I'd take a position between you two. I personally don't see the problem with a military force being operated as a private business. The state still has the monopoly on approving the use of force, and they are no more and no less protected from a force "going rogue", when you think about it.

I don't think the private, for-profit operation of a unit or facility of a military is inherently flawed in any distinct way. The onus is on the government to draft and enforce the contracts appropriately, and make sure they retain control over the force.

Ultimately, war is in the hands of the armed; not governments, not corporations. The governments and corporations which organize armed men are responsible for setting up the correct incentive structures to achieve the goals, with as few mistakes as possible.