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Foreign Firms a Mainstay Of Pentagon Contracting
A container ship passes the New York skyline. Security concerns thwarted Dubai Ports World when it aimed to run some U.S. port operations.
(By Mark Lennihan -- Associated Press)
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Foreign-owned or controlled companies that work with classified information are subject to a special set of rules. The firms must set up U.S. subsidiaries with separate boards that include members approved by the Defense Department. The subsidiaries must have their own e-mail systems and network servers and must fully document communications with employees of the parent company -- hence Nadworny's phone logs.
U.S. citizens must be involved in key roles and are the only individuals who can be cleared to have access to classified material, a fact Pentagon officials consider an important protection.
A report published by the Government Accountability Office last July, however, found the system lacking -- understaffed, too dependent on self-reporting by companies, and unable to fully track foreign involvement with high-security U.S. contractors. In one instance, the GAO found that a foreign-owned company had access to classified information for six months before proper safeguards were in place. In another, the GAO found that Pentagon officials were unaware that a company had hired a foreign national as its president until someone spotted the fact on a Web site nine months later.
"Just think of the magnitude, the complexity, of monitoring what 96 companies are doing with access to classified information. Just the potential for letting something slip or get in the way is hugely magnified," said Rep. John Barrow (D-Ga.), a critic of the Dubai ports deal.
Defense Department officials and contracting experts defended the current system.
In a written response to the GAO, Carol A. Haave, deputy undersecretary of defense for counterintelligence and security, said that defense officials vet foreign involvement in contractors carefully, but also keep in mind issues like the "nature and source" of the foreign involvement, the sensitivity of the information, and "the relationship of the foreign source's government with our government."
"If there is any indication of risk to classified information . . . appropriate action is taken."
David Dempsey, a partner with Holland & Knight LLP who helps foreign companies navigate Pentagon regulations, said it can take up to nine months and cost as much as $600,000 to comply. But, he added, the system seems to work.
"I have never seen an intentional breach and I have never seen a serious breach," of security rules, Dempsey said.
