimal protections for claimants.
324 Need citation Id at 10. remedies when cost or performance problems arise with insurance carriers.
If privity of contract existed between insurance carriers and government agencies, it would enhance contract formation and performance for the Government Competitive bidding would drive down premium rates, supported by effective negotiations from government agencies Moreover, agencies would have the ability to award contracts based on past performance and customer satisfaction, significantly benefiting claimants who currently rely on their employers to secure quality insurance By directly engaging with insurance carriers, Contracting Officers could also ensure that carriers have obtained DBA insurance, serving as a powerful preventative measure.
While the contract formation process would allow the
To meet its cost and quality assurance goals, the government relies on monitoring and bonding within government contracts to ensure that carriers fulfill their obligations This contractual relationship grants the government access to all remedy provisions outlined in the Federal Acquisition Regulation (FAR), thereby incentivizing insurance carriers to make timely and accurate payments.
Under FAR 49.402-2 (2011), claims must be managed effectively to prevent default If an insurance carrier improperly denies claims, the contracting officer has the authority to not only default the contractor for non-performance but also to document the carrier's inadequate performance in the Federal Awardee Performance and Integrity Information System (FAPIIS) Such negative reports can significantly impact a contractor's future opportunities with the U.S Government Implementing a multiple provider system would enhance the Government's control over the claims process, ensuring that insurance carriers remain aligned with government objectives This approach would rectify inefficiencies and prevent abuses that can harm injured contractors, unlike the Department of Labor's current dispute resolution process.
Stakeholders, including the DoD, insurance industry, and contractors, have differing opinions on the potential cost savings of various alternatives In contrast, the DOS, USAID, and USACE have successfully implemented a single-provider system, leading to noticeable cost savings Although the DoD's size makes a single-provider system impractical, a multiple-provider system can still deliver similar benefits Ultimately, there are two significant cost advantages for the DoD to consider.
332 See FEDERAL AWARDEE PERFORMANCE AND INTEGRITY INFORMATION SYSTEM, https://fapiis.ppirs.gov/ (last visited Jan 14, 2012)
A multiple-provider system eliminates the need for minimum premium payments that contractors face in an open-market system In an open-market scenario, insurance premiums are calculated as a percentage of total payroll, for example, $10 per $100 of payroll However, insurance carriers often impose minimum premium payments on contractors with limited employees or payrolls, which can add financial strain Although these amounts may seem minor, the House Oversight and Government Reform Committee has identified this issue as significant.
47 contractors that paid more in insurance premiums than they paid in salaries 337
The Government can influence premium rates by utilizing a negotiated procurement process, where contractors and insurance carriers typically negotiate rates, often with broker assistance.
334 See Memorandum from the Majority Staff, H Comm on Oversight and Gov’t Reform, 110th Cong., to Members of the H Comm on Oversight and Gov’t Reform, 110th Cong 14 (May 15, 2008)
[hereinafter Memorandum from the Majority Staff, H Comm on Oversight and Gov’t Reform], available at http://abcnews.go.com/images/Blotter/DBA%20hearing%20_
%2020080515102024.pdf.Need citation (possibly same as next)
335 See id.Need citation (possibly same as next)
A memorandum from the Majority Staff of the House Committee on Oversight and Government Reform, dated May 15, 2008, provides insights for committee members regarding ongoing investigations The document is accessible online for further reference.
337 Id Since 2002, over 700 contractors have been required to make minimum premium payments amounting to about $8.5 million.
Cost-type contracts reimburse contractors without considering carrier charges, leading to a lack of incentive for brokers to negotiate lower rates Implementing a multiple-provider system could help the Government reduce unnecessary costs, such as eliminating minimum premium charges, while also enabling more effective control over carrier rates through aggressive negotiation strategies.
A key benefit of the multiple-provider system is the assurance of Defense Base Act (DBA) insurance for all contractors In the current open-market environment, new contractors often struggle to obtain DBA insurance due to perceived risks, hindering their ability to compete for government contracts and diminishing competition in the procurement process The multiple-provider system addresses this issue by utilizing risk pooling, which enables insurers to combine the risks of various contractors, thereby distributing risks across the entire pool This approach not only leads to lower insurance premiums but also ensures that all contractors can secure DBA insurance.
339 See e.g., id at 8.Need citation
341 See ROBERT E KEETON & ALAN I WIDISS, INSURANCE LAW § 1.3, at 12-13 (West, 1988); see also e.g., Memorandum from the Majority Staff,
H Comm on Oversight and Gov’t Reform, supra note 334, at 8- 9.See ROBERT E KEETON & ALAN I WIDISS, INSURANCE LAW §1.3 (West, 1988).
In an open-market system, contractors acquire insurance individually, which diminishes the direct benefits of risk pooling, as highlighted in the Majority Staff memorandum from the House Committee on Oversight and Government Reform.
The multiple-provider solution significantly improves upon the existing DBA strategy, but to fully protect contractor veterans returning from war, it is essential to incorporate additional components beyond just monitoring and bonding.
Maintaining the Status Quo
The Department of Defense (DoD) recommends maintaining the existing open-market strategy while proposing four key improvements: enhancing accessibility of loss data for all Defense Base Act (DBA) carriers, establishing risk pools for contractors struggling to secure DBA insurance, separating DBA insurance pricing from other insurance types, and appointing a single DoD contact for country-specific DBA insurance waivers Although the DoD explored the potential cost savings of a government self-insurance model, it ultimately rejected this approach due to the lengthy implementation process While these recommendations aim to increase transparency, they are unlikely to significantly address the ongoing cost and claims processing issues within the current DBA system.
Since the introduction of DBA insurance in 1941, the Department of Defense (DoD) has implemented an open-market strategy, allowing contractors to obtain their own DBA insurance from a list of approved carriers provided by the Department of Labor (DOL).
366 Need citation (likely same as next) See DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND TECH., supra note Error: Reference source not found, at 54.
367 Need citation (likely same as next) See id.
368 See DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND TECH., supra note Error: Reference source not found, at 54
369 See, e.g., Memorandum from the Majority Staff, H Comm on Oversight and Gov’t Reform, supra note 334, at 4 Need citation
370 See, e.g., DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF
Self-insurance is an option for those with the financial capacity and approval from the Department of Labor (DOL) Advocates argue that a free-market approach is the most effective way to manage costs in this context.
Insurance carriers compete for DBA insurance business in the open-market, which, in theory, allows contractors to obtain the best possible premium rates 373
An open-market strategy presents significant challenges, as the Government lacks direct contractual relationships with insurance carriers, limiting its ability to enforce compliance with its objectives The Department of Labor (DOL) oversees the process but does not handle DBA claims directly and has minimal authority over the insurance providers Consequently, injured contractors facing claim disputes must wait for the final rulings from OWCP administrative law judges before they can seek relief.
371 See id at 7 A contractor may self-insure either by taking steps to financially prepare for losses on their own, or by establishing a legally licensed insurance company, known as a
“captive insurer.” About 170 8 employers are listed by DOL as self-insured See Division of Longshore and Harbor Workers'
The U.S Department of Labor's Division of Longshore and Harbor Workers' Compensation (DLHWC) provides a list of authorized self-insured employers under the Defense Base Act (DBA), which can be found on their official website As of January 12, 2012, there are eight employers recognized as self-insured for DBA purposes For more information, visit the Department of Labor's website.
372 See, e.g., DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF
ACQUISITION AND TECH., supra note Error: Reference source not found, at 19 Need citation
See, e.g., DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF
ACQUISITION AND TECH., supra note Error: Reference source not found, at 38.
The government's lack of authority over the premiums negotiated between contractors and insurance carriers, despite covering the costs, has led to significant issues in the open-market system, including uncontrollable cost increases, excessive profits for insurance carriers, and numerous denials of PTSD claims Consequently, the existing strategy fails to meet the moral and statutory obligations owed to contractor veterans, even with the Department of Defense's proposed improvements.
The Department of Defense (DoD) recommends implementing a nationwide database to make loss data accessible to all Defense Base Act (DBA) carriers This initiative would enhance carriers' understanding of DBA risks and promote greater transparency in the acquisition process However, while this improvement is significant, it does not fully address the underlying issues.
Since the onset of the Persian Gulf War in 1991, Congress has raised immediate concerns regarding the costs and claims processing related to the Department of Defense's increasing reliance on contractors Notably, three insurance carriers have supplied 97% of the Defense Base Act (DBA) insurance for these contractors.
(1) AIG, (2) CNA, and (3) ACE Group 380 These carriers contend that the early years of war in Iraq and Afghanistan were novel situations and that premiums have declined because carriers now
379 Need citation (same as next?)
380 DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND
Understanding the risks associated with working in certain regions is crucial Despite the fact that three carriers have gathered claims data over the past two decades, issues related to costs and claims processing persist Recent audit reports from USAAA and findings from the GAO over the last five years indicate increasing DBA costs and significant fluctuations in insurance rates Consequently, simply sharing claims data is unlikely to address these ongoing challenges.
Perhaps it is the nature of war-time contracting that makes the risk so unpredictable; each conflict depends greatly on geographical, political, military, social, and economic factors
A national DBA claims database is surely an improvement over individual carriers tracking claims However, data collected by the major DBA insurers has not yet resulted in decreased costs of
The Department of Defense (DoD) proposes the establishment of contractor risk pools to ensure that larger insurers offer coverage to high-risk contractors unable to secure insurance independently This initiative aims to emulate a multi-provider system that utilizes risk pools to extend insurance access to all contractors However, within an open-market framework, challenges arise in achieving this goal.
382 Need citation (likely same as next)
383 See Valerie B Grasso, Baird Webel, & Scott Szymendera, supra note Error: Reference source not found, at 18.
384 Need citation (likely same as previous)
The Department of Defense's Office of the Deputy Under Secretary of Defense for Acquisition and Technology highlights that high-risk contractors may not receive fair-market rates under the current system Unlike a multiple-provider framework, where government agencies can negotiate rates for all contractors within the risk pool, the government lacks control over the premiums set for high-risk contractors Consequently, this approach does not achieve the same leveling effect for high-risk contractors as a multiple-provider system would.
The Department of Defense (DoD) recommends that insurers should not bundle Defense Base Act (DBA) coverage with other insurance types and suggests establishing a single point of contact for the DBA waiver process However, these suggestions are unlikely to address existing cost and claims processing challenges Most insurers already refrain from bundling DBA insurance with other coverages, such as accidental death or kidnap and ransom insurance, making this recommendation largely ineffective in resolving acquisition issues Additionally, a centralized point of contact for waivers would have minimal impact, as waivers are only applicable to a limited number of contractors—specifically foreign nationals—who meet local workers' compensation standards Consequently, these recommendations fall short of addressing the pressing cost and claims processing problems.
386 Need citation (likely same as previous) See id at 56.
387 See id at 56 DoD identified one insurer that bundled DBA insurance coverage with other insurance coverage.
The Department of Defense's recommendation to maintain the current system, with only four minor changes, falls short in addressing the needs of injured contractors and the significant concerns raised by Congress While sharing claims loss data could enhance transparency, the data from AIG, which controls 75% of the Defense Base Act (DBA) insurance market, has not led to reduced premiums Implementing risk pooling could mitigate the challenges faced by insurers reluctant to cover high-risk contractors, yet the government lacks a mechanism to ensure fair rates for these individuals Although waivers and pricing transparency could enhance the acquisition process, they fail to tackle Congress's pressing issues Consequently, adopting the DoD's recommendations does little to alleviate the ongoing problems related to costs and claims processing.
Government Self-Insurance: An Ideal Alternative
Conclusion: The Way Ahead
The advantages of Government self-insurance are widely acknowledged by all stakeholders involved in the Defense Base Act (DBA) However, until Congress formulates a comprehensive implementation strategy, adopting a multiple-provider acquisition approach serves as the most effective temporary solution This transition would necessitate minimal statutory modifications and could be executed swiftly Engaging multiple insurance carriers to offer coverage to various agencies or divisions within the Department of Defense (DoD) is currently feasible.
A multiple-provider system offers significant advantages for government self-insurance, primarily by establishing a contractual relationship with insurance carriers This privity of contract enables government agencies to maintain control over the claims process, thereby enhancing accountability within the DBA insurance framework.
Empowering DOL district directors to issue binding decisions would alleviate the financial burden on injured contractors and their families throughout the appeals process Furthermore, implementing self-insurance for the risks associated with PTSD and TBI would conserve valuable resources for the Government and other stakeholders.
417 See DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF ACQUISITION AND TECH., supra note Error: Reference source not found, at 52;
See also See H Comm on Oversight and Gov’t Reform, 110th Cong.,supra note Error: Reference source not found, at 98.