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Book World: 'Spies for Hire'

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Tim Shorrock
Investigative Journalist and Author
Tuesday, June 3, 2008; 3:00 PM

"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."

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Investigative journalist Tim Shorrock was online Tuesday, June 3 to discuss his new book Spies for Hire: The Secret World of Intelligence Outsourcing, which was recently reviewed in Book World.

Shorrock's work has appeared in many publications, including The Nation, Salon, and Mother Jones. Spies for Hire examines the increasing use of private contractors by U.S. intelligence agencies, including the CIA.

A transcript follows.

Join Book World Live each Tuesday at 3 p.m. ET for a discussion based on a story or review in each Sunday's Book World section.

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Tim Shorrock: Hello, Post readers. This is Tim Shorrock author of SPIES FOR HIRE, the first book to cover the vast outsourcing taking place in US intelligence. I've been an investigative reporter for 25 years and have written for many pubs both at home and abroad. I'm ready to take your questions and welcome this opportunity for dialogue.

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Denver, Colo.: Hi Tim! Writing to ask if you can give a general overview of the "Intelligence" agencies, how many there are, what work they do, both domestically and abroad, and whether we know roughly how much of our tax money is spent by them. Thank you -- Jack

Tim Shorrock: I'll begin with this question from Denver, asking for an overview of the Intelligence Community. There's 16 agencies in what's called the "IC." They include the CIA, which is responsible for human intelligence - spying on foreign countries and governments - as well as writing key intel reports for government. The NSA monitors telephone, cell and email traffic around the world. The National Geospatial Intelligence Agency provides satellite and overhead imagery and mapping to military commanders and other agencies. The National Reconnaissance Office controls military spy satellites. The Defense Intelligence Agency provides human intelligence and surveillance on foreign militaries to the Joint Chiefs and the SecDef.

There's also intel units within the Navy, Marines, Army and Air Force. And key agencies, such as Treasury, Energy, State and DHS have their own intel units.

We now spend about $60 billion a year on all these agencies. It's important for readers to know that about 85 percent of that money is controlled by the Pentagon, which has command and control over the NSA, the NGA, the NRO and the DIA, plus of course the individual intel units within the military.

And as I report in the book, about 70 percent of the budget goes to private contracts, covering the acquisition of everything from pencils to satellites.

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Palm Beach, Fla.: Mr. Shorrock: I am so upset about the outsourcing of intelligence roles, corporate greed and egregious waste of taxpayer money and government resources that would be better spent elsewhere. Would better government salaries create incentives to improve oversight, or are the problems far more formidable?

Tim Shorrock: I think better salaries would help. But we need to create an entirely new oversight structure for the privatized side of intelligence. Congress doesn't even have accurate numbers for outsourcing in the various agencies. This in my opinion is an entirely new type of 'national security capitalism' and we need to understand it much better.

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Los Angeles, Calif.: The ubiquitous use of contractors in the intelligence community concerns me from a counter-intelligence aspect. Is there any information is to whether foreign intelligence agencies (Chinese, Israeli, etc) have penetrated these private companies? Is it easier to recruit contractors to spy as opposed to direct hires?

Tim Shorrock: No, I haven't found any evidence of this. There are potential problems, however, when companies like Lockheed Martin or L-1 Identity Solutions do work for US intel and also have contracts with governments in places like China.

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Bethesda, Md.: Glad to see this important topic get full investigative treatment. Do you think that outsourcing is helping or hurting the effectiveness of our intelligence community? I am an ex-intelligence officer with a decade and a half of time with the government and contractors -- and I know what I think! In my estimation, there is significant shortcutting and shoddiness, in both the awarding and management of contracts and in the actual execution of the work. What has your research uncovered?

Tim Shorrock: I would answer this on two levels. Obviously after 9/11, the government did not have enough analysts and operatives to staff the agencies. The fact that private contractors were available helped fill the gap. But I've found many examples of conflicts of interest, and I think overall the private sector, by making intel and sensitive ops like interrogation profit centers, is hurting our intel services. When we have Booz Allen Hamilton writing major policy reports that will influence intel spending in the future - thus directly affecting their bottom line - we must reevaluate the role of contractors.

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Freising, Germany: In the past (30 years ago or so), I'd read that a job at the CIA was a coveted position. However, I'm not sure that it's anything new that former secret service agents, of any nationality, often procure positions as consultants after retiring.

It difficult to argue, however, that increased outsourcing to the private sector has decreased responsibility and accountability.

Have you looked at ways to remedy this situation?

Tim Shorrock: As I said earlier, we need to completely restructure how congressional oversight works to cover the fact that outsourcing now takes up 70% of the intel budget. There was a recent report from the Pentagon's IG that as Pentagon budgets have gone through the roof, oversight over contracting has greatly diminished. that's very troubling.

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Lyme, Conn.: I am among many who have questioned why there were not the correct protective vehicles manufactured and sent to Iraq and why there aren't more drone airplanes patrolling in Iraq. The answer we receive is that long term contracts require the purchasing and use of resources according to previous agreements. Have we lost sight of the importance of protecting our soldiers over protecting legal right in business contracts?

Tim Shorrock: A few months ago, at a conference, I heard a high-level military commander complain to an audience of contractors that they were trying to sell technology to soldiers on the ground that really didn't help. He urged them to better understand the need of commanders and soldiers. Capitalism in my opinion has no place on the battlefield.

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Anonymous: Minor problem is that the billions in profits, much in hidden offshore accounts, can come back to influence or even control policy, which, of course, results in more and larger contracts with less and less supervision. The biggest single threat to this country is that those billions in lost dollars will ultimately gain control of our mass media and put an effective end to our democratic system, replacing it with an aristocracy - governed by and for the wealthiest. As a campaign manager in the Chicago suburbs during my law school days, I saw the powerful influence that the mob had by buying into suburban newspapers. It will happen again, but on a much larger scale.

Tim Shorrock: In one of my chapters I talk about industry groups such as the Intelligence and National Security Alliance, which represents big contractors at the CIA and the NSA. They meet frequently behind closed doors, often in classified environments, to discuss issues like domestic surveillance. We as a public know nothing about these discussions, yet they affect us in major ways. These organizations themselves need better oversight. Policy should not be made in secret. Congress needs to get involved with how intel policy is made by government and the big contractors, and find ways to get involved in that debate. As intel expert Steve Aftergood told me, with the contractors and the agencies so close, there IS no debate.

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Gaithersburg, Md.: Mr. Shorrock, what do we do when the whole system is corrupt? I really enjoyed your book, but I'm sorry to say, with tears in my eyes. that the corruption in our government is at a peak. After going through your book I'm not convinced that you really understand the damage that this administration has done to the US in the intelligence field.

Tim Shorrock: I disagree that I don't understand the damage. Anybody who reads the Post and other media understand how badly skewed intel has been during the Bush-Cheney years. My book was written to help the public understand the role of contractors in intel, not to provide deep background into intel policy per se. There's some excellent reporters out there covering intelligence from a policy standpoint, including quite a few here at the Post.

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Washington, D.C.: Have there been personnel cuts that have led to the use of consultants and contract employees? Or is it because after 9/11 they needed to expand so quickly they did not have time to add so many government jobs?

Tim Shorrock: Both, actually. During the '90s, as a result of the peace dividend after the cold war, intel and defense budgets were cut. Intel agencies like the NSA lost up to 30 percent or more of their people. Those decisions were probably wise - we didn't need such a huge intel system once the Soviet Union collapsed. But when intel needs ramped up during Clinton's second term, there was only one place to go to fill the ranks - the private sector. I go into that in my history chapter. then, after 9/11, the gov't created new institutions such as the DHS and the National Counterterrorism Center. There weren't enough trained gov't analysts to staff them, so the agencies went to the big defense and IT contractors. But at no time did anyone in gov't stop and think through the implications, or consider what should remain 'inherently governmental.' That's where the mistake was.

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Bethesda, Md.: Your book delves into the history of intelligence outsourcing, and how the current state of affairs really blossomed under Clinton's Reinventing Government initiative, which envisioned "business" or "private sector" involvement in government processes. As a veteran of both government contractors and industry that does little or no business with government, I have a hard time thinking of government contractors as businesses -- many of the companies (or divisions of companies) your book covers would likely never survive in a truly competitive marketplace with private sector customers.

Tim Shorrock: You're right about that, especially with companies that earn 70 percent or more of their revenue from intel or defense. Yet these companies answer to shareholders, they make profits (big ones) and they compete with other companies for the work they do. So they are businesses too. What we have is a huge part of intelligence being performed, for profit, by private companies.

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Arlington, Va.: Do contractors have to have the same kind of security clearances, etc that the regular employees do? A few years ago a friend of mine was working as a consultant at an intelligence agency and tried to keep secret where he was working, but I was able to figure it out pretty easily. He was embarrassed, but I imagine it takes skill to keep mum about where you are working...

Tim Shorrock: Yes, in fact security clearances have become a commodity. You have to have one to even learn about, or bid for, a classified contract. You have to have one to perform certain intelligence tasks. So the government trains its operatives, spend millions so they can get the clearances, and then many of these people join the private sector and sometimes go back to work at the same agencies where they were trained. No wonder CIA Director Hayden complained that the CIA had become a 'farm team' for contractors. The clearance situation gets a little ridiculous, too, because different agencies have different standards. I learned that sometimes someone will go from CIA to NSA; but when NSA seeks confirmation from CIA that the person worked at the agency, the CIA will refuse to give out that information.

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washingtonpost.com: Tim, the Post and other papers recently reported that Booz Allen is selling its government consulting arm to the Carlyle Group -- can you explain what is happening, and what it means from your perspective?

Tim Shorrock: Sure. Here's a link to something I wrote about this, on my blog:

http://timshorrock.com/?p=236

Carlyle used to be heavy in defense and intel, but sold off many of its holdings in recent years. In 2003, it bought a major UK firm, QinetiQ, and invested millions to help it expand in the US intel market. QinetiQ is now a major US contractor. Booz Allen is one of the most important intel contractors. The director of national intelligence, Mike McConnell, came from Booz Allen. They provide strategic advice to the NSA, the CIA, the ODNI and many military intel agencies. I've heard they hold nearly $1 billion a year in classified contracts. So they're a major player. By buying them, Carlyle is planting its flag in intelligence. My guess is they'll pump a lot of money into Booz and raise the company's stake even higher in intelligence. Then they'll sell it for a bundle. Carlyle made nearly half a billion dollars in profit from their acquisition and sale of QinetiQ.

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Harrisburg, Pa.: Since we have essentially privatized much of our intelligence operations, how do we oversee that the contractors are not secretly in collaboration with a rival intelligence agency?

Tim Shorrock: Only through extensive oversight. Most of the biggest contractors do work with all the big agencies. Back to Booz Allen - they work with the NSA, the CIA and the NGA, among others. I don't question the integrity of the people working there, but we simply can't take their word for it. I think Congress really needs to take a hard look at the implications of all this. With Carlyle expanding Booz's reach, for example, should we be considered about a company getting a monopoly position in intelligence? I think we should be concerned about that.

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Tim Shorrock: Getting back to the issue of the wisdom of contracting and its origins: I try to communicate in my book that this goes beyond mere outsourcing. The private sector is now an integral part of US intelligence, operating at extremely high levels of national security. We've always had a revolving door in defense. But this is more than that. It's a wholesale transfer of operations that used to be done only by government operatives now being done for profit by private companies. We as a nation really need to grapple with this. I don't think most people believe its OK to have interrogations of enemy prisoners being carried out by contractors; but that's what is happening. They're involved in NSA spying too, and every other major operation. Even some agencies are saying they want contractors out of intel analysis. In my opinion, a lot of these operations need to be nationalized, essentially, and returned back to government.

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Juneau, Alaska: Hi - I heard an interview on NPR with you in which you stated that up to 70 percent of the intel budget went to private companies. Can you elaborate on this for me, as I am dumbfounded by this?

Tim Shorrock: I broke this story in Salon last year. I learned from a leaked DIA document that 70 percent of the intel budget is spent on private contracts. The ODNI essentially confirmed the number by telling me that the 70 percent covers everything from pencils to satellites. I also found numbers showing that the intel agencies spent about $43 billion in 2005 on private contracts - at 70 percent, that would make the intel budget about $60 billion. I was astounded by the numbers too. Originally, in a Mother Jones article a few years back (http://www.motherjones.com/news/outfront/2005/01/12_400.html) I had estimated 50 percent. Thus we have a new animal: the Intelligence Industrial Complex.

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Alexandria, Va.: Are private contractors being made into the bogeyman? If government jobs take nine months to fill, it seems obvious that those who need a solution will turn to a contractor to get the job done. And government agencies have their share of scandals and information lapses, too.

Tim Shorrock: In some ways they are. Clearly the responsibility for outsourcing, and what contractors end up doing, lies with the government. Read the prologue to my book, posted on the Post Book World site. A contractor relates how companies have been put in awkward positions by the agencies, and argues that both contractors and gov't need to take a step back and evaluate what contractors should be doing. He was talking about Abu Ghraib, where two contractors were deeply involved. But it was SecDef Rumsfeld and his aides who set up that situation - they should have taken responsibility. Yes, the contractors are to be blamed for some of this, but ultimately the government is in charge. Or at least its supposed to be. But when you have contractors providing oversight over other contractors and managing key sections of certain agencies, the government isn't even involved. I find that scary.

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Bethesda, Md.: In the reporting on the Booz Allen divestiture story, buried deep in the stories, have been bits about how the culture of Booz's world class consulting business has been at odds with Booz's government business. Some of this stems from the onerous accounting and auditing requirements that beset all big contractors. Another element at work has been the security requirements to which all Booz units must adhere because of the Federal unit's sensitive accounts. Do you think the "close enough for government work" ethic and the not-from-Ivy League/ex-civil servant cadre of employees prevalent in the government unit was hurting the blue-chip, Fortune 500 brand of Booz's private sector consulting business?

Tim Shorrock: I don't know enough about Booz's commercial business to flesh that out. Officially, it's said that Booz earns about $4 billion a year, split evenly between the two divisions. I've heard that the government side earns even more - as much as $1 billion more. The vice presidents of Booz owned the company, and made much of the profits. The ratio between gov't and commercial VPs was weighted heavily towards the commercial VPs, which may have meant that the gov't side felt it wasn't making enough of the company's overall profits. But clearly Booz felt the gov't side was more lucrative and would grow much faster than the commercial side. So the company decided to split in two and sell off the government side to Carlyle. That's my understanding from talking to people in the industry. Booz, like most contractors, says next to nothing about its government work.

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Tim Shorrock: On my '70 percent' findings: here's my original story from Salon reporting on that figure. I believe the URL for the original DIA document may still be on-line at Secrecy News, edited by Steve Aftergood of the Federation of American Scientists.

http://www.salon.com/news/feature/2007/06/01/intel_contractors/

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Tim Shorrock: Thank you all for your questions. It was a very interesting hour. If you want to follow my work, or catch me on C-Span or see what else I write about, check out my website, www.timshorrock.com. Much appreciation to WashingtonPost.com for setting this up.

TS

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