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David Isenberg

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No Wonder It's Classified: The Effectiveness of Intelligence Outsourcing?

Posted: 07/24/2012 2:23 pm

Over the past decade, due to U.S. military campaigns in Iraq and Afghanistan the Pentagon has both proactively and often to external pressure from Congress and public pressure, more greatly regulated its use of private contractors, whether those doing logistics or security work.

But there is one glaring exception to that trend; the Department of Defense's (DOD) use of commercial intelligence contractors. The use of intelligence outsourcing may be "financially and structurally deleterious and undermines American constitutional governance when contractors are allowed to perform inherently governmental activities," according to a master's thesis paper, written last year by Georgetown University student Jacob B. Gale, Intelligence Outsourcing In The U.S. Department Of Defense: Theory, Practice, And Implications.

Gale, by the way, is no typical grad student. He worked with and supervised defense intelligence contractors during the course of his post-9/11 government career.

While I've written on this topic before (see, for example, here and here), this critically important topic still remains under covered, aside from now classic works like Tim Shorrock's Spies for Hire; Managing the Private Spies: The Use of Commercial Augmentation for Intelligence Operation by Glenn Voelz; and the Washington Post's 2010 investigative series Top Secret America.

What are some of Gale's concerns? To start, he feels that one longstanding problem with private military contractors also affects intelligence contractors, i.e., their performing inherently governmental functions that should only be performed by public servants, not private enterprise. An example is the Counterintelligence Field Activity (CIFA), a now-defunct organization created in 2002 and tasked with developing and managing counterintelligence (CI) programs and functions to protect the Pentagon.

According to some estimates, contractors accounted for up to 70 percent of CIFA's workforce, raising concerns over whether the government could effectively oversee service contractors' activities. Judging from CIFA's record prior to its disestablishment, it failed to effectively to do so. The Defense Department Inspector General (IG) received a series of complaints beginning in 2004 that CIFA was committing mismanagement and abuse that involved its contract workforce. An IG report published in 2006 substantiated several of these complaints, including that CIFA was using contractors to prepare SOW for which they were beneficiaries and that contractors were directing and authorizing each others' work in direct contravention of the FAR (Federal Acquisition Regulation] and DFARS [Defense Federal Acquisition Regulations].

Another example would be the involvement of CACI company interrogators in the now infamous torture and abuse scandal at Abu Ghraib prison in Iraq. Although this is well known and documented Gale points out that, aside from all the other problems:

The CACI interrogation contract was flawed from the outset. The Army investigation found the contract's SOW [Statement of Work] had been authored in conjunction with a CACI employee prior to award, a violation of the FAR and DFARS. A subsequent GAO investigation found that government personnel abdicated their responsibilities and allowed CACI to perform procurement functions reserved for government personnel.

While one can argue, as contractor advocates often do, that these cases are outliers and exceptions, and not typical, Gale wrote "that the observed failures are symptomatic of an underlying pathology. In both cases the department's contracting practices stretched or violated legislation, policy, and regulations intended to optimize the use of taxpayer dollars and guarantee that inherently governmental functions are reserved only for government personnel."

When one adds in the sheer layers of secrecy that intelligence activities are typically wrapped in it is easy to see how the use of contractors could easily get out of hand very quickly.

If moral and ethical considerations don't engage you however, perhaps money will. The classic argument for the use of contractors is that they are cheaper than using their public sector counterparts. While that may be true for picking up the garbage it seems doubtful when it comes to the intelligence community. Gale writes:

According to an often-cited congressional estimate, Intelligence Community "core contractors" cost on average $250,000 annually, as compared to $126,500 for comparable government employees. These figures first appeared in the Intelligence Authorization Act for fiscal year 2008, but were not further explicated. In other words, it is unclear what costs were included in the topline numbers. Nevertheless, the fact that contractors may be approximately twice as expensive as government employees collapses the once-prevalent argument that contractors are more cost effective than government employees.

Note that this does not include additional hidden transaction costs such as administering the contracting process from solicitation to award and monitoring contractor performance once an award has been made. Contractor advocates traditionally claim that marketplace competition drives down costs but Gale notes that "outsourcing functions with a high level of idiosyncrasy (i.e., specialization) can significantly increase transaction costs by making it difficult to switch vendors and reducing the population of vendors capable of competing for a given contract."

Even worse, as costs increase quality suffers. Transaction cost economic theory finds that "firms will take advantage of this idiosyncrasy by standardizing services to achieve economies of scale rather than tailoring their services to the unique needs of individual firms. Thus the hidden costs of outsourcing can be accompanied by diminished quality of support."

There is a lot more useful material in the paper but consider that, since the 9/11 attacks, all observers, regardless of political party or ideology, agree than an effective intelligence community is critical to preserving the safety and security of America. Yet, "Where the Defense Department achieved cost savings through contracting it did so by outsourcing commercial and non-core functions. To the extent that the defense intelligence enterprise contracts out core functions--as it clearly does--it risks compromising its performance and mission effectiveness in return for negligible savings," according to Gale.

 
 
 

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