What you need to know about Booz Allen Hamilton

June 10, 2013

CORRECTION: An earlier version of this post misidentified J. Michael McConnell as the current head of Booz Allen Hamilton. He serves as the firm's vice chairman.

With the revelation that Edward Snowden, the man who admitted disclosing top-secret information about National Security Agency surveillance programs, is an employee of the consulting firm Booz Allen Hamilton, the degree to which the federal government has outsourced much of its intelligence activities is back in the spotlight.

In 2010, The Washington Post published "Top Secret America," a two-year investigation of the explosive growth of the government's national security system -- and the ecosystem of contractors that emerged around it -- since 2001.

The project examined the nearly 2,000 private companies doing top-secret work, and Booz Allen Hamilton, where Snowden worked for the last three months as a tech specialist in Hawaii, is among the most prominent.

The analysis found that the McLean-based firm was contracted to perform top-secret work with 26 of the 45 government agencies engaged in such activities in 69 locations. The company performed work in 16 of the 23 categories examined by The Post, including law enforcement, disaster preparation, border control, nuclear operations, special operations, weapons technology, satellite operations, building and personal security, security training, counterintelligence, and intelligence analysis.

The firm currently employs approximately 24,500, after cutting about 500 jobs over the last year. The Associated Press reports that "about 23 percent of its revenue, or $1.3 billion, came from U.S. intelligence agencies last year." The company reported $5.86 billion in revenue in fiscal year 2012, up from $5.59 billion in 2011.

View the company's "Top Secret America" profile here.

According to the book "Top Secret America: The Rise of the New American Security State," written by Post reporters Dana Priest and William M. Arkin, Booz Allen is "one of the [national security] industry's top management consulting firms."

Nearly 100 percent of Booz Allen Hamilton's business is with the federal government, making it a profit-making nonunionized version of the federal workforce, where top managers are paid like celebrities and many mid-managers make more than the heads of the agencies they work for.

Former Director of National Intelligence J. Michael McConnell, an ex-navy intelligence officer who became the head of intelligence for the Joint Chiefs of Staff during the first Gulf War, serves as the firm's vice chairman. McConnell was first hired by Booz Allen in 1996 to run the company's national security branch. Priest and Arkin write:

A decade later, though, President George W. Bush called him back from the corporate world to become the second director of national intelligence, replacing John Negroponte. McConnell's private-sector job had been so closely intertwined with the government's intelligence and defense agencies, he announced at a news conference, that he felt like he had "never left" the intelligence business. [...]

As national intelligence director, McConnell was a strong advocate for increasing the contracting work of intelligence companies like Booz Allen. They were, he argued, more efficient and innovative than government. Three years into his tenure as director of national intelligence, a period of time when all sorts of unusual intelligence practices were being unearthed by the press -- including warrantless wiretaps by his former National Security Agency -- McConnell returned to Booz Allen as a senior vice president in charge of its national security business unit, making $1 million a year in salary but with a total compensation package of $4.1 million. By then Booz Allen boasted of having ten thousand people with security clearances whom it could contract out to government.

A 2007 article by Post reporter Robert O'Harrow documented the rapid rise of Booz Allen, beginning with a $2 million no-bid contract in 2003 to "help the new Department of Homeland Security quickly get an intelligence operation up and running."

Over the next year, the cost of the no-bid arrangement with consultant Booz Allen Hamilton soared by millions of dollars per month, as the firm provided analysts, administrators and other contract employees to the department's Information Analysis and Infrastructure Protection offices.

By December 2004, payments to Booz Allen had exceeded $30 million -- 15 times the contract's original value. When department lawyers examined the deal, they found it was "grossly beyond the scope" of the original contract, and they said the arrangement violated government procurement rules. The lawyers advised the department to immediately stop making payments through the contract and allow other companies to compete for the work.

But the competition did not take place for more than a year. During that time, the payments to Booz Allen more than doubled again under a second no-bid arrangement, to $73 million, according to internal documents, e-mail and interviews.

The arrangements with the McLean consulting firm, one of the nation's largest government contractors, illustrate a transformation in the way the federal government often gets its work done: by relying on private, sometimes costly consultants to fill staffing shortfalls in federal agencies.

Time will tell whether Snowden's disclosures affect Booz Allen's bottom line. Last month, the company announced that profits rose about 8 percent to $54.8 million in the three-month period that ended March 31, up from $50.6 million in the same period a year earlier. The company's chief financial officer Samuel R. Strickland said last month that the automatic federal spending cuts known as sequestration that took effect earlier this year have not been particularly damaging, but the firm has trimmed about 100 jobs as a result.

The Associated Press reports that the price of Booz Allen shares slipped Monday morning following Snowden's revelations.

More on this story:

Edward Snowden comes forward as source of NSA leaks

Hong Kong seen as unlikely refuge for NSA leaker

Power of government gets scrutiny from left and right

Who is Edward Snowden?

Post reporter on talks with Snowden

 

This post was last updated at 11:20 p.m.

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