Is It Intelligent To Outsource Intelligence?

Another reality in the post-9/11 growth of intelligence analysis capability is outsourcing. We have outsourced the management of billlion-dollar technical collection programs, and we have contracted intelligence analysts.

The National Reconnaissance Office is a lot more than an office; may have the largest budget of all the U.S. intelligence agencies. It may also be the best example of how U.S. government contractors, i.e., private industry, are taking over the government and costing us needless billions of dollars. The NRO buys spy satellites. Over the course of the last ten years, much of its government employee expertise has largely been eliminated by swapping career experts out for military personnel rotated in for a few years. Instead of having an Air Force officer who worked on satellites for ten or fifteen years making decisions, the NRO began bringing in officers on two- and three-year assignments. Someone who was procuring tires last year would be procuring satellite component systems this year. The result was that the big aerospace contractors gained greater influence in the decision making, not only because they were the only ones left with expertise, but also because the NRO decided to transfer much of its own program management responsibility to a single, big contractor.

Simultaneously with handing off management responsibility to the contractor, in the late 1990s and the first five years of this decade, the NRO and the aerospace industry were planning to spend scores of billions of dollars on a new generation of spy satellites with even more marvelous capabilities. The winning contractor was Boeing, which set about to build billions of dollars' worth of new spy satellites with incremental capabilities under the project named Future Imagery Architecture, or FlA. The costs escalated, the delivery dates slipped by years, but the NRO kept going. Eventually, presented with ever bigger bills and ever later schedules, the NRO canceled FIA under congressional pressure. Billions of dollars had been wasted.38

These costly new spacecraft were to be built not so much because we needed to use their capabilities, but rather because if we spent the money, we would keep the industrial base alive by ordering newer and better satellites. It became a perpetual motion machine: constantly building slightly more capable satellites at ever-increasing cost, spending more on research to develop more capabilities, even though those capabilities did not address important intelligence collection needs. I was part of that cycle thirty years ago when, during my one year as an employee at a defense contractor, I was told by the NRO that it had developed a new capability that could lead to a new satellite. My job, at the NRO's request, was to come up with some problem on which we could use the new technology. In other words, I was to figure out the need that the new satellite would meet, the requirement. This same backwards process (first developing the technology and then figuring out why we need it) has been going on for decades.

After you can see really small objects, after you have a synthetic aperture radar satellite that can take pictures at night, after you can pick up any signal released in the radio spectrum, what more do you really need? When most of the world's communication is moving from electrons passing through the air to photons in fiber-optic cables, when commercial imaging satellites allow private companies to sell reconnaissance imagery, should we perhaps consider spending less on satellites, rather than more? Maybe what we do need is more numerous, less expensive spy satellites, capable of being quickly launched in a crisis to augment existing satellites or to replace satellites that may fail or be destroyed. Although the nation's spy satellite agency is not planning to do that, another part of the Defense Department is. In addition to the costly satellites of NRO, the Air Force is planning to build the cheaper, more quickly launched birds as part of an additional program.

We do need to maintain an industrial base with the expertise to innovate intelligence platforms in space, but what we have done is destroy career government expertise and hand the keys to an agency over to giant contractors. These companies have so much congressional influence that feeding the beast becomes the requirement, rather than collecting intelligence we need at a reasonable cost, so that available funds can also be spent on other needs.

In the area of analysis, the number of contractors also grew. Not satisfied with doubling the number of analysts at the CIA, the intelligence community wanted access to even more staff. The intelligence community turned to the private sector, or at least privately owned companies. Many of the companies involved, such as Lockheed Martin, earn almost all of their money by selling to governments. Others, such as Booz Allen Hamilton, also have a commercial line of business. The companies are consultancies, weapons manufacturers, software developers, and IT support firms. What they now have in common is that they have established intelligence analysis staffs that are on contract to support various intelligence agencies.

A drive around northern Virginia reveals the many newly constructed high-rises in which private companies employ intelligence analysts to do the work that was formerly done only by government employees. Inside the buildings, in highly secured suites, analysts with top secret clearances write intelligence analyses for the CIA, DIA, and other agencies. Often the analyses are only slightly edited by government employees before being sent off to policy makers. A former government official told me that the initial draft of one National Intelligence Estimate was reportedly written by an analyst who was not a government employee; it was allegedly revised only slightly by the government. When an analysis is done by a contractor, the corporate logo is usually replaced by CIA letterhead and the policy maker is often unaware that the CIA did not really produce the analysis; a for-profit corporation did.

The private intelligence officers are not just in the corporate high-rises. Many work "on site," meaning they go to the intelligence agencies and work alongside government counterparts doing similar work. As Sebastian Abbot, a former student of mine at Harvard and now with the Associated Press, reported, "That has led to a phenomenon known as 'butss in seats' -- contractors literally sit beside their public sector counterparts and perform equivalent tasks. According to [former CIA official John] Gannon, 'Butts in seats within the analytic community . . . is really a post-9/11 phenomenon, for the most part.' John Brennan, former acting Director of the National Counterterrorism Center (NCTC) and currently President and CEO of TAC, says more than half of the 200 analysts at the NCTC were from the private sector while he was there . . . the vast majority of Booz Allen's intelligence work is not classic management consulting, but simply providing. 'butts in seats' to the intelligence community."39

One colleague of mine being given a tour of the National Counterterrorism Center (NCTC) expressed surprise at the number of people working there and was told that "most of them are contractors." He could have been told the same at the intelligence analysis division at Homeland Security or many other agencies in and around Washington. R. J. Hillhouse has made it her preoccupation to track intelligence outsourcing. She writes, "For all practical purposes, effective control of the NSA is with private corporations, which run its support and management functions . . . more than 70 percent of the staff of the Pentagon's newest intelligence unit, CIFA (Counterintelligence Field Activity), is made up of corporate contractors. Defense Intelligence Agency (DIA) lawyers revealed at a conference in May that contractors make up 51 percent of the staff in DIA offices. At the CIA, the situation is similar. Between 50 and 60 percent of the workforce of the CIA's most important directorate, the National Clandestine Service (NCS), responsible for the gathering of human intelligence, is composed of employees of for-profit corporations."40

The head of one private intelligence analysis program proudly told me that the hundreds of analysts in his division average many more years of experience than do the young analysts now at CIA. Why have these experienced staff left the government to do essentially the same jobs in a privately owned company? The popular assumption is that the pay is better. For the corporate vice presidents and partners, that is the case. They have almost all been senior officials in intelligence agencies for twenty years or more, "retired" to collect their federal pension, and are now also being paid by their new private sector employer, often more than twice their previous federal salary. For the typical analyst, however, the private salary is about the same as what he or she would be paid "on the inside." The analysts I have spoken with say they prefer the corporate environment because "it's just run better" or "there is less bureaucratic chickenshit." Their supervisors all seem to agree that they have "more time to focus on the issues" and "more ability to select only really good staff and an easier time getting rid of the ones who don't work out."

But does it cost more money than if the government's work were done by government employees? Some studies show that a contract for a given number of analysts' time is more expensive than paying a similar number of government employees. The contractors, however, cry foul and note that in an "all-in" comparison including the support costs (IT systems, buildings, and other overhead), the cost of private analysts is about the same. There is, however, a profit margin associated with the contracts. The hefty bonuses given senior officials in the contractor firms, along with the publicly reported profitability, are costs that would nor have been accrued had the jobs been done in-house, in the government agencies. Cost, however, is not the determining factor in the outsourcing boom. Ease of execution is probably the driving consideration. After 9/11, when money flowed quickly and in large sums to intelligence agencies, it was the path of least resistance to simply sign contracts rather than to rebuild the intelligence community in a thoughtful way with a long-term strategic plan.41

Senior intelligence managers have found it easier and quicker to turn to private companies to hire and house staff than to fix their own agencies' hiring systems. The problems of hiring and firing civil servants that are often given as a justification for outsourcing really do not hold. Intelligence agency personnel are exempted from normal civil service personnel rules. They could be paid more than other government employees. They can quickly be fired without cause anytime an agency believes they are doing substandard work or their expertise is no longer in demand. The government could easily rent office space for more analysts. It was just easier for an intelligence agency manager to have a contractor do it all.

The result of all those many decisions to take the easy way out and sign contracts is that we have created a two-tier system for intelligence analysis. For now, at least, the more experienced analysts are often in profit-making firms, aspiring to be among the ranks of their highly paid bosses someday. And their highly paid bosses are motivated to persuade the intelligence agencies, where they once worked, of the continued need for their contracts. And many of the bosses in the intelligence agencies are thinking about what they will do when they have worked twenty years and can begin pulling down a government pension. Given those dynamics, it is unlikely that the post-9/11 boom in intelligence analysis outsourcing will be reversed anytime soon. The CIA did, however, promise in 2007 that there would be a 10 percent cut in outsourcing soon.42 It will, of course, be difficult to know if that really happens.

What is more likely to happen is that the dramatic growth in the intelligence community budget will slow and the budget may even have to retract, given overall federal fiscal realities. When cuts have to be made, based on past tendencies, the agency managers will cut their contracts before they reduce their own staffs and other activities. What we may then discover is that many of the best analysts we had, those with institutional memories, are no longer working on the important problems.

The above is an excerpt from the book Your Government Failed You
by Richard A. Clarke
Published by HarperCollins Publishers; May 2008;$25.95US/$27.95CAN; 978-0-06-147462-0
Copyright © 2008 Richard A. Clarke