As the U.S. military downsizes in the post-Cold War era, privatization is playing a larger role. This includes both the outsourcing of a growing fraction of support services and the privatization of selected base closures.

The first example of the latter was announced in mid-May in Indianapolis. The Naval Air Warfare Center (NAWC), which had been slated for closure, instead becomes the first military installation to be totally privatized. It is being handed over to the city of Indianapolis, which is leasing it for 10 years (via a competitive process) to Hughes Technical Services (a division of Hughes Electronics).

For the Pentagon, the deal is expected to save $1 billion over the next 10 years, as NAWC develops non-military customers in addition to the Navy and becomes a more cost-effective Navy supplier. And for Indianapolis, the deal means that the 2,550 NAWC jobs will remain in the city, as the employees transition from the Navy to Hughes. The contracts are expected to be signed in October, with the actual transfer to Hughes taking place next April. DOD spokesman Glenn Flood says that two other such privatizations are in the works, in Sacramento and San Antonio.

Meanwhile, Congress continues to debate the extent to which the overhaul and repair of weapons systems ("depot maintenance") should be contracted out. At present, 28 percent of such maintenance is outsourced, but DOD would like to increase that sum to 50 percent. Two obstacles stand in the way. Current laws require competitions between existing government installations and private operators for any contract over $3 million; DOD wants to have competitions only between contending private bidders. Second, current regulations mandate a 60/40 split between in-house and contracted depot maintenance, which "limits the military's ability to manage depot maintenance in an efficient and cost-effective manner." Currently depot maintenance amounts to $14 billion per year. Ten of the 30 major DOD depots have been targeted for base closures. Sen. John McCain (R., AZ) favors retaining the requirement for government-private competitions, and he and several other senators have asked DOD for a more detailed proposal about what laws and regulations should be changed. DOD estimates it could save $1.5 billion per year with greater outsourcing of depot maintenance.

According to Aviation Week, DOD already outsources about 25 percent of base commercial activities, 70 percent of Army aviation training, and 33 percent of parts distribution. At several bases (e.g. Vance AFB in Oklahoma), 100 percent of support functions have been outsourced.