March 12, 2010  -- The government's use of private security contractors in Iraq and Afghanistan has been blasted as costly to the image of the U.S., and to the country's bottom line, because a company like Blackwater can charge as much as $1222 a day for a hired gun.

But a new government report says they may actually have saved U.S. taxpayers money. The State Department saves roughly $900 million a year using private firms to protect American diplomats in Iraq rather than relying on U.S. government employees, according to a recently published review by the non partisan Government Accounting Office.

The review found a number of reasons for the difference in price.

The state department did not have to pay overtime or provide benefits or vacation time to the contractors. They were not saddled with extensive travel and housing costs. And they did not have to outfit them with weapons and gear.

In several of the cases reviewed by the government accountants, the private contractors were employing foreign nationals, a key factor in holding down costs. Of the nearly 2000 contractors providing security at the U.S. embassy in Baghdad, for instance, 89 percent are foreign nationals. Eight percent are US citizens. The report noted that the State Department would have been "reluctant to hire third country nationals to provide security in Iraq because the department does not want to be perceived as hiring mercenaries."

Still, the State Department saved $785 million in 2008 alone by hiring contractors to provide for embassy security, according to the report. If the State Department had hired and trained its own guards, the cost would have exceeded $858 million. Instead, private security cost roughly $78 million.

The report analyzed five different contracts the government has put out in Iraq to protect State Department employees and facilities. Of the five, four showed savings with contractors. The only outlier dealt with bodyguards for State Department employees in Baghdad. Hiring contractors for that cost $140 million more than had they used their own people.

Prior government reports have indicated that it is this type of high intensity work – the work that companies such as Blackwater provide – that comes with the heaviest cost burden. By one 2008 estimate, those guards cost as much as $1,222 per day.

However, the report notes, " the State Department does not currently have a sufficient number of trained personnel to provide security in Iraq, the department would need to recruit, hire, and train additional employees at an additional cost of $162 million."

The State Department also said they would have to hire double the 3,165 people as are currently employed for the Iraq security contracts because State Department employees are only required to serve one year rotations in warzones before returning to the U.S.

There were limitations to the study, the report acknowledges. Costs for awarding security contracts and oversight of contractors could not be determined by the State Department, for example.

Despite the apparent savings, several deadly incidents in Iraq and Afghanistan involving Xe Services, the company formerly known as Blackwater, have drawn protests in and out of government about whether or not private security contractors are an incendiary element of the US presence in those two warzones.

The list of contractor incidents has become extensive since the deadly Nisour Square shooting incident in 2007, when Blackwater personal security guards allegedly killed 17 Iraqi civilians. Last year, Armor Group lost its contract to provide embassy security in Kabul, Afghanistan, after a series of lewd photos of their employees surfaced. And two Blackwater security trainers were indicted for allegedly killing two Afghan civilians after spending the evening drinking.

Congresswoman Jan Schakowsky (D-IL), who has sponsored a bill to outlaw government contracts to private security companies, defended her bill against the report, told ABC News that money was not the biggest factor in assessing the value of contractors in war zones.

"You can outsource the work, but you also outsource the oversight," Schakowsky said. "We have been willing to hire less trained foreign nationals to do the work then we can get the job done by sweeping problems under the rug."

At a recent Senate hearing, the contradictions were apparent when Senator Claire McCaskill (D-MO), who was in the midst of lambasting both DoD officials and contractors from Raytheon and Blackwater, acknowledged that Blackwater had provided her security on a trip to Afghanistan.

"And let me acknowledge how many veterans are working for these companies that are doing great service, that are putting themselves in harm's way, and that are helping us achieve a mission that frankly we could not achieve with the number of boots on the ground we can get there in a very quick time period."

Carole Coffey, one of the report's authors, noted that the U.S. government has no precedent for needing such a large security footprint in a foreign country. "The US has never build and fight at the same time," she said. "These are unique situations."

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