by Tim Shorrock
The Joint Military Program (MIP) funds two agencies that provide intelligence for all elements of the U.S. military. The largest of these are the Defense Advanced Research Projects Agency ($3.5 billion) and the Defense Intelligence Agency ($2 billion). Both answer to the secretary of defense (in a quirk in the intelligence system that we’ll explore in Chapter 5, three of the national agencies, the NSA, the NRO, and the NGA, are considered combat support agencies and receive some funding through the MIP). This program also includes the intelligence units of the Army ($6 billion), the Navy ($4 billion), the Air Force ($8 billion), and other service branches, such as the Marines ($2 billion). These units fall under the authority of the DIA and the undersecretary of defense for intelligence.
Budgets for these programs are drafted and approved in classified hearings of the House Select Committee on Intelligence and included in the annual defense appropriations bills passed by the House Armed Services Committee and then the full House. The legislation is then considered by the Senate and approved by House-Senate conference committees. The line items for the NSA, the NGA, the DIA, and the NRO (and even subagencies like the Pentagon’s Counterintelligence Field Activity office) can be clearly seen in the defense budget, but the actual amounts are left blank and marked CLASSIFIED. The CIA budget is harder to find; John Pike, the director of GlobalSecurity.org and a highly respected intelligence expert, has concluded that the agency’s annual appropriation is hidden in a section of the Air Force budget devoted to “other procurement aircraft.”
Secrecy, however, comes at a cost. “The problem is the lack of transparency,” says Scott Amey, the general counsel for the Project on Government Oversight, a Washington public interest group. “We have billions of dollars in spending going out that has little or no oversight” by Congress.19 Other critics of the system point out that budgetary information about individual agencies is available to contractors, who are at liberty to lobby members of Congress about those budgets. Yet the public is completely excluded when these appropriations are discussed in Congress, skewing policy in favor of the private sector.
“It’s not like a debate when someone loses,” says Aftergood, who is a leading advocate for declassifying the intelligence budget. “There is no debate. And the more work that migrates to the private sector, the less effective congressional oversight is going to be.” From that secretive process, he added, “there’s only a short distance to the Duke Cunninghams of the world and the corruption of the process in the interest of private corporations.”20 He was referring to the case of Randy “Duke” Cunningham, a former Republican congressman from California, who was sentenced in 2006 to eight years in prison after pleading guilty of accepting more than $2 million in bribes from executives with MZM Inc., a prominent San Diego defense contractor. In return for the bribes, Cunningham used his position on the House appropriations and intelligence committees to win tens of millions of dollars’ worth of contracts for MZM at the CIA and the Pentagon’s CIFA office.
Secrecy can also be problematic for the many contractors that trade their shares on Wall Street. The Securities and Exchange Commission requires publicly traded companies to report “material events,” which includes important contracts signed or canceled. At the same time, companies hoping to drive their share prices up have an interest in telling investors that they’ve won an important contract. The problems emerge when the agency awarding a contract wants it to remain secret. “It’s a bit of a tug-of-war,” explains Leonard Moodispaw, the CEO of Essex Corporation, a key NSA contractor recently acquired by Northrop Grumman. “Investors want to know about your contracts, how likely it is you’ll lose this contract, and so on. If they can’t look it up in the defense budget, they don’t feel comfortable about it.” Although it’s impossible to be completely transparent, he says, “you overcome that by performance—by them getting to trust you, doing what you say you’re going to do.”21
To make things easier for agencies and companies alike, John Negroponte, Mike McConnell’s predecessor as DNI, issued an edict in 2005 that gave publicly traded contractors the right to exclude certain “material events” from their public filings with the SEC, including the signing of a new contract with the CIA or the NSA. As a result, it’s now up to the companies to decide for themselves what’s material, and announcements of new contracts are frequently crafted with extremely vague language. In 2006, for example, ManTech announced a new contract worth $130 million to “support intelligence missions that help fight the Global War on Terrorism,” and CACI said it had obtained a $230 million contract “designed to increase the capabilities of federal agencies directly engaged in providing homeland security and waging the war on terrorism.”22 Exactly what those contracts entailed was left to the reader’s imagination.
The lack of transparency also makes it almost impossible to create an accurate list of intelligence contractors, ranked by size and market share, as you might see for the defense or homeland security industries. The closest thing to a Top 100 list are the annual rankings published by Washington Technology and other newspapers of the market leaders in defense and federal information technology, the two sectors where most intelligence contracting takes place. Creating an intelligence industry ranking, therefore, requires drawing from the defense and IT rankings as well as culling information from every public source imaginable—press releases, annual reports, public filings with the Securities and Exchange Commission, corporate brochures, industry association newsletters, company presentations at investor conferences, and speeches and press conferences by intelligence agency officials. Out of this riot of data we can start to see the outlines of the intelligence contracting industry as it looks in 2008. Here’s how it shakes out.
At the top tier are the “systems integrators” that manage mega-projects for government agencies and supply the large armies of cleared analysts and technicians who fill slots at the CIA, the National Counterterrorism Center, and other agencies. The leading companies are SAIC and Booz Allen Hamilton, which stand together like a private colossus across the whole intelligence industry. Of SAIC’s 42, 000 employees, more than twenty thousand hold U.S. government security clearances; Booz Allen commands a private intelligence army at least ten thousand strong. Both companies are deeply involved in the operations of all the major collection agencies, particularly the NSA, the NGA, and the CIA. Each employs an executive vice president with authority over all intelligence matters; by the nature of their companies and the scope of their work, these executives should probably be considered deputy directors of national intelligence—with the proviso that they answer to shareholders instead of the government. At SAIC, that man is retired Army Major General John D. Thomas, the company’s senior vice president and general manager of operations, intelligence, and security. Until recently, his counterpart at Booz Allen was Mike McConnell, who is now the director of national intelligence.*
The systems integrators, whose ranks also include Lockheed Martin, Northrop Grumman, Raytheon, Computer Sciences Corporation (CSC), General Dynamics Advanced Information Systems, and BAE Systems, separately earn total revenues of at least $4 billion a year. They provide much of the software and systems engineering required for agencies such as the NSA to share intelligence with military commanders and other members of the IC. SAIC, for example, managed one of the NSA’s largest efforts in recent years, the $3 billion Project Trailblazer, which attempted (and failed, as we shall see) to create actionable intelligence from the cacophony of telephone calls, fax messages, and e-mails picked up by the NSA every day. Booz Allen plays an instrumental role as an adviser on technology to the DNI as well as the National Security Agency. The top tier companies are involved in every aspect of intelligence, from signals to imagery to open source human intelligence (HUMINT): they are the giants of the spying industry. Their ties with the agencies are so close that top executives encourage their people to think of themselves as extensions of the government. “Everyone talks about the Intelligence Community as ‘those guys in g
overnment,’ whether it’s the people in the military or the people in the agencies,” Ben Romero, the director of Intelligence and Homeland Security Programs for Lockheed Martin, told a roomful of contractors in 2005. “Well, guess what? You are all part of the Intelligence Community. In fact, you probably make up the largest part of it.”23
The second tier is composed of companies with combined total revenues of between $1 billion and $2 billion a year, nearly all of it—95 percent in some cases—from contracts with the Pentagon and the national intelligence collection agencies: the NSA, the NGA, and the NRO. These companies provide the specialized technical IT services and analytical services that are essential to agencies such as the CIA and the NSA, and often work as subcontractors to the systems integrators. The largest and best known of the second tier companies is CACI International. Its chief competitor, ManTech International, is well-known in the homeland security market for making a key software program that allows national agencies to share classified and unclassified intelligence with the FBI and local law enforcement agencies.
Like the larger systems integrators, the midlevel firms often have satellite operations near important intelligence outposts. In addition to holding down the fort in Washington, a typical contractor might have an office in Dayton, Ohio, near Wright-Patterson Air Force Base; in Huntsville, Alabama, near the U.S. Army’s Missile Defense Agency; or in San Diego, the headquarters for some of the Navy’s most classified operations. The latest area to experience an intelligence boom in recent years is Colorado, where the Pentagon’s Northern Command and its Counterintelligence Field Activity office conduct many of their domestic intelligence operations.
The third tier of companies in the industry are the small technical shops established around Washington to provide specialized technology or services to one or more of the intelligence agencies. They are often called “Beltway bandits” because of their proximity to the interstate highway that encircles the capital city. Since 9/11, literally thousands of such companies have started up, primarily to service the IC’s enormous appetite for technology—any technology—that will help find meaning in the flood of data sweeping through the intelligence system.
“Perhaps nowhere is unstructured data piling up faster than at American security organizations tasked with winning the war on terrorism,” the Chesapeake Innovation Center, a Maryland business “incubator” funded in part by the National Security Agency, said in a 2005 report.24 “They are inundated with an unprecedented ‘volume, velocity and variety,’ or ‘3Vs,’ of data, causing massive ‘information overload.’” To ease that overload, the NSA might turn to a company like Attensity Inc., a California firm that was one of the first companies financed by In-Q-Tel. Its product line includes a software program called PowerDrill, which allows analysts to “drill quickly and deeply into written information and uncover important patterns and relationships, including patterns of behavior by a person or organization.”25 That might prove extremely useful to the NSA as it analyzes phone calls and dialing patterns, domestically or internationally.
The fourth tier of the intelligence contracting industry is made up of companies, large and small, that are known primarily for their achievements in information technology, communications, or satellites but have made major inroads as the Intelligence Community has opened up to contracting. Here’s where we find Google, which has created a major niche by selling its powerful search engine technology to government agencies. Accenture, the global consulting company that was formerly a branch of Andersen Consulting, does financial planning and audits for intelligence agencies, and recently began providing information-sharing and collaboration tools to the IC; its customers, according to Accenture literature distributed at industry gatherings, include the NSA, the DIA, the NGA and the NRO. Microsoft sells classified versions of its operating systems to the IC and also cooperates with the NSA in such areas as encryption and computer security (if you’re using a PC with Microsoft’s XP system, your system was tested extensively by the NSA before it was placed on the market). BearingPoint, another major federal contractor, does a considerable amount of business with the NSA.
The last tier also includes telecommunications companies, such as AT&T, which has had a long relationship with U.S. intelligence because of its leading role as a telephone and Internet services provider. It reportedly allowed the NSA to gain access to its huge customer databases as part of the Bush administration’s warrantless surveillance program, when the NSA was given the power to monitor international telephone conversations involving U.S. persons—either a U.S. citizen or a foreign resident of the United States—in which one participant was considered to be a member or supporter of Al Qaeda or another terrorist group. AT&T also supplies technology and expertise to help intelligence agencies secure their communications systems and classified operations from outside attacks and intrusions. IBM is a player in the industry as well, in part as a major provider of computer systems to the Pentagon and the NSA, and in part because of its acquisition in 2005 of a company called SRD, which was funded by In-Q-Tel to help intelligence agencies track terrorists after the 9/11 attacks.
Winning a contract from an intelligence agency can be a long and arduous process, even when a company is the only bidder (that’s a common occurrence at the highest levels of intelligence, particularly at the NSA). The process begins at the bidding stage, where prospective contractors must have at their command a sizable number of employees with high-level security clearances. That has made security clearances—and the people who hold them—a precious commodity. “Top security clearances are actually marketable,” says Robert Baer, the former CIA officer. As a result, contractor executives frequently begin presentations to investors with facts about their workforce. At a 2006 conference on defense and homeland security investing that I attended, the numbers on cleared employees flew like statistics at a ball game: at CACI, 70 percent of its employees held top secret clearances; at SI International and NCI Information Systems, which both hold NSA contracts, the figures were 83 percent and 65 percent, respectively.
New companies to the market must also be prepared for a lengthy procurement process made worse by the “risk-adverse, slow-moving bureaucracies” in the Intelligence Community, warns John Elstner, the founding CEO of the Chesapeake Innovation Center.26 The slow pace works to the advantage of incumbent contractors and is “especially onerous” for small companies that “may not have the resources to last several months” of procurement meetings, says Elstner, who is now the managing director of the Convergent Security Group, a Maryland investment firm that raises capital for homeland security and intelligence contractors.
But once a contract is signed, a company can be assured of strong revenues well into the future. “Intelligence is a very robust market because the contracts are typically very long—at least five to ten years,” says Steve Waechter, who was the chief financial officer at CACI International from 1999 to 2007. “That makes intelligence a very attractive place to invest.”* And once a company is ensconced at an agency, a long-term relationship is almost assured because the government becomes reliant on that service. “If you’re really doing something mission-critical and you take over that function for the government, it’s pretty hard to replace you if you’re doing a good job,” explains Thomas E. Dunn, the executive vice president and chief financial officer of SI International, a key NSA contractor. “And, frankly, [officials] are not motivated to do that.”27
Like any other industry, the Intelligence-Industrial Complex has a distinct culture and history. As we begin to peer into different parts of the community—human intelligence, direct aid to the war-fighter, signals intelligence, imagery, and domestic security—we will notice many points in common. But one point of reference is shared by every agency: the revolving door.
Perhaps in no other area of business are former high-ranking officials as ubiquitous as they are in intelligence. From SAIC to ManTech to the smallest Beltway bandit, companies involved in the intelligence bu
siness seek out former intelligence and national security officials as both managers and directors. For the most part, these are people who have served for decades at the pinnacle of national power. Their lives have been defined by secret briefings, classified documents, covert wars, and sensitive intelligence missions. Many of them have kept their security clearances and maintain a hand in government by serving as advisers to high-level advisory bodies at the Pentagon, the CIA, the National Security Agency, and the White House.
Now, with their government careers behind them, they make their living by rendering strategic advice to the dozens of IT vendors and intelligence contractors headquartered along the banks of the Potomac River and the byways of Washington’s Beltway. In these new jobs, they continue to fight terrorist threats and protect the “homeland,” as they once did while working in government—but now they do it for profit, in the form of lucrative stock options, director and consultant fees, and executive salaries. By fusing their politics with business, these former officials have brought moneymaking into the highest reaches of national security and created a new class of capitalist policy-makers the likes of which have never been seen before.
Take the case of George Tenet, who retired as CIA director in 2004. As he was writing his memoirs and preparing for a new career as a professor at Georgetown University, Tenet quietly began cutting deals with companies that earn much of their revenue from contracts with the Intelligence Community. By the summer of 2007, he had made nearly $3 million in director fees and other compensation from his service as a director and adviser to four companies, including QinetiQ, the British defense research company that was privatized in 2003 and acquired by the well-known Carlyle Group.