Top-Secret America: National Security Inc.
July 21, 2010
by Dana Priest and William M. Arkin
THE WASHINGTON POST
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In June, a stone carver from Manassas, Va., chiseled another perfect star into a marble wall at CIA headquarters, one of 22 for agency workers killed in the global war initiated by the 2001 terrorist attacks.
The intent of the memorial is to publicly honor the courage of those who died in the line of duty, but it also conceals a deeper story about government in the post-9/11 era: Eight of the 22 were not CIA officers at all. They were private contractors.
To ensure that the country's most sensitive duties are carried out only by people loyal above all to the nation's interest, federal rules say contractors may not perform what are called "inherently government functions." But they do, all the time and in every intelligence and counterterrorism agency, according to a two-year investigation by The Washington Post.
What started as a temporary fix in response to the terrorist attacks has turned into a dependency that calls into question whether the federal workforce includes too many people obligated to shareholders rather than the public interest and whether the government is still in control of its most sensitive activities. In interviews last week, both Defense Secretary Robert Gates and CIA Director Leon Panetta said they agreed with such concerns.
Map: Companies doing top-secret work nationwide
The Post investigation uncovered what amounts to an alternative geography of the United States, a Top Secret America created since 9/11 that is hidden from public view, lacking in thorough oversight and so unwieldy that its effectiveness is impossible to determine.
It is also a system in which contractors are playing an ever more important role. The Post estimates that out of 854,000 people with top-secret clearances, 265,000 are contractors. There is no better example of the government's dependency on them than at the CIA, the one place in government that exists to do things overseas that no other U.S. agency is allowed to do.
Private contractors working for the CIA have recruited spies in Iraq, paid bribes for information in Afghanistan and protected CIA directors visiting world capitals. Contractors have helped snatch a suspected extremist off the streets of Italy, interrogated detainees once held at secret prisons abroad and watched over defectors holed up in the Washington suburbs. At Langley, Va., headquarters, they analyze terrorist networks. At the agency's training facility in Virginia, they are helping mold a new generation of American spies.
Through the federal budget process, the George W. Bush administration and Congress made it much easier for the CIA and other agencies involved in counterterrorism to hire more contractors than civil servants. They did this to limit the size of the permanent workforce, to hire employees more quickly than the sluggish federal process allows and because they thought - wrongly, it turned out - that contractors would be less expensive.
Nine years later, well into the Obama administration, the idea that contractors cost less has been repudiated, and the administration has made some progress toward its goal of reducing the number of hired hands by 7 percent over two years. Still, close to 30 percent of the workforce in the intelligence agencies is contractors.
"For too long, we've depended on contractors to do the operational work that ought to be done" by CIA employees, Panetta said. But replacing them "doesn't happen overnight. When you've been dependent on contractors for so long, you have to build that expertise over time."
A second concern of Panetta's: contracting with corporations, whose responsibility "is to their shareholders, and that does present an inherent conflict."
Or as Gates, who has been in and out of government his entire life, puts it: "You want somebody who's really in it for a career because they're passionate about it and because they care about the country and not just because of the money."
Contractors can offer more money - often twice as much - to experienced federal employees than the government is allowed to pay them. And because competition among firms for people with security clearances is so great, corporations offer such perks as BMWs and $15,000 signing bonuses, as Raytheon did in June for software developers with top-level clearances.
The idea that the government would save money on a contract workforce "is a false economy," said Mark Lowenthal, a former senior CIA official and now president of his own intelligence training academy.
As companies raid federal agencies of talent, the government has been left with the youngest intelligence staffs ever while more experienced employees move into the private sector. This is true at the CIA, where employees from 114 firms account for roughly a third of the workforce, or about 10,000 positions. Many of them are temporary hires, often former military or intelligence agency employees who left government service usually to work less and earn more while drawing a federal pension.
Across the government, such workers are used in every conceivable way.
Contractors kill enemy fighters. They spy on foreign governments and eavesdrop on terrorist networks. They help craft war plans. They gather information on local factions in war zones. They are the historians, the architects, the recruiters in the nation's most secretive agencies. They staff watch centers across the Washington area. They are among the most trusted advisers to the four-star generals leading the nation's wars.
So great is the government's appetite for private contractors with top-secret clearances that there are now more than 300 companies, often nicknamed "body shops," that specialize in finding candidates, often for a fee that approaches $50,000 a person, according to those in the business.
Making it more difficult to replace contractors with federal employees: The government doesn't know how many are on the federal payroll. Gates said he wants to reduce the number of defense contractors by about 13 percent, to pre-9/11 levels, but he's having a hard time even getting a basic head count.
"This is a terrible confession," he said. "I can't get a number on how many contractors work for the Office of the Secretary of Defense," referring to the department's civilian leadership.
The Post estimate of 265,000 contractors doing top-secret work was vetted by several high-ranking intelligence officials who approved of The Post's methodology. The newspaper's Top Secret America database includes 1,931 companies that perform work at the top-secret level. More than a quarter of them - 533 - came into being after 2001, and others that already existed have expanded greatly. Most are thriving even as the rest of the United States struggles with bankruptcies, unemployment and foreclosures.
The privatization of national security work has been made possible by a nine-year "gusher" of money, as Gates recently described national security spending since the 9/11 attacks.
With so much money to spend, managers do not always worry about whether they are spending it effectively.
"Someone says, 'Let's do another study,' and because no one shares information, everyone does their own study," said Elena Mastors, who headed a team studying the al-Qaida leadership for the Defense Department. "It's about how many studies you can orchestrate, how many people you can fly all over the place. Everybody's just on a spending spree. We don't need all these people doing all this stuff."
Most of these contractors do work that is fundamental to an agency's core mission. As a result, the government has become dependent on them in a way few could have foreseen: wartime temps who have become a permanent cadre.
Just last week, typing "top secret" into the search engine of a major jobs website showed 19,759 unfilled positions nationwide.
"We could not perform our mission without them. They serve as our 'reserves,' providing flexibility and expertise we can't acquire," said Ronald Sanders, who was chief of human capital for the Office of the Director of National Intelligence before retiring in February. "Once they are on board, we treat them as if they're a part of the total force."
The Post's investigation is based on government documents and contracts, job descriptions, property records, corporate and social networking websites, additional records, and hundreds of interviews with intelligence, military and corporate officials and former officials. Most requested anonymity either because they are prohibited from speaking publicly or because, they said, they feared retaliation at work for describing their concerns.
The investigation focused on top-secret work because the amount classified at the secret level is too large to accurately track. A searchable database of government organizations and private companies, which can be found at topsecretamerica.com, was built entirely on public records.
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The national security industry sells the military and intelligence agencies more than just airplanes, ships and tanks. It sells contractors' brain power. They advise, brief and work everywhere, including 25 feet under the Pentagon in a bunker where they can be found alongside military personnel in battle fatigues monitoring potential crises worldwide.
Late at night, when the wide corridors of the Pentagon are all but empty, the National Military Command Center hums with purpose. There's real-time access to the location of U.S. forces anywhere in the world, to granular satellite images or to the White House Situation Room.
The purpose of all this is to be able to answer any question the chairman of the Joint Chiefs of Staff might have. To be ready 24 hours a day, every day, takes five brigadier generals, a staff of colonels and senior noncommissioned officers - and a man wearing a pink contractor badge and a bright purple shirt and tie.
"Knowledge engineer" Erik Saar is the only person in the room who knows how to bring data from far afield, fast. Saar and four teammates from a private company, SRA International, teach these top-ranked staff officers to think in Web 2.0. They are trying to push a tradition-bound culture to act differently, digitally.
That sometimes means exchanging ideas on shared Web pages outside the military computer networks dubbed .mil - things much resisted within the Pentagon's self-sufficient culture. "Our job is to change the perception of leaders who might drive change," Saar said.
Since 9/11, contractors have made extraordinary contributions - and extraordinary blunders - that have changed history and clouded the public's view of the distinction between the actions of officers sworn on behalf of the United States and corporate employees with little more than a security badge and a gun.
Contractor misdeeds in Iraq and Afghanistan have hurt U.S. credibility in those countries as well as in the Middle East. Abuse of prisoners at Abu Ghraib, some of it done by contractors, helped ignite a call for vengeance against the United States that continues today. Security guards working for Blackwater added fuel to the five-year violent chaos in Iraq and became the symbol of an America run amok.
Contractors in war zones, especially those who can fire weapons, blur "the line between the legitimate and illegitimate use of force, which is just what our enemies want," Allison Stanger, a professor of international politics and economics at Middlebury College and the author of "One Nation Under Contract," told the independent Commission on Wartime Contracting at a hearing in June.
Misconduct happens, too. A defense contractor formerly called MZM paid bribes for CIA contracts, sending Randy "Duke" Cunningham, who was a California congressman on the intelligence committee, to prison. Guards employed in Afghanistan by ArmorGroup North America, a private security company, were caught on camera in a lewd-partying scandal.
But contractors have also advanced the way the military fights. During the bloodiest months in Iraq, the founder of Berico Technologies, a former Army officer named Guy Filippelli, working with the National Security Agency (NSA), invented a technology that made finding roadside-bomb makers easier and helped stanch the number of casualties from improvised explosives, according to NSA officials.
Contractors have produced blueprints and equipment for the unmanned aerial war fought by drones, which have killed the largest number of senior al-Qaida leaders and produced a flood of surveillance videos. A dozen firms created the transnational digital highway that carries the drones' real-time data on terrorist hide-outs from overseas to command posts throughout the United States.
Private firms have become so thoroughly entwined with the government's most sensitive activities that without them important military and intelligence missions would have to cease or would be jeopardized. Some examples:
- At the Department of Homeland Security (DHS), the number of contractors equals the number of federal employees. The department depends on 318 companies for essential services and personnel, including 19 staffing firms that help DHS find and hire even more contractors. At the office that handles intelligence, six out of 10 employees are from private industry.
- The NSA, which conducts worldwide electronic surveillance, hires private firms to come up with most of its technological innovations. The NSA used to work with a small stable of firms; now, it works with at least 484 and is actively recruiting more.
- The National Reconnaissance Office cannot produce, launch or maintain its large satellite surveillance systems, which photograph countries such as China, North Korea and Iran, without the four major contractors it works with.
- Every intelligence and military organization depends on contract linguists to communicate overseas, translate documents and make sense of electronic voice intercepts. The demand for native speakers is so great, and the amount of money the government is willing to pay for them is so huge, that 56 firms compete for this business.
- Each of the 16 intelligence agencies depends on corporations to set up its computer networks, communicate with other agencies' networks, and fuse and mine disparate bits of information that might indicate a terrorist plot. More than 400 companies work exclusively in this area, building classified hardware and software systems.
Hiring contractors was supposed to save the government money. But that has not turned out to be the case. A 2008 study published by the Office of the Director of National Intelligence found that contractors made up 29 percent of the workforce in the intelligence agencies but cost the equivalent of 49 percent of their personnel budgets. Gates said that federal workers cost the government 25 percent less than contractors.
*****
Washington's corridors of power stretch in a nearly straight geographical line from the Supreme Court to the Capitol to the White House. Keep going west, across the Potomac River, and the unofficial seats of power - the private, corporate ones - become visible, especially at night. There in the Virginia suburbs are the brightly illuminated company logos of Top Secret America: Northrop Grumman, SAIC, General Dynamics.
Of the 1,931 companies identified by The Post that work on top-secret contracts, about 110 of them do roughly 90 percent of the work on the corporate side of the defense-intelligence-corporate world.
To understand how these firms have come to dominate the post-9/11 era, there's no better place to start than the Herndon, Va., office of General Dynamics. Ten years ago, General Dynamics' center of gravity was the industrial port city of Groton, Conn., where workers churned out submarines. Today, the firm's commercial core is made up of data tools such as the digital imagery library and the secure BlackBerry-like device used by President Barack Obama.
The evolution of General Dynamics was based on one simple strategy: Follow the money.
It embraced the emerging intelligence-driven style of warfare. It developed small-target identification systems and equipment that could intercept a single insurgent's cellphone and laptop communications. It found ways to sort the billions of data points collected by intelligence agencies into piles of information that a single person could analyze.
It also began gobbling up smaller companies that could help it dominate the new intelligence landscape, just as its competitors were doing. Between 2001 and 2010, the company acquired 11 firms specializing in satellites, signals and geospatial intelligence, surveillance, reconnaissance, technology integration and imagery.
On Sept. 11, 2001, General Dynamics was working with nine intelligence organizations. Now it is has contracts with all 16. Its employees fill the halls of the NSA and DHS. The corporation was paid hundreds of millions of dollars to set up and manage DHS's new offices in 2003, including its National Operations Center, Office of Intelligence and Analysis and Office of Security. Its employees do everything from deciding which threats to investigate to answering phones.
General Dynamics' bottom line reflects its successful transformation. It also reflects how much the U.S. government - the firm's largest customer by far - has paid the company beyond what it costs to do the work. The company reported $31.9 billion in revenue in 2009, up from $10.4 billion in 2000. Its workforce has more than doubled in that time, from 43,300 to 91,700 employees, according to the company.
Revenue from General Dynamics' intelligence- and information-related divisions, where the majority of its top-secret work is done, climbed to $10 billion in the second quarter of 2009, up from $2.4 billion in 2000, accounting for 34 percent of its overall revenue last year.
The company's profitability is on display in its Falls Church, Va., headquarters. There's a soaring, art-filled lobby, bistro meals served on china enameled with the General Dynamics logo, and an auditorium with seven rows of white leather-upholstered seats, each with its own microphone and laptop docking station.
General Dynamics now has operations in every corner of the intelligence world. It helps counterintelligence operators and trains new analysts. It has a $600 million Air Force contract to intercept communications. It makes $1 billion a year keeping hackers out of U.S. computer networks and encrypting military communications. It even conducts information operations, the murky military art of trying to persuade foreigners to align their views with U.S. interests.
"The American intelligence community is an important market for our company," said General Dynamics spokesman Kendell Pease. "Over time, we have tailored our organization to deliver affordable, best-of-breed products and services to meet those agencies' unique requirements."
This year, General Dynamics' overall revenue was $7.8 billion in the first quarter, Jay Johnson, the company's chief executive and president, said at the earnings conference call in April. "We've hit the deck running in the first quarter," he said, "and we're on our way to another successful year."
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In the shadow of giants such as General Dynamics are 1,814 small to midsize companies that do top-secret work. About a third of them were established after Sept. 11, 2001, to take advantage of the huge flow of taxpayer money into the private sector. Many are led by former intelligence agency officials who know exactly whom to approach for work.
Abraxas, of Herndon, headed by a former CIA spy, quickly became a major CIA contractor after 9/11. Its staff even recruited midlevel managers during work hours from the CIA's cafeteria, former agency officers recall.
Other small and medium-size firms sell niche technical expertise such as engineering for low-orbit satellites or long-dwell sensors. But the vast majority have not invented anything at all. Instead, they replicate what the government's workforce already does.
Of all the different companies in Top Secret America, the most numerous by far are the information technology, or IT, firms. About 800 companies do nothing but IT.
Some IT companies integrate the mishmash of computer systems within one agency; others build digital links between agencies; still others have created software and hardware that can mine and analyze vast quantities of data.
The government is nearly totally dependent on these firms. Their close relationship was on display recently at the Defense Intelligence Agency's annual information technology conference this spring in Phoenix. The agency expected the same IT firms angling for its business to pay for the entire five-day get-together, a DIA spokesman confirmed.
And they did.
General Dynamics spent $30,000 on the event. It hosted a party at Chase Field, a 48,569-seat baseball stadium, reserved exclusively for the conference attendees. Government buyers and corporate sellers drank beer and ate hot dogs while the DIA director's morning keynote speech replayed on the gigantic scoreboard.
Carahsoft Technology, a DIA contractor, invited guests to a casino night where intelligence officials and vendors ate, drank and bet phony money at craps tables run by professional dealers. The McAfee network security company, a Defense Department contractor, welcomed guests to a Margaritaville-themed social where 250 firms paid thousands of dollars each to advertise their services and make their pitches to intelligence officials walking the exhibition hall.
Government officials and company executives say these networking events are critical to building a strong relationship between the public and private sectors.
"If I make one contact each day, it's worth it," said Tom Conway, director of federal business development for McAfee.
As for what a government agency gets out of it: "Our goal is to be open and learn stuff," said Grant Schneider, the DIA's chief information officer and one of the conference's main draws. By going outside Washington, where many of the firms are headquartered, "we get more synergy. ... It's an interchange with industry."
These types of gatherings happen every week. Many of them are closed to anyone without a top-secret clearance.
At a U.S. Special Operations Command conference in Fayetteville, N.C., in April, vendors paid for access to some of the people who decide what services and gadgets to buy for troops. In mid-May, the national security industry held a black-tie evening funded by the same corporations seeking business from the defense, intelligence and congressional leaders seated at their tables.
Such coziness worries other officials who believe the post-9/11 defense-intelligence-corporate relationship has become, as one senior military intelligence officer described it, a "self-licking ice cream cone."
Another official, a lifelong conservative staffer on the Senate Armed Services Committee, described it as "a living, breathing organism" impossible to control or curtail. "How much money has been involved is just mind-boggling," he said. "We've built such a vast instrument. What are you going to do with this thing? ... It's turned into a jobs program."
Even some of those gathered in Phoenix criticized the size and disjointedness of the intelligence community and its contracting base. "Redundancy is the unacceptable norm," Lt. Gen. Richard Zahner, Army deputy chief of staff for intelligence, told the 2,000 attendees. "... Are we spending our resources effectively? ... If we have not gotten our houses in order, someone will do it for us."
Another speaker, Kevin Meiners, a deputy undersecretary for intelligence, gave the audience what he called the key to thriving even when the Defense Department budget eventually stabilizes and stops rising so rapidly.
"Overhead," Meiners told them, is going to get cut first. And that means IT, the very products and services sold by the businesspeople in the audience.
"You should describe what you do as a weapons system, not overhead," Meiners instructed. "Overhead to them - I'm giving you the secret sauce here - is IT and people. ... You have to foot-stomp hard that this is a war-fighting system that's helping save people's lives every day."
Staff researcher Julie Tate contributed to this report.
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