For whatever reason, this still pretty stupid.
1. The iPhone cost is not getting cheaper by modifying the current 4S into camera-less model by whatever means.
Instead the price is going UP because they need additional cost for removing the camera

... super nice, huh?
And iPhone camera is one of the best camera sensor for a phone out there. Taking it off, or covering it is just like removing ECU from your Ferrari engine.
Remember in Singapore, many people pay upfront to get an unlocked iPhone. So yeah, they swallow $900 price upfront for a 64GB iPhone, and camera less?
2. They claim this camera less iPhone going to lose warranty due to the modification. dable you tee eff to that!! ....

3. If military asking this for security, why not removing GPS and cell radio too? You know, people can spy your camp location via GPS. So yeah, you really should remove that too. Make it on Airplane Mode all the time .. nice huh?


4. So ... Let's sum this up: Stripped down camera, still not cheaper (it's more expensive indeed), voiding official warranty, still be able to track location via GPS/cell tower for not so secure connection.. pointless, wouldn't you say? Like paying ugly cheapo stripped down Hyundai while you can get a Ferrari for $300.000.
If I were a military staff, I'd go with super cheap feature phone for professional text/call, and iPhone for personal use. Good thing they remove the plan (at least temporarily).