THE BLOG
10/15/2012 10:59 am ET Updated Dec 12, 2012

A Contractor, Wrapped in Mystery, Inside an Enigma

The use of private contractors is not just for the Pentagon or the State Department. It is also for that frequently crashing collection of agencies euphemistically known as the intelligence community (IC).

I have written previously on this but let's consider some of the costs of using contractors in the IC. The following is taken from a paper, "'We Can't Spy ... If We Can't Buy!': The Privatization of Intelligence and the Limits of Outsourcing 'Inherently Governmental Functions" by Simon Chesterman of the National University of Singapore Faculty of Law, presented at a meeting of the International Studies Association in San Diego back in April. Chesterman is author of the book One Nation Under Surveillance: A New Social Contract to Defend Freedom Without Sacrificing Liberty, published last year.

Just like old Pentagon contractors, IC contractors can go way over budget. One example was the "National Security Agency's contract with Science Applications International Corporation (SAIC) to modernize its ability to sift vast amounts of electronic information with a proposed system known as 'Trailblazer,'" according to Chesterman's work.

"Between 2002 and 2005, the project's $280 million budget ballooned to over $1 billion and was later described as a 'complete and abject failure'. Perhaps the most spectacular such failure was Boeing's Future Imagery Architecture, a 1999 contract with the National Reconnaissance Office (NRO) to design a new generation of spy satellites. It was finally cancelled in 2005 after approximately ten billion dollars had been spent. Nevertheless the pool of potential contractors -- in particular given the requirement for security clearances -- remains small. Thus when the NSA sought a replacement to the failed Trailblazer, the contractor it retained to develop the new programme ExecuteLocus was SAIC."

More sensitive however is using contractors for covert operations. In Iraq, U.S. reliance on contractors appears to have extended also to recruiting and managing human intelligence sources. In 2004:

"Aegis Defence Services, a British company, was awarded a $300 million contract that explicitly required hiring a team of analysts with 'NATO equivalent SECRET clearance'; responsibilities included 'analysis of foreign intelligence services, terrorist organizations, and their surrogates targeting [Department of Defense] personnel, resources and facilities."

Turning to the private sector for assistance in warrantless electronic surveillance, one of the notable scandals of the Bush administration, was also problematic.

"Examples of potential problems in outsourcing collection in this manner are not hard to find. As a result of an 'apparent miscommunication', an Internet provider complying with a warrant to forward e-mails from one account instead gave the FBI e-mails from every account on the domain for which it served as host. Intelligence officials refer to this as 'overproduction', when third parties provide them with more information than actually required. In the case of the NSA's programme, the absence of the requirement for a warrant, the secrecy of the programme, and the self-interest of companies engaging in legally questionable activity suggest little reason for confidence in oversight. Legislators only became involved after the story had become public."

Then, of course, there is the blindingly obvious problem of ensuring effective accountability over agencies and that day-to-day routine activities are cloaked in secrecy. This only gets worse when involving the private sector.

According to Chesterman:

"Oversight and review of intelligence services is always difficult given the secrecy necessary for many of their activities to be carried out effectively. In the case of privatization of these services within the U.S. intelligence community, however, secrecy appears to have compounded ignorance."

In May 2007, the House Permanent Select Committee on Intelligence reported that the leaders of the U.S. intelligence community:

"do not have an adequate understanding of the size and composition of the contractor work force, a consistent and well-articulated method for assessing contractor performance, or strategies for managing a combined staff-contractor workforce. In addition, the Committee is concerned that the Intelligence Community does not have a clear definition of what functions are 'inherently governmental' and, as a result, whether there are contractors performing inherently governmental functions.

[...]

In addition to undermining effective oversight either by formal or informal means, such as media scrutiny, access to secrets creates the possibility of abuse of those secrets. In 2006, the Boeing Corporation, a major defence contractor, agreed to a $565 million civil settlement arising from its use of sensitive bid information to win rocket launch contracts. The information had been provided by an engineer formerly to talk to employed by a competitor for the contracts, who had moved to the Department of Defense.

The abuse of sensitive information is suggestive of the potential conflict of interest on the part of private actors engaged in intelligence activities. Discussions of this issue frequently paint a somewhat idealized picture of the patriotism and competence of full-time government employees, but there are reasonable grounds to be wary of inserting a profit motive into intelligence activities. The former head of the CIA's clandestine service has been quoted as saying that 'There's a commercial side to it that I frankly don't like ... I would much prefer to see staff case officers who are in the chain of command and making a day-in and day-out conscious decision as civil servants in the intelligence business.'"

Finally, given that contractor advocates often argue that the market competition and the drive for profits will ensure proper behavior, Chesterman writes:

"Markets can indeed be an effective form of regulation, but they operate best where there is competition, an expectation of repeat encounters, and a free flow of information. It is far from clear that these qualities apply to the commercial military sector; there is even more reason to be wary of embracing such a philosophy in the realm of intelligence.

Competition is severely restricted by the requirement that intelligence contractors meet security clearances. The process of granting new clearances is famously inefficient while the government frequently needs to hire people quickly. The 'market' thus tends to be dominated by former military and civilian officials who already have such clearances, exacerbating the 'brain drain' cited earlier and creating predictable monopoly-type problems."

In 1939 Winston Churchill said about Russia, "It is a riddle, wrapped in a mystery, inside an enigma." Perhaps today we should say about the IC use of contractors that it is an inscrutable puzzle, wrapped in opaqueness, inside a labyrinth.