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FEATURE

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Intelligence Contracting Is Here to Stay

By J. Michael Waller

As a private company on contract with the federal government, they effectively ran U.S. counterintelligence and military intelligence. They reported secretly to the president and some of his top military leaders. The for-profit company became the eyes and ears of the president and his military chiefs, with powers that no federal agency could match. Sometimes their work was stellar. Sometimes they made big mistakes. Congress had no say in the matter. No checks and balances, no oversight, existed. The president allowed them to run because the nation was in a wartime national emergency.

That president would surely go down in history as one of the worst.

Or would he? The private contractor was Allan Pinkerton and his Pinkerton National Detective Agency. The war was the Civil War. And the president, of course, was Abraham Lincoln.

So what’s so new about the U.S. government’s outsourcing of large parts of the intelligence community? Not much, to those who know their history.

To be sure, it’s a startling fact to learn that up to 70 percent of today’s intelligence budget, as much as $42 to $50 billion, is handled by private contractors and providers. The contractors didn’t make that policy. Since the Soviet collapse, bipartisan majorities in Congress under presidents of both parties have constructed the intelligence system that way.

Today’s big questions are…Is the country getting what its taxpayers are working for? Are we building the best intelligence capabilities possible? Are the private providers reliable, cost-effective, and accountable?

The United States has the largest and most far-reaching intelligence capabilities of any country on earth, and the need for information and operational capabilities shows no sign of abating. That’s good news for private companies that provide the goods and services that the country needs. In the present fast-paced, ever-changing environment, the old ways of doing things—super-centralized through cumbersome, change-resistant bureaucracies—are hindrances, as the 9/11 Commission findings have shown.

Congressionally Created Need

Allan Pinkerton, founder of the first U.S. private detective agency. Copyright © North Wind / North Wind Picture Archives—All rights reserved.

When Congress sharply increased the national intelligence budget after 9/11, it pointedly did not lift the personnel ceilings so the nation’s spy services could hire the necessary full-time professionals. With a legally mandated limit on government employees, the intelligence community had only one alternative: Hire large numbers of private contractors to do the necessary jobs. This was deliberate policy.

That policy followed the slashing of the size of the intelligence community in the 1990s, a policy that put thousands of highly trained intelligence professionals out of work and uprooted worldwide clandestine networks that had taken decades to build.

For many intelligence professionals and others with the requisite skills, government service had lost much of the attraction it had during the Cold War. Excessive legalisms, bureaucratic caution and inefficiency, and the expense of supporting families on government salaries and inflexible work schedules caused seasoned professionals and newcomers to shun the traditional way of national service. But they wanted to serve just the same, and the private sector offered more stimulating and financially rewarding alternatives to do the same mission.

Congress effectively mandated the explosion in private contractors to perform intelligence functions. While lawmakers accepted large-scale private contracting as a means to ramp up for wartime needs, concerns about cost have prompted Capitol Hill to start clamping down. For fiscal year 2008, Congress has allowed the Office of the Director of National Intelligence (DNI) to convert contractors into career employees, but has capped the growth to 10 percent. That’s a significant increase, yet insufficient to meet the demand the policymakers have set.

That personnel cap means that the contracting business will continue for the foreseeable future. So the question becomes, how can the intelligence contracting sector police itself before isolated scandals, politicians’ agendas, and media hype force counterproductive and even damaging limits on contractors?

American Tradition

Using private companies to perform intelligence and counterintelligence functions dates back to the founding of America. The tradition previously existed in Europe. Benjamin Franklin, considered one of the first U.S. intelligence officers, ran intelligence networks in Europe that relied in part on private citizens and businesses. With Franklin’s collaboration, the French government set up an independent firm, Hortalez et Cie., that would ship weapons, supplies and cash to the Americans in 1776. Hortalez would be self-financing; a private businessman, Pierre-Augustin Caron de Beaumarchais, ran the company, being responsible for absorbing any losses and enjoying any and all profits.

During and after the Civil War, necessary limitations on the seemingly all-powerful Pinkertons didn’t destroy the company. When the contractor’s federal services were no longer needed, Pinkerton continued to expand in other areas, with the company prospering well into its second century as the top security firm in the U.S. In 1999, a Swedish firm acquired Pinkerton, which now operates as Pinkerton Consulting and Investigations. The parent company, the Securitas Group, claims 250,000 employees and 12 percent of the global market in outsourced security services.

American companies played decisive roles supporting of U.S. intelligence during World War II and throughout the Cold War. Banks, trading companies, shipping lines, telecommunication firms, manufacturers and other American-owned companies provided cover, logistics, technical resources, collection services and operational services in some of the most important intelligence collection and operation activities of the Cold War.

And it’s true that, left unchecked, even the best-run private companies can overstep and cause the public and their elected leaders to reassess their missions and rein them in. This is what today’s debate on intelligence outsourcing centers on. For most, the issue is not the fact that private companies are providing goods and services to the intelligence community. It’s about the scope of the contracting, the quality of the work, the stewardship of taxpayer dollars, and overall accountability.

Stirring the Pot

Technology has changed the scope of surveillance in the 21st century.

The Iraq war has focused new attention on defense and intelligence contracting. Investigative writer Tim Shorrock has stirred the pot with his new book, Spies for Hire: The Secret World of Intelligence Outsourcing (Simon & Schuster, 2008).

Shorrock isn’t exactly a detached observer, but he raises a lot of provocative points. While the tone of his book has the anti-private enterprise spin won’t disappoint those who appreciate his writings in Mother Jones, The Nation, and The Progressive, the work is not the partisan diatribe that one might expect. Shorrock provides a service toward understanding the intelligence private contracting sector. He dispatches the popular myth that the contracting boom is a Bush administration plot. The origins of what he calls the intelligence “outsourcing boom” are found in the Carter administration in the 1970s, a trend that continued under President Ronald Reagan to defeat the Soviet Union without going to war.

The author shows, with even-handed skepticism, that officials from both parties have been major drivers of intelligence outsourcing, both from their government posts and in their private sector contracting executive positions. While one might quarrel with his philosophy and conclusions, Shorrock shows with impressive attention to detail that intelligence outsourcing is a solid bipartisan issue that reaches the core of the political establishment in Washington.

That’s great news for the contracting business and national security.

Backlash

But a backlash is rising as Capitol Hill reacts to the situation it created. While some try to blame the contractors, others recognize that Congress and the executive branch have to shoulder the responsibility.

For example, in 2005 the Government Accountability Office (GAO), the auditing arm of Congress, blamed inexperienced contracting officers and poor internal controls within the Department of Defense and Department of Interior for alleged problems concerning contractor CACI International and its supply of interrogators for the U.S. Army. Some of the interrogators were involved in the Abu Ghraib prison scandal.

Critics lashed out at CACI and at Titan Corporation, the supplier of interpreters, but the GAO found that the biggest problems were with the government agencies themselves. GAO auditors faulted CACI for procedures they saw as conflicts of interests, but pinned the real blame on the government. The auditors wrote that contracting officers at Defense and Interior “did not fully carry out their roles and responsibilities, the contractor was allowed to play a role in the procurement process normally performed by the government.”

That isn’t the fault of the contractor, which stepped in to help the warfighters when the people in the bureaucracy were moving too slowly. “The Army wanted to give American soldiers the intelligence information they needed to win the war in Iraq with the fewest possible casualties, military and civilian,” a CACI spokesperson wrote in a media statement at the time of the report’s release. “CACI acted in good faith in honoring the Army’s request for help. We proudly stand by our decision.”

Although Army soldiers were convicted or otherwise disciplined in connection with the Abu Ghraib scandal, some observers are upset that the contractors weren’t punished as well, though there is no evidence that they were involved in the abuses. In late June, lawyers advocating for detainees in Guantanamo filed suit against L-3 Communications, which acquired Titan, and CACI, on behalf of four prisoners who say they were abused at Abu Ghraib. The suits name three individual contractors as defendants, as well. CACI dismisses the suit as baseless.

It’s easy for deskbound critics in Washington to snipe rhetorically at people hired in a national emergency to make a broken system work when American troops are dying in the field. Process and procedure are important, but in a war with people’s lives on the line, private should be expected to legally and ethically go the extra mile to deliver as required in their government contracts—or simply deliver as promised.

In the Abu Ghraib case, the GAO pinned most of the blame on untrained or inexperienced contracting officers in government, not the contractors themselves.

The temptation of many of the public critics is to question the motives of the contractors, whether or not they do a good job. This comes from a cynical belief that people in business are in it for themselves, and just out to make a buck, whereas people in government tend to be more virtuous because they are public servants. The contracting sector has been slow to try to change that misperception.

New Limits and Greater Accountability

MQ-1 Predator unmanned aerial vehicles, like the one shown here, support coalition ground forces with firepower, overwatch, and reconnaissance. Some Predator programs rely heavily on private contractors.

“Contracting in the intelligence community has more than doubled in scope in the last decade, and it’s clear that effective management and oversight is lacking,” says Rep. David Price (D-NC).  “We’ve got to get a handle on it.  That means demanding more complete information, establishing more effective management practices and, in some cases, drawing a red line to prevent the privatization of especially sensitive activities.”

The Office of the Director of National Intelligence (DNI), which coordinates the nation’s 16 principal intelligence agencies, said in a classified report to Congress that about 40 percent of the contracting jobs are for intelligence analysis, and almost 50 percent are for management and planning, computer technical support, and personnel and payroll officers. The intelligence community hired about a fourth of its private contractors to go around federal hiring ceilings. USA Today broke the news of the report last April. A joint congressional panel instructed DNI Michael McConnell last year to conduct the survey.

And while the contractors generally earn more than salaried federal employees, there has been no “mass exodus” from government into the contracting sector. Some “talented individuals” have quit their jobs to become contractors, but the DNI office does not see a problem. The DNI office conducted the survey in part due to concerns of an exodus of workers into the contracting sector. The CIA is conducting its own study.

Allegations of revolving doors and conflicts of interests taint the contracting industry. And even where there may be no wrongdoing, the image of sweetheart, insider deals tarnishes the whole sector.

An example is the Counterintelligence Field Activity (CIFA) office, a new intelligence unit of the Department of Defense. In January, a subsidiary of a British-owned company called QinetiQ made waves with it hired former under secretary of defense for intelligence Steve Cambone, who oversaw CIFA when he was at the Pentagon. However, as Shorrock notes in his book, the practice of hiring well-connected and well-informed former officials is common. That leaves the philosophical question of whether or not it is a good thing.

CIA Director Michael Hayden voiced concerns last fall that the agency might wind up being a “farm system for contractors” and that it had to build safeguards. He banned retired CIA officers from returning to their old jobs as private contractors for 18 months.

Brain Drain?

Private businesses are contracted to design, build, and operate intelligence satellites, and to analyze the data they produce. © Photo168/Dreamstime.com

Many object to the idea that seasoned intelligence professionals are quitting their government jobs, only to be re-hired by private companies as contractors to do similar work for their old agencies.

This is a valid concern. However, it overlooks the fact that many careerists find government work to be personally and professionally unrewarding, as bureaucratic timidity and slowness, onerous accounting practices, gun-shy management fearful of lawsuits, and overactive internal lawyers who have ruined the can-do mentality and overall esprit de corps among people who really want to devote their careers to fighting the bad guys.

Government salaries and excessive personnel regulations are also rough on professionals with growing families. Many careerists are quitting because it’s simply too expensive to live as a public servant in the Washington, D.C., area and other high-priced cities, and they want more time with their spouses and children.

Contracting allows the government to retain the highly trained people with the requisite skill sets, while giving those experts the pay and flexibility they desire. Private companies, especially banks, as well as foreign governments will eagerly hire such individuals, but those with a patriotic mindset aren’t budging in those directions. They still want to fight for Uncle Sam.

Sincerity of Critics

Some of the congressional backlash is extreme and ill-informed, or driven by thinly camouflaged philosophical opposition. Rep. Jan Schakowsky (D-Ill.), an anti-contractor crusader, has introduced legislation to ban the use of any private military contractors in Iraq and Afghanistan.

Schakowsky is mainstreaming herself by aligning with more moderate reformers like Rep. Price to grab an unpopular issue—interrogation of detainees—and introduce legislation to forbid private contractors from taking part. “Our bill will take detention-related activities out of the hands of private contractors and put the responsibility back where it belongs, in the hands of authorized government personnel,” says Schakowsky, whose legislation is titled, The Transparency and Accountability in Intelligence Contracting Act of 2008.  “Outsourcing our most critical intelligence functions to unaccountable private contractors undermines the integrity of our intelligence and jeopardizes the safety of our troops.”

But are the contractors really unaccountable? If Schakowsky’s main concern is accountability, most in the industry understand and agree with her concerns: Well-defined rules of the road are vital in any good business. Nobody wants to jeopardize the safety of the troops. But Schakowsky goes further: Accountability is not the real issue. In her words, “Simply put, private contractors should not be trusted with such mission-critical activities.”

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From the July/August 2008 issue of Serviam.