The aim of this study is to examine the factors and perceptions surrounding the privatization and outsourcing of governmental military functions to Private Military and Security Companies (PMSCs), with a specific focus on Blackwater’s involvement in Iraq. It analyzes a 2007 Congressional hearing, a significant event in the PMSC discussion. Applying Lobell’s neoclassical realist theory of threat assessment, the study explores the hearing participants’ perception of threats and shifts in power dynamics within the U.S., and how these influenced the policy implementation. Through a directed content analysis of the hearing, the study identifies constraints at both domestic and systemic levels, posing challenges for the United States. Key actors exhibited differing viewpoints on how to manage the U.S. operation in Iraq, the role of PMSCs, and whether their presence assisted or undermined U.S. efforts. Perceptions of the most imminent threat varied, with some seeing privatization and outsourcing as a domestic threat while others prioritized the mission in Iraq. Several other constraints were discussed during the analysis, including cost, military logistics, public support, partisan interests, and the control of force, providing an insight to important factors in the decision-making process.