The corporate takeover of U.S. intelligence

U.S. intelligence agencies have always relied on private companies for technology and hardware. Lockheed built the famous U-2 spy plane under specifications from the CIA, and dozens of companies, from TRW to Polaroid to Raytheon, helped develop the high-resolution cameras and satellites that beamed information back to Washington about the Soviet Union and its military and missile installations. The National Security Agency, which was founded in the early 1950s to monitor foreign communications and telephone calls, hired IBM, Cray and other companies to make the supercomputers that helped the agency break encryption codes and transform millions of bits of data into meaningful intelligence.

By the 1990s, however, commercial developments in encryption, information technology, imagery and satellites had outpaced the government's ability to keep up, and intelligence agencies began to turn to the private sector for technologies they once made in-house. Agencies also turned to outsourcing after Congress, as part of the "peace dividend" that followed the end of the Cold War, cut defense and intelligence budgets by about 30 percent.

When the National Geospatial-Intelligence Agency was created in 1995 as the primary collection agency for imagery and mapping, for example, it immediately began buying its software and much of its satellite imagery from commercial vendors; today, half of its 14,000 workers are full-time equivalent contractors who work inside NGA facilities but collect their paychecks from companies like Booz Allen Hamilton and Lockheed Martin. In the late 1990s, the NSA began outsourcing its internal telecommunications and even some of its signals analysis to private companies, such as Computer Services Corp. and SAIC.

Outsourcing increased dramatically after 9/11. The Bush administration and Congress, determined to prevent further terrorist attacks, ordered a major increase in intelligence spending and organized new institutions to fight the war on terror, such as the National Counterterrorism Center. To beef up these organizations, the CIA and other agencies were authorized to hire thousands of analysts and human intelligence specialists. Partly because of the big cuts of the 1990s, however, many of the people with the skills and security clearances to do that work were working in the private sector. As a result, contracting grew quickly as intelligence agencies rushed to fill the gap.

That increase can be seen in the DNI documents showing contract award dollars: Contract spending, based on the DNI data and estimates from this period, remained fairly steady from 1995 to 2001, at about $20 billion a year. In 2002, the first year after the attacks on New York and Washington, contracts jumped to about $32 billion. In 2003 they jumped again, reaching about $42 billion. They have remained steady since then through 2006 (the DNI data is current as of last August).

Because nearly 90 percent of intelligence contracts are classified and the budgets kept secret, it's difficult to draw up a list of top contractors and their revenues derived from intelligence work. Based on publicly available information, including filings from publicly traded companies with the Securities and Exchange Commission and company press releases and Web sites, the current top five intelligence contractors appear to be Lockheed Martin, Northrop Grumman, SAIC, General Dynamics and L-3 Communications. Other major contractors include Booz Allen Hamilton, CACI International, DRS Technologies and Mantech International. The industry's growth and dependence on government budgets has made intelligence contracting an attractive market for former high-ranking national security officials, like former CIA director George Tenet, who now earns millions of dollars working as a director and advisor to four companies that hold contracts with U.S. intelligence agencies and do big business in Iraq and elsewhere.

Congress, meanwhile, is beginning to ask serious questions about intelligence outsourcing and how lawmakers influence the intelligence budget process. Some of that interest has been generated by the Cunningham scandal. In another recent case, Rep. Rick Renzi, a Republican from Arizona, resigned from the House Intelligence Committee in April because he is under federal investigation for introducing legislation that may have benefited Mantech International, a major intelligence contractor where Renzi's father works in a senior executive position.

In the Cunningham case, many of MZM's illegal contracts were funded by "earmarks" that he inserted in intelligence bills. Earmarks, typically budget items placed by lawmakers to benefit projects or companies in their district, are often difficult to find amid the dense verbiage of legislation -- and in the "black" intelligence budgets, they are even harder to find. In its recent budget report, the House Intelligence Committee listed 26 separate earmarks for intelligence contracts, along with the sponsor's name and the dollar amount of the contract. The names of the contractors, however, were not included in the list.

Both the House and Senate are now considering intelligence spending bills that require the DNI, starting next year, to provide extensive information on contractors. The House version requires an annual report on contractors that might be committing waste and fraud, as well as reviews on its "accountability mechanisms" for contractors and the effect of contractors on the intelligence workforce. The amendment was drafted by Rep. David Price, D-N.C., who introduced a similar bill last year that passed the House but was quashed by the Senate. In a statement on the House floor on May 10, Price explained that he was seeking answers to several simple questions: "Should (contractors) be involved in intelligence collection? Should they be involved in analysis? What about interrogations or covert operations? Are there some activities that are so sensitive they should only be performed by highly trained Intelligence Community professionals?"

If either of the House or Senate intelligence bills pass in their present form, the overall U.S. intelligence budget will be made public. Such transparency is critical as contracting continues to expand, said Paul Cox, Price's press secretary. "As a nation," he said, "we really need to take a look and decide what's appropriate to contract and what's inherently governmental."

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