Three quarters of the U.S. intelligence budget now goes to outside contractors.

Reviewed by Jeff Stein
Sunday, June 1, 2008


The Secret World of Intelligence Outsourcing

By Tim Shorrock

Simon & Schuster. 439 pp. $27

Not long ago I had lunch with a recently retired senior CIA officer who worked himself into an expletive-laced rage over private contractors who had taken up seats in the agency's sanctum sanctorum, the clandestine services where the spies roam.

Many of them, he said, had spent only a few years working for the agency. Then they performed Washington's version of alchemy, turning their top-secret security clearances into gold-plated jobs with the new breed of Beltway bandits, the intelligence contractors, at twice their old pay.

Unlike in decades past, when firms such as Boeing and Lockheed provided spy planes and satellites and other hardware that the CIA could not possibly build itself, the new breed of contractor offers the CIA guys in trench coats and black ops gear, ready to do the work the agency traditionally has done.

My CIA acquaintance, who retired as chief of a large European station, groused that making money had replaced duty, honor, country in the spy ranks -- and along with it, accountability. "If they make a mistake," he asked, "do you think their company is going to admit it, if it threatens their contract?"

Late last year, CIA Director Michael V. Hayden finally jammed a crowbar into the revolving doors, barring ex-employees from returning to work on their old projects for 18 months.

As investigative reporter Tim Shorrock notes in this valuable (and angry) book, contractors have long had the run of the Pentagon and CIA, working hand in hand on projects ranging from reconnaissance satellites to Predator drones. But Shorrock persuasively shows that the business has changed dramatically in recent years, beginning even before the Sept. 11 attacks set off a homeland security gold rush.

Today, intelligence contracting is a $45 billion-a-year industry, he says, chewing up three quarters of the estimated $60 billion intelligence budget. It is no longer limited mainly to providing hardware; its reach now extends from top to bottom, from data-mining contractors who sift the Internet for terrorist activity to spy handlers, regional intelligence analysts and ex-special operations troops who run paramilitary operations.

Cold War-era hardware, such as the U-2 spy plane, unquestionably made us safer. Has outsourcing made us safer in an age of non-state terrorism? Shorrock does not think so. As the U.S. occupation of Iraq was tanking in 2006, he writes, intelligence contractors gathered "over sushi and Chinese hors d'oeuvres . . . sipping cognac" at a conference at the Mandarin Oriental Hotel in Washington, where they gloated over their business fortunes. "The industry's on a roll," one investment adviser told him, even if the war on terror isn't.

The new buzz phrase, according to Shorrock, is "net centric warfare," a contractor-supplied technology that pushes information out "to the soldier at the tip of the spear," allowing him "to download data, imagery, and intelligence from computer bases located in nearby command posts or from spy planes flying overhead." Net centric warfare "is right in the sweet spot we provide for our customers," Shorrock quotes Robert Coleman, president of ManTech International, a top intelligence contractor, telling investors at the Mandarin Oriental. The event's keynote speaker was former CIA Director George Tenet, who within three months of his speech "would join, either as a director or an adviser, four companies that were directly involved with the high-tech military strategies he was endorsing," Shorrock writes.

This is a movie version of Washington, of course, with black-hat war profiteers right out of Catch-22's M & M Enterprises. Beyond the caricatures is a world in which contractors necessarily fill gaps in U.S. intelligence capabilities and provide valuable new technology. Yes, they're turning a profit along the way, but is that inherently evil, as Shorrock suggests? His book would have benefited mightily from interviews with some of the officials he lampoons. But one-sided though it is, it contains some important, timely truths about the influx of private entrepreneurs into America's spy agencies.

Shorrock -- a frequent contributor to such liberal muckraking magazines as Mother Jones, the Nation and the Progressive -- dates the beginning of the intelligence "outsourcing boom" to the Carter and Reagan years, when cutting the federal payroll became a Washington mantra. But it was during the Clinton administration that the privatization of intelligence went on steroids, abetted by industry-dominated study commissions championed by Vice President Al Gore and Defense Secretary William Cohen. Oh, the savings, purred the representatives of Boeing, Lockheed Martin, L-3 Communications and other contracting giants on the board of the National Defense Panel, which recommended a vast privatization of national security activities. More than 30,000 government jobs, it estimated, could be cut.

"A revolution in business affairs," Gore and Cohen said in a joint statement.

"A corporate vision for the Defense Department," said Cohen, more precisely.

The revolution was accompanied by the collapse of the Soviet Union, which was to provide a "peace dividend" through reductions in national security spending. The soft part of the budget, as always, was personnel. R. James Woolsey, faced with cuts as Bill Clinton's CIA director in 1993, slashed the number of large CIA stations by more than 60 percent and of case officers working overseas by more than 30 percent, Shorrock reports.

The spies were out in the cold. Yet Woolsey was "ferocious" in defending the intelligence community's technical budget, according to Spies for Hire:"He fought vigorously to increase spending on expensive high-technology programs -- precisely the vehicles that were funding the great leaps being made at the time by Titan, Martin Marietta, and other companies he advised before going to the CIA."

That's a nasty swipe. Is Shorrock suggesting that Woolsey fired spies to make a buck for his pals? Alas, Woolsey doesn't get space to defend himself. In any event, as has been fully reported elsewhere, the CIA was sadly lacking HUMINT -- spy handlers collecting human intelligence -- when al-Qaeda's storm hit landfall in New York and Washington.

So the old boys who had been cut from the rolls, or had retired, saw an opportunity. One of them was Richard "Hollis" Helms, a 30-year CIA veteran who retired in 1999. "In the months after the 9/11 attacks, he began taking notice of the many retired intelligence officers who were being hired by defense contractors," Shorrock writes. He "seized the moment" and created Abraxas, which quickly grew into a company with $65 million in revenues and more than 200 former intelligence officers on its payroll, "the largest aggregate of analytical counter-terrorism capabilities outside of the U.S. government."

Would the United States be better off if those operatives were working as CIA employees, reporting directly to agency supervisors rather than to private bosses whose loyalty to the company's bottom line may trump the nation's national security? After reading Shorrock's strenuous indictment, you will wonder. ยท

Jeff Stein is the national security editor and SpyTalk columnist for Congressional Quarterly.

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