The corporate takeover of U.S. intelligence

The U.S. government now outsources a vast portion of its spying operations to private firms -- with zero public accountability.

Editor's note: This story has been corrected since it was originally published.

By Tim Shorrock

Read more: Terrorism, Politics, Afghanistan, News, Iraq, CIA, Spies, Torture, Homeland Security, Outsourcing, Abu Ghraib, Salon stories by Tim Shorrock, Guantánamo Bay

June 1, 2007 | More than five years into the global "war on terror," spying has become one of the fastest-growing private industries in the United States. The federal government relies more than ever on outsourcing for some of its most sensitive work, though it has kept details about its use of private contractors a closely guarded secret. Intelligence experts, and even the government itself, have warned of a critical lack of oversight for the booming intelligence business.

On May 14, at an industry conference in Colorado sponsored by the Defense Intelligence Agency, the U.S. government revealed for the first time how much of its classified intelligence budget is spent on private contracts: a whopping 70 percent.

The DNI figures show that the aggregate number of private contracts awarded by intelligence agencies rose by about 38 percent from the mid-1990s to 2005. But the surge in outsourcing has been far more dramatic measured in dollars: Over the same period of time, the total value of intelligence contracts more than doubled, from about $18 billion in 1995 to about $42 billion in 2005.

"Those numbers are startling," said Steven Aftergood, the director of the Project on Government Secrecy at the Federation of American Scientists and an expert on the U.S. intelligence budget. "They represent a transformation of the Cold War intelligence bureaucracy into something new and different that is literally dominated by contractor interests."

Because of the cloak of secrecy thrown over the intelligence budgets, there is no way for the American public, or even much of Congress, to know how those contractors are getting the money, what they are doing with it, or how effectively they are using it. The explosion in outsourcing has taken place against a backdrop of intelligence failures for which the Bush administration has been hammered by critics, from Saddam Hussein's fictional weapons of mass destruction to abusive interrogations that have involved employees of private contractors operating in Iraq, Afghanistan and Guantánamo Bay, Cuba. Aftergood and other experts also warn that the lack of transparency creates conditions ripe for corruption.

Trey Brown, a DNI press officer, told Salon that the 70 percent figure disclosed by Everett refers to everything that U.S. intelligence agencies buy, from pencils to buildings to "whatever devices we use to collect intelligence." Asked how much of the money doled out goes toward big-ticket items like military spy satellites, he replied, "We can't really talk about those kinds of things."

The media has reported on some contracting figures for individual agencies, but never before for the entire U.S. intelligence enterprise. In 2006, the Washington Post reported that a "significant majority" of the employees at two key agencies, the National Counterterrrorism Center and the Pentagon's Counter-Intelligence Field Activity office, were contractors (at CIFA, the number was more than 70 percent). More recently, former officers with the Central Intelligence Agency have said the CIA's workforce is about 60 percent contractors.

But the statistics alone don't even show the degree to which outsourcing has penetrated U.S. intelligence -- many tasks and services once reserved exclusively for government employees are being handled by civilians. For example, private contractors analyze much of the intelligence collected by satellites and low-flying unmanned aerial vehicles, and they write reports that are passed up to the line to high-ranking government officials. They supply and maintain software programs that can manipulate and depict data used to track terrorist suspects, both at home and abroad, and determine what targets to hit in hot spots in Iraq and Afghanistan. Such data is also at the heart of the National Security Agency's massive eavesdropping programs and may be one reason the DNI is pushing Congress to grant immunity to corporations that may have cooperated with the NSA over the past five years. Contractors also provide collaboration tools to help individual agencies communicate with each other, and they supply security tools to protect intelligence networks from outside tampering.

Outsourcing has also spread into the realm of human intelligence. At the CIA, contractors help staff overseas stations and provide disguises used by agents working under cover. According to Robert Baer, the former CIA officer who was the inspiration for the character played by George Clooney in the film "Syriana," a contractor stationed in Iraq even supervises where CIA agents go in Baghdad and whom they meet. "It's a completely different culture from the way the CIA used to be run, when a case officer determined where and when agents would go," he told me in a recent interview. "Everyone I know in the CIA is leaving and going into contracting whether they're retired or not."

The DNI itself has voiced doubts about the efficiency and effectiveness of outsourcing. In a public report released last fall, the agency said the intelligence community increasingly "finds itself in competition with its contractors for our own employees." Faced with arbitrary staffing limits and uncertain funding, the report said, intelligence agencies are forced "to use contractors for work that may be borderline 'inherently governmental'" -- meaning the agencies have no clear idea about what work should remain exclusively inside the government versus work that can be done by civilians working for private firms. The DNI also found that "those same contractors recruit our own employees, already cleared and trained at government expense, and then 'lease' them back to us at considerably greater expense."

A Senate Intelligence Committee report released on Thursday spells out the costs to taxpayers. It estimates that the average annual cost for a government intelligence officer is $126,500, compared to the average $250,000 (including overhead) paid by the government for an intelligence contractor. "Given this cost disparity," the report concluded, "the Committee believes that the Intelligence Community should strive in the long-term to reduce its dependence upon contractors."

The DNI began an intensive study of contracting last year, but when its "IC Core Contractor Inventory" report was sent to Congress in April, DNI officials refused to release its findings to the public, citing risks to national security. The next month, a report from the House Permanent Select Committee on Intelligence rebuked the DNI in unusually strong language, concluding that U.S. officials "do not have an adequate understanding of the size and composition of the contractor work force, a consistent and well-articulated method for assessing contractor performance, or strategies for managing a combined staff-contractor workforce."

U.S. intelligence budgets are classified, and all discussions about them in Congress are held in secret. Much of the information, however, is available to intelligence contractors, who are at liberty to lobby members of Congress about the budgets, potentially skewing policy in favor of the contractors. For example, Science Applications International Corp., one of the nation's largest intelligence contractors, spent $1,330,000 in their congressional lobbying efforts in 2006, which included a focus on the intelligence and defense budgets, according to records filed with the Senate's Office of Public Records.

The public, of course, is completely excluded from these discussions. "It's not like a debate when someone loses," said Aftergood. "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." In March 2006, Randy "Duke" Cunningham, R-Calif., who had resigned from Congress several months earlier, was sentenced to eight years in prison after being convicted of accepting more than $2 million in bribes from executives with MZM, 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, which has been criticized by Congress for spying on American citizens. The MZM case deepened earlier this month when Kyle "Dusty" Foggo, the former deputy director of the CIA, was indicted for conspiring with former MZM CEO Brent Wilkes to steer contracts toward the company.

Next page: George Tenet's war profits, "black" intelligence budgets, and a House Republican under investigation