ir4099 - outsourcing of us intelligence dissertation v2
TRANSCRIPT
THE OUTSOURCING OF U.S. INTELLIGENCE
Robert Akira Watson (110001586)
This dissertation is submitted in part requirement for the Degree of M.A. (Honors with International Relations) at the University of St Andrews,
Scotland, and is solely the work of the above named candidate.
24 April 2015 12,600 words
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TABLE OF CONTENTS
Abstract………………………………………………………………………….……………………………………...2 I−Introduction………………………………………………………………………………………………………..3 II−Intelligence Contracting……………………………………………………………………………………...5 III−The U.S. Intelligence Community and its Place in Government……………………………..11 IV−Bureaucracy and Bureaucratic Politics……………………………………………………………...14 V−Privatization and Principal-‐Agent Theory…………………………………………………………..21 VI−Issues with Intelligence Contracting………………………………………………………………….28 VII−The IC’s Demand for Expertise…………………………………………………………………………45 VIII−Conclusion…………………………………………………………………………………………………….52 Appendix: Glossary of Acronyms……………………………………………………………………………..53 References…………………………………………………………………………………………………………....54
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ABSTRACT
Private contracting in U.S. intelligence is a $50 billion per year industry that has
received little public and academic attention. This paper aims to shed light on this
topic by evaluating what happens when contractors, as private actors, are deeply
involved in as sensitive an activity as intelligence, traditionally reserved to
government. To support discussion, frameworks for public and private provision are
developed, and principal-‐agent theory is extensively used. Intelligence contracting is
studied by considering the problematic issues that arise in the private provision of
different intelligence functions. These issues taken whole provide a substantive
argument against outsourcing intelligence to contractors. The Intelligence
Community’s unique demands for expertise provide the thrust of the argument in
favor of bounded intelligence contracting. Through its dialectical approach, this
paper is able to generate normative prescriptions for the appropriate use of private
contractors in intelligence.
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THE OUTSOURCING OF U.S. INTELLIGENCE
I. INTRODUCTION This paper examines the subject of intelligence contracting. The involvement of
private contractors in the most sensitive functions of government has been a rising
silent trend over the past two decades, most prevalent in the United States; as such,
this paper exclusively deals with contracting in within the 17-‐member U.S.
Intelligence Community (IC). Intelligence contracting raises serious, troubling
questions about conflict of interest, democratic accountability, and the nature of
government responsibility, to name a few. This paper seeks to understand the
dynamics at work when contractors, as private actors, participate in what most would
consider inherently governmental functions, and from this, derive a normative
conclusion on whether this involvement is appropriate.
The weight of the legal and ethical issues associated with intelligence
contracting contrasts with the dearth of public and academic attention the subject has
received. Pervasive secrecy surrounds intelligence, extending to the use of
contractors. Official figures are difficult to come by; intelligence budgets are
classified and contracting companies are usually not at liberty to disclose their work
with the IC in much detail (Shorrock, 2008: 17). Secrecy creates real barriers to
scholarship (Crampton, Roberts, and Poorthuis, 2014: 197). There has been scant
research devoted specifically to intelligence contracting (Shorrock, 2008;
Chesterman, 2008; Crampton et al., 2014; Hansen, 2006; Krishnan, 2011). The topic
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does sometimes receive passing mention in the larger study of private military
contracting as well as intelligence (Chesterman and Lednardt, 2009; Isenberg, 2009;
Singer, 2008).
This paper makes full use of the above material, as well as unclassified
government reports on IC contracting. However, achieving this paper’s objectives
requires going outside the strict purview of international relations and political
science. I enlist scholarship in public administration, bureaucracy, and privatization
to develop a theoretical framework for approaching intelligence contracting. Models
of public and private provision, including their respective advantages and
disadvantages, are conceptualized; intelligence can be construed as a service to be
provided by either. The general role of intelligence in U.S. government is used to
provide a frame of reference for private contracting. Principal-‐agent theory
undergirds much of the paper’s discussion. With these conceptual instruments in
place, intelligence contracting is dissected according to the various issues and
dilemmas it entails. These issues are weighted against the IC’s particular demands
for expertise, from which a final normative assessment of intelligence contracting can
be made.
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II. INTELLIGENCE CONTRACTING Some good scholarship has been written about private military and security
companies (PMSCs) amidst their rising use in the 2000s. PMSCs may offer their
services to state and non-‐state actors, including national militaries and private
businesses, for a fee. Intelligence contractors form a distinct subsection in the PMSC
industry. Their use by the U.S. government is the exclusive focus of this paper.
Writing in 2008, Tim Shorrock estimated the domestic private intelligence market to
be worth $50 billion per year (Shorrock, 2008: 12). According to an unclassified
2007 PowerPoint presentation by the Office of the Director of National Intelligence
(ODNI), spending on private contracts accounted for 70 percent of the intelligence
budget at the time (Shorrock, 2008: 18-‐19). Across the IC, which includes civilian and
military intelligence agencies, contractors are believed to account for 18 percent of
the total workforce (RAND, 2013: 16-‐17). In a follow-‐up to a 2007 ODNI inventory of
the IC workforce, the ODNI’s Chief Human Capital Officer (CHCO) Ronald Sanders
cited contractors as comprising 27 percent of the total IC workforce (ODNI, 2008).
The discrepancy between the 2007 and 2013 figures reflects two factors: First,
intelligence contracting peaked around 2005-‐07, largely in response to surfacing IC
and congressional concern over the practice’s extent (ODNI, 2008). Second, different
intelligence agencies’ commonly use different methodologies for defining what
constitutes a contractor, and more specifically a core contractor (GAO, 2014: 18).
Core and non-‐core contractors. This paper breaks down intelligence contractors by
their use in core and non-‐core capacities. Non-‐core contractors supply a diverse
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range of mainly uncontroversial services, such as staffing cafeterias and grounds
maintenance. Non-‐core also denotes commodity contractors, which sell products like
computers and satellites to the IC (ODNI, 2008). The aforementioned 70 percent
figure includes spending on non-‐core contractors (ODNI, 2008). Due to the relatively
mundane nature of most non-‐core contracting, this paper focuses predominately on
core contractors. Core contractors, as defined by the ODNI, “provide direct support to
core IC mission areas such as collection activities and operations (both technical and
human intelligence [HUMINT]), intelligence analysis and production, basic and
applied technology research and development, acquisition and program
management, and/or management and administrative support to those functions”
(Kennedy, 2006: 1).
In October 2009, the ODNI issued Intelligence Community Directive 612 (ICD
612) to guide IC agencies in their hiring of core contractors, by stipulating
appropriate roles for their use. Directly referenced in ICD 612 is the concern that
core contractors “perform functions closely associated with…inherently
governmental functions” (GAO, 2014: 2). This basic concern undergirds much of the
criticism of military and intelligence outsourcing in general. I return later in the
paper to the inherently governmental standard, which is a federal regulation
supervising contractible activities.
Intelligence contracting companies. A diverse range of firms of different sizes and
specialties define the multibillion-‐dollar private intelligence industry. Shorrock
subdivides the intelligence industry into four classes of companies, led by top tier
systems integrators (Shorrock, 2008: 23). These companies are worth several billion
dollars, possess thousands of security-‐cleared staff, and are involved at nearly every
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level of intelligence, obscuring the public/private sector division in intelligence
(Shorrock, 2008: 23-‐24). Second tier companies provide specialized technical and
analytic services to the IC, often as subcontractors for the systems integrators
(Shorrock, 2008: 24). Third, are small technical firms providing more singular
expertise to intelligence agencies; many of these companies have sprung up since
9/11 and are regularly based around the Washington, D.C. area. They are colloquially
referred to as beltway bandits (Shorrock, 2008: 25). Shorrock’s fourth class of
contractors includes “companies, large and small, that are known primarily for their
achievements in information technology, communications, or satellites [which] have
made major inroads as the [IC] has opened up to contracting” (Shorrock, 2008: 26).
This class of companies includes major telecommunications providers enlisted by the
government after 9/11 to assist in its mass electronic surveillance and data mining
programs (Shorrock, 2008: 307). A common denominator for these companies that
should be apparent is their servicing of the IC’s enormous appetite for technology. In
the proceeding paragraphs I discuss some of the factors that have helped generate
this distinctive demand, which defines contemporary intelligence.
External causal factors for intelligence contracting
Peace dividend and 9/11. With the Cold War’s end, the IC suddenly found itself
missing its primary raison d'être: checking the global communist threat. The peace
dividend of the 1990s saw dramatic cuts in military and civilian intelligence budgets,
leading to equally substantial cuts in personnel. According to CHCO Sanders, the IC’s
workforce peaked between the late 1980s and early 1990s, declining by 40 percent
before bottoming out in 2001 (RAND, 2013: 43). Many of these former government
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employees found work in the private sector, bringing with them their experience,
institutional knowledge, and security clearances (Hansen, 2014: 73).
Whether a fully staffed U.S. intelligence apparatus would have potentially
thwarted the 9/11 attacks is totally open to speculation. What is clear, however, is
that in the immediate aftermath of the attacks there was a massive surge in demand
for intelligence services. Owing to the decimation of its ranks during the 1990s, the
IC found itself unable to meet this demand with in-‐house supply (RAND, 2013: 45).
Much of the expertise the IC needed was now in the private sector, which is where the
IC turned, rapidly expanding capacity with contracted personnel. Between 2002 and
2005, the IC’s spending on contracts rose from $32 billion to $43.5 billion, before the
government began concerted efforts at hiring its own intelligence personnel
internally (Shorrock, 2008: 113-‐114). Partly because of this post-‐9/11 contracting
binge and the dependencies it seeded, it is now virtually impossible for the IC to wean
itself off completely from contracted labor.
New wars and new actors. Different modes of conflict are historically linked to the
chosen means of executing military ends. Singer argues there is a relationship
between mass military demobilization and increased conflict in weak state zones
(Singer, 2008: 38). In this respect, the end of the Cold War (which included a set of
organizing principles for international relations) and the peace dividend “produced a
vacuum in the market of security” (Singer, 2008: 49-‐50). The post-‐9/11 security
paradigm, as part of a broader post-‐Cold War paradigm, views threats as being
unbound to traditional state actors and emanating from asymmetric – often non-‐state
– sources, largely in the form of international terrorism and rogue states (Halperin
and Clapp, 2006: 10-‐11). Michael Hayden, a former director of the CIA and the NSA,
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framed the difference between Cold War and post-‐9/11 intelligence as having to
confront an enemy (the Soviets) that “was easy to find [but] hard to finish” and now
facing a jihadi enemy that “is easy to finish, [just] very, very hard to find” (Shorrock,
2008: 193-‐194).
Two-‐edged technologies. A major factor driving the ongoing shifts in contemporary
threats and conceptions of security is the proliferation of two-‐edged technologies. I
borrow this term from the ODNI’s 2006 “Five Year Strategic Human Capital Plan”
(ODNI, 2006: 3-‐4). Advances in computers, the internet, imagery, and other
information technologies (IT), as key examples, both produce great societal benefits
and complicate the state’s ability to provide security within and outside its borders
because of these technologies’ empowering of non-‐state actors (ODNI, 2006: 3-‐4;
Avant, 2009: 182).
Technological advancements in encryption, IT, communications, and imagery
have fundamentally altered how intelligence is gathered today. Since the 1990s,
these advancements have predominately been made in the commercial sector –
outstripping the government and IC’s ability to keep up (Shorrock, 2007). By the
1990s, “commercial developments in computing power, cryptology, and high-‐speed
telecommunications [had] surpassed” the NSA’s capacity to collect signals intelligence
(SIGINT) and break codes (Shorrock, 2008: 199-‐199). In meeting its obligations as an
agency, the NSA under Hayden turned to the private sector, with its technical
expertise, to help create a SIGINT system able to perform in a world of cell phones
and fiber optics (Shorrock, 2008: 201). The IC has a crucial demand for technological
solutions that can decipher valuable intelligence from the reams of information
available from open sources. In satellites and imagery software, the center of gravity
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today for technical expertise firmly rests in the private sector – boosted in large part
by Clinton-‐era policies to enhance U.S. competitiveness in high technology (Shorrock,
2008: 245).
Contemporary technologies offer powerful tools for intelligence agencies to
conduct their work. However, these same technologies are two-‐edged, in that they
offer similar benefits to previously weak actors with goals contrary to American
interests. There is an overwhelming drive within the IC to harness technological
advances to suit intelligence needs. The commercial-‐driven nature of today’s
technological innovations has meant the IC has had to enlist the help of the private
sector to accomplish this.
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III. THE U.S. INTELLIGENCE COMMUNITY AND ITS PLACE IN GOVERNMENT
This section describes the structure of the U.S. Intelligence Community and the
general role of intelligence in American government.
The Intelligence Community. The U.S. Intelligence Community consists of 17
organizations structured in a loose federation headed by the Director of National
Intelligence (DNI), whose office, the ODNI, is one of the 17 IC members (GAO, 2014:
1). The IC is broadly divided into civilian and military intelligence, represented by the
National Intelligence Program (NIP) and Military Intelligence Program (MIP). Most
government intelligence personnel are military, and 80 percent of the IC’s budget is
under the Pentagon’s jurisdiction, extending to the NSA, National Reconnaissance
Office (NRO), and National Geospatial-‐Intelligence Agency (NGA) – the three most
important collection agencies (Shorrock, 2008: 154). There are significant
differences between the organizational structure of the NIP and the MIP. The MIP’s
primary concern is intelligence for the “planning and conduct of tactical military
operations” (RAND, 2013: 52). The MIP follows a formal chain of command with the
Secretary of Defense at the top (RAND, 2013: 53). In contrast, the civilian-‐based NIP
lacks clear hierarchy and is largely decentralized. Prior to the intelligence reforms of
2004, the CIA’s director served simultaneously as head of the agency and Director of
Central Intelligence (DCI), with responsibility for coordinating the activities of the
entire IC but lacking power to fully exercise this mandate (RAND, 2013: 10). The
2004 reforms, which replaced the DCI with the DNI, were meant to redress this
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problem; however, the DNI still lacks “chain of command authority,” as CHCO Sanders
pointed out in 2007 (RAND, 2013: 10).
Office of the Director of National Intelligence. The Director of National
Intelligence’s position and office were created by the Intelligence Reform and
Terrorism Prevention Act of 2004 (IRTPA). Passage of the IRTPA and the ODNI’s
establishment were motivated by the 9/11 Commission’s recommendation that the IC
develop stronger central leadership to more effectively coordinate intelligence
activities (RAND, 2013: 5). The DNI and his office are tasked with broad
responsibilities, which include coordinating IC functions, facilitating greater
interagency cooperation, and community-‐wide workforce planning (RAND, 2013: 7).
However, as previously pointed out, the IRTPA did not give the ODNI sufficient formal
authority to truly exert centralized control of the IC. As part of its workforce planning
mandate, the ODNI has basic authority to regulate the use of contracted personnel by
IC agencies, as illustrated in its 2009 ICD 612, stipulating appropriate uses for core
contractors. While intelligence agencies generally do follow the ODNI guidelines,
actual execution of workforce policies is at agencies’ discretion (GAO, 2014: 28-‐29).
Role of intelligence in U.S. government. Annual U.S. government spending on
intelligence (civilian and military) totals almost $80 billion (Crampton, Roberts, and
Poorthuis, 2014: 197). As with any bureaucratic organization, intelligence agencies
are intended as an executive tool for implementing decisions made by the state’s
political leaders (Svara, 1999: 687-‐688). However, intelligence agencies are unique
from other bureaucratic actors in that their most basic mission is to provide the
information from which their political superiors can make decisions. Hence, while
these agencies are situated in the government’s bureaucratic hierarchy under
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decision makers, their main sphere of activity can be interpreted as existing one step
ahead of decision-‐making. In addition to providing intelligence and analysis to
decision makers, intelligence agencies are also tasked with conducting covert, or
clandestine, operations: this area is a particular specialty of the CIA.
In practical terms, the IC’s primary responsibility of providing the sensitive
information used as the basis of policy formation and decision-‐making gives it
enormous power in the government. Given the structural power the IC has, U.S.
intelligence agencies are barred from recommending specific policies; in their
estimates and reports to decision makers, including the president, agencies are
instead “limited to predicting the consequences of alternative policies” (Halperin and
Clapp, 2006: 142). The first step in setting the IC’s priorities comes from the White
House’s National Security Strategy (NSS). The broad points conveyed in the NSS are
adapted into the classified National Intelligence Priorities Framework (NIPF), first
introduced in 2003 (RAND, 2013: 34). The NIPF communicates IC-‐wide guidance for
member agencies in determining their resource requirements and matching NSS
goals with individual agencies’ own internal organizational vision (RAND, 2013: 35).
Just as IC members use the NIPF to plan their organizational functions, the ODNI uses
it to develop community-‐wide planning (RAND, 2013: 35).
***
Having conceptualized the basic role of the IC in U.S. government, I explore in Part IV
principles of model bureaucratic administration, and how actual governance
frequently deviates from this model.
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IV. BUREAUCRACY AND BUREAUCRATIC POLITICS
This section considers various theories on bureaucracy, starting with Max Weber’s
foundational work on the topic. I then consider defects in bureaucratic
administration, which center on the premise of bureaucracy as a politically active
agent. Finally, these concepts will be related back to the IC.
Weber’s rational legal bureaucracy. Max Weber’s writings in his Theory of Social
and Economic Organization underlie the classical conception of modern bureaucratic
administration. Weber identifies bureaucratic administration as the purest type of
exercising authority on rational legal grounds (Weber, 2012: 333-‐334). It is
important to note the pure distinction: Weber implies the systems he describes do not
exist in practice as perfect models. Nonetheless, Weber’s work is still normatively
and descriptively valuable in studying bureaucracy. The central advantage of
bureaucracy is its ability to handle complex tasks in a maximally efficient and
consistent manner (O’Connor, 2013). Bureaucracy is able to do this because of its
division of labor into different offices, each with a marked sphere of professional
competence and responsibility (Weber, 2012: 330). As Weber demonstrates, the
exercise of power by bureaucracy is founded on the basis of knowledge; this is what
makes it a supremely rational form of authority (Weber, 2012: 339). Candidates for
office are selected and promoted on a meritocratic basis by their technical
qualifications (Weber, 2012: 333-‐334). Offices are organized by hierarchy,
generating a clear chain of command and appeals/feedback process; this hierarchy
reflects the bureaucracy’s specialized division of labor (Weber, 2012: 331).
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Bureaucracy’s capacity to handle complex tasks is finally cemented by its potentially
vast fiscal and material resources, including human capital (Hill, 1991: 271). These
resources and concentration of competencies tend to put public administration at a
distinct advantage over competitors in providing certain goods and services, often
resulting in the state being a monopoly provider of said goods and services.
Interestingly for this paper, one of services associated by Weber with monopoly
provision by the state is the legitimate use of force: military and intelligence
contracting plainly challenge this idea.
Weber’s formal model of legal bureaucracy is the essential starting point for
understanding how bureaucracies and public provision work, or at least are
supposed to work. In the following paragraphs, I consider two general criticisms of
bureaucratic administration, which are followed by the bureaucratic politics
perspective.
Two criticisms of bureaucracy
Subject to grooved thinking. While Weber idealized bureaucracy for its competence
and ability to handle complex tasks, the term bureaucratic has negative connotations
for most of the public (O’Connor, 2013). It conjures an image of administration that
tends to be remote, inflexible, and slow. The complex tasks bureaucracies are
responsible for managing are often rife with uncertainties; this is no truer than in
foreign and security policy. In dealing with these uncertainties, large organizations,
like bureaucracies, and their staff adopt particular assumptions and images to help
instruct their work (Halperin and Clapp, 2006: 21-‐22). How these images are formed,
whether other individuals share them, and how they guide thinking and action
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depends on a wide range of variables; however, a good place to start looking is the
actor’s position in context. Most bureaucrats, especially in low to mid-‐level positions,
exhibit what is called grooved thinking: in looking at a given situation or problem,
they are inclined “to focus on a few key variables and [have] a programmed response
to those particular variables” (Halperin and Clapp, 2006: 22). Bureaucratic
administrations tend to condition grooved thinking because they regularly confront
complex problems and are principled on producing stable, consistent results in
dealing with these problems.
Bureaucratic administration as antidemocratic? Since the inception of modern
bureaucratic administration, bureaucracy’s concentration of resources and technical
expertise on a large scale in unelected officials has elicited concerns over its potential
threat to democratic accountability (O’Connor, 2013; Svara, 1999). These concerns
are related to the general perception of bureaucracy as remote and its treatment as a
black box (even among academics), owing to the complexities and scale of its
operations (Hill, 1991: 266). The apparent separateness between bureaucratic
administration and democratic politics, and the concerns this generates, stems from
bureaucracy’s operating principle of exercising authority based on specific neutral
expertise – not popular support (Svara, 1999: 677). Sometimes the public regards
this separateness positively; in highly partisan American politics, bureaucrats can be
viewed as honest, unbiased brokers (Hill, 1991: 273). Adhering to the classical
conception of bureaucracy as an administrator but not a decision maker, a certain
degree of political disengagement is necessary for the successful implementation of
policy.
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Having considered these two criticisms of bureaucracy, I now examine the
argument that bureaucracies are actively political agents, with independent interests
and decision-‐making processes not necessarily constrained by Weber’s views on
neutral, rationally-‐based authority.
Bureaucratic politics. As Hill writes, “in the long run, political issues become
bureaucratic issues” (Hill, 1991: 272). In most cases where public decision makers,
such as Congress and the president, delegate authority to bureaucratic or executive
bodies, they allow these agencies discretion in determining the terms and substance
of their mandate (Laffont, 1990: 1344). While bureaucratic agents have a supposed
professional obligation to serve the public interest in a neutral fashion, this entrusted
discretion means that ultimately it is their choice to decide how to conduct their
activities. Moreover, the notion of acting in the public interest is almost impossible to
verify because it is too ambiguous a term to feasibly define (Levine and Forrence,
1990: 181). In foreign and security policy, including intelligence, actors are working
in the similarly vague national interest (Halperin and Clapp, 2006: 9). The result is
that agents in either setting will pursue their own private conceptions of the public
and national interest (Halperin and Clapp, 2006: 9).
The bureaucratic politics perspective argues that bureaucratic actors
formulate their version of the national interest along their interests as an
organization. Bureaucracy is not a monolithic actor (Hill, 1991: 274). It may seem
obvious, but it is necessary to remember that U.S. government is populated by a
multitude of different agencies, whose responsibilities, or turfs, frequently overlap in
jurisdictional gray areas. In the American system of government, there is moreover
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no inherent guarantee of an agency’s permanent survival; in order to secure their
present and future position in government, bureaucratic agencies “must be politically
proactive” (Hill, 1991: 272-‐273). Bureaucratic actors are acutely aware of the
implications of decisions made by their political leaders, especially concerning
budgets (Halperin and Clapp, 2006: 26). They will pursue an audience with decision
makers when topics at hand intersect with their perceived organizational interests,
and will advance their interests in these settings, in concert with other bureaucratic
actors sharing similar organizational motivations (Hill, 1991: 287). This process
produces outcomes that therefore do not reflect a purely rational pursuit of the public
and national interest but rather the result of bargaining among involved parties (Hill,
1991: 287).
Application to the IC. In the final portion of Part III, I discussed the IC’s model role in
U.S. government. The basic conceptualization presented there more closely
resembles Weber’s work on bureaucracy – as a neutral executive instrument – than it
does bureaucratic politics. The remainder of Part IV applies this latter model to
further develop understanding of the IC’s role in government.
Within the IC, interagency conflict is clearly seen in competition between the
CIA and armed services over control of covert operations (Halperin and Clapp, 2006:
40). That there exist numerous redundant functions between civilian and military
intelligence agencies suggests a prevailing concern for achieving and preserving
organizational autonomy. The arrival of new actors and threats in foreign and
security policy has a causal relationship to the means chosen to address them: this
casual relationship is furthermore impacted on both sides by new technological
developments. What means are chosen can create new operational areas and
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reorganize old ones for competing bureaucratic agencies, producing rippling effects
in budgets and instigating turf wars. A contemporary example of these processes in
play is the ongoing debate between the CIA and Pentagon about operational control
over drone warfare (Harman, 2015: 101).
Just as American bureaucracy is not monolithic, neither are the individual
bureaucratic agencies themselves. Internal debate over what should be a given
organization’s essence is another area of bureaucratic politics. While the NSS and
NIPF provide some guidance towards setting IC members’ goals and needed
capabilities, the agencies still preserve considerable freedom in ultimately
determining these factors (Halperin and Clapp, 2006: 26). Returning to the CIA’s
drone program, the use of drones for targeted killings has produced notable
apprehension among many CIA officers about what it entails for the agency’s
organizational essence (Harman, 2015: 100-‐101). Within the CIA, there are three
rough groups of opinion about what should be the agency’s primary focus:
intelligence gathering, covert operations, and intelligence analysis (Halperin and
Clapp, 2006: 34).
Internal and interagency competition impacts how information is transmitted
to senior officials and decision makers (Halperin and Clapp, 2006: 49). Although the
IC is formally limited to evaluating alternative policy courses and cannot endorse a
particular option, intelligence agencies can still effectively signal their given
preferences in weighting the consequences of alternative policies (Halperin and
Clapp, 2006: 142). Additionally, the predilection for autonomy can hinder sharing of
intelligence between agencies, with potentially deleterious consequences. The 9/11
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Commission’s criticism of the CIA and FBI’s failure to share potentially valuable
intelligence prior to 9/11 can be read this way (Halperin and Clapp, 2006: 147-‐148).
Concerns about the democratic accountability of bureaucratic organizations
are no more relevant than they are with intelligence. Public accountability through
congressional oversight of intelligence is severely constrained by the pervasive
secrecy that surrounds intelligence activities. Only select members of Congress are
permitted to review the doings of the IC, with strict limitations on disclosure of
information obtained by these members (Halchin and Kaiser, 2012: 34). This secrecy
and deficit of oversight are typically justified on the grounds of national security
(Nathan, 2009: 2), which essentially means intelligence agencies get to determine the
amount of oversight they receive. One of the few potent oversight mechanisms that
exists in intelligence is informal leaks, which I briefly consider in Part VI.
***
This section has attempted to demonstrate that government bodies, including
intelligence agencies, can and do deviate from norms of ideal public administration.
To determine in a balanced fashion whether it is appropriate for the government to
outsource intelligence capabilities, it is necessary to have good understanding about
how public provision of these services works.
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V. PRIVATIZATION AND PRINCIPAL-‐AGENT THEORY This section provides basic mechanisms of private provision of goods and services,
which go some way in illuminating the motivations for privatizing publically-‐
administered services, like intelligence. I also formally introduce principal-‐agent
theory, and its real world application in contracts.
Reinventing U.S. government. In the United States, faith in markets and skepticism
with government provision cross Republican and Democratic party lines, and have
done so more or less since the Reagan administration (Freeman, 2003: 1292-‐1293).
Buttressing these beliefs is neoliberalism, an economic and political doctrine
skeptical of the concentration of power and resources in the central government and
which aims to delegate as many functions as possible to the private sector (Kruck,
2014: 119). Privatization serves as a key vehicle for achieving neoliberalism’s
minimal state (Kruck, 2014: 119).
During Clinton’s administration, Vice President Al Gore was tasked with
leading the National Performance Review (also known as the “Reinventing
Government” initiative); this policy’s basic purpose was to assess which government
services should remain public and which should be opened to privatization and
contractor bidding (Freeman, 2003: 1293). The inherently governmental standard
was formally developed at this time. (Chesterman, 2008: 1069-‐1070). According to
the Federal Activities Inventory Reform (FAIR) Act of 1998, inherently governmental
describes functions “so intimately related to the public interest as to require
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performance by Federal Government employees” (FAIR Act, 2000). The Federal
Acquisition Regulation (FAR), which governs the federal government’s purchasing of
goods and services (including contractors), lists in Subpart 7.5 specific functions it
considers inherently governmental, for which contractors cannot be used (FAR,
2006). However, the FAR list is “not all inclusive,” which leaves agencies discretion in
determining whether a given function meets the FAR standard for inherently
governmental (FAR, 2006). The result is that the inherently governmental standard
acts less to protect public provision of certain services than it does to justify having
them provided by the government in the first place (Chesterman, 2008: 1069-‐1070).
This paper returns to the inherently governmental standard in both Parts VI and VII.
Private provision mechanisms. Weber describes the profit motive as “the ultimate
driving force of all economic activity” in a market economy (Weber, 2012: 320-‐321).
Private businesses are purposely organized to maximize profits, which sustain the life
of an enterprise (Trebilcock and Iacobucci, 2003: 1424). Businesses, as producers of
goods and services, in a model free market compete against one another to satisfy
consumer demands (Avant, 2009: 181). A firm’s performance and subsequent net
capital accumulation (profit) is determined by how well the firm supplies its
consumers’ demands in relation to other firms. Failure to sufficiently meet consumer
demands and generally poor performance and waste can jeopardize a firm’s profits
and thus its survival (Trebilcock and Iacobucci, 2003: 1436). The profit motive,
market competition, and the risk of failure combine to strongly incentivize a firm’s
performance: the basic principles of market discipline (Trebilcock and Iacobucci,
2003: 1436). Free market and privatization advocates use this concept of market
discipline to argue that markets naturally self-‐regulate, as well as to argue against
public provision and government regulations.
23
There is good reason to be skeptical of the proposition that markets self-‐
regulate. Versus the hard controls government regulation provides, market-‐based
regulatory mechanisms are essentially voluntary (Cockanye, 2009: 207-‐208). While
the profit motive underlies the notion of market discipline, there are certainly
situations where it can lead to a firm’s determination that “going for the ‘quick score’
is worth the risks of long-‐term market costs” (Singer, 2008: 224).
Private versus public provision. Private businesses are motivated to maximize
their profits. As discussed, these profits are contingent in an ideal marketplace upon
how well a firm satisfies its consumers’ demands in comparison to the firm’s
competitors. Thus, market discipline means that producers (private firms) are
broadly accountable to the demands of their consumers, which can be determined
quantitatively in the form of the firm’s earnings. It is worth noting that privatization
advocates elevate utility as conceived in economic terms, and mostly neglect other
potentially important intrinsic values relevant in provision (Freeman, 1296-‐1297).
The primary motivation for privatization is to improve efficiency: delivering high-‐
quality goods and services at the minimum possible cost (Freeman, 2003: 1296-‐
1297).
Privatization advocates argue the effectiveness of strictly legal accountability
mechanisms should not be overstated, including the notion of hierarchal control
embedded in bureaucratic theory (Trebilcock and Iacobucci, 2003: 1447-‐1448).
Public agencies typically lack the incentives towards maximizing performance and
minimizing costs competitive market discipline conditions (Freeman, 2003: 1297-‐
1298). Moreover, these agencies have soft budget constraints, as their operations are
24
generally guaranteed by taxpayer dollars regardless of performance (Laffont and
Tirole, 1991: 88). In comparison, private providers are strongly incentivized by
market discipline to maintain accountability to their consumers’ demands and to
deliver goods and services efficiently (Freeman, 2003: 1297-‐1298). In arguing for
privatization, Trebilcock and Iacobucci offer the following summary: “Market-‐based
accountability is not merely an incidental benefit of privatization; [rather] the
benefits of privatization arise largely because of the accountability generated by
private markets” (Trebilcock and Iacobucci, 2003: 1447-‐1448).
Principal-‐agent theory. Undergirding discussion of private and public provision is
principal-‐agent theory. Originally developed in economics, principal-‐agent theory
describes when a client or supervisor (principal) tasks a provider or subordinate
(agent) to do a job (O’Connor, 2013). The principal is interested in seeing the job
completed properly, and grants the agent some independent discretion, called slack,
to fulfill the principal’s directive (Cockanye, 2009: 197-‐198). Slack describes the fact
that principal-‐agent transactions happen “under conditions of uncertainty and
asymmetric information” (Cockanye, 2009: 197-‐198). Slack presents an agent
opportunity to pursue its own interests in place of its principal’s. An agent has a
broad self-‐regarding interest in shirking, which is any deviation from a task as
assigned by the principal. An agent may also be working simultaneously for multiple
principals, giving rise to problems of coordination, conflict of interest, and hidden
gaming (Cockanye, 2009: 209; Laffont, 1990: 302). Principals must therefore monitor
their agents in order to ensure their instructions are properly completed. However,
monitoring costs can be high. Agents are the actors involved in actually carrying out
their principals’ orders and can leverage this position by controlling the upward flow
25
of information, or feedback (O’Connor, 2013). Monitoring problems are further
compounded when tasks or objectives are imprecise and/or difficult to verify.
Contracts. A contract is a principal-‐agent transaction for a service. In everyday life,
most decisions to contract a service, such as a lawyer or electrician, are made on the
basis of needing a contractor’s expertise because the client himself lacks the given
skills; this fact points to the asymmetric information that frequently accompanies
contracts, as a form of principal-‐agent transaction. An enduring concern in
contracting for clients is being overbilled (Singer, 2008: 155). In comparison to the
purchase of an overpriced good, which is a one-‐off event, overbilling for a service
recurs over the life of the contract (Singer, 2008: 155). The client – who may lack the
knowledge and tools to accurately monitor performance – is at the contractor’s mercy
to inform him on the contract’s progress and what should be done next (Singer, 2008:
153). Contractual slack exhibits itself acutely in the form of contract incompleteness:
when the terms and objectives of a contract are difficult to specify and subsequently
difficult to monitor (Singer, 208: 153). Incomplete contracts give contractors
discretion “to make judgment calls, trade-‐offs, and [decisions] to fill in the contractual
gaps,” which may not be in their client’s best interests (Freeman, 2003: 1343).
Overbilling and also cost reductions through sacrificing quality may not technically
violate the terms of incomplete contracts (Freeman, 2003: 1345). Most of the
contracts in intelligence are necessarily incomplete because the areas they deal with
(foreign and security policy) are inherently complex and unpredictable, making
contractual terms difficult to specify in full (Hart, Shleifer, and Vishny, 1997: 1155).
One could argue that a contractor’s desire for future business and maintaining
good reputation should regulate his performance and prevent undue shirking.
26
However, this desire for future business also provides perverse incentives for
contractors to create path dependencies, whereby contractors structure future need
to retain their services through their current work (Cockanye, 2009: 208). Some jobs,
especially in incomplete contracts, mandate long-‐terms of service, which paves the
way for principals to become dependent on their contractor/s.
Public and private provision similarities. Principal-‐agent theory has found
widespread application outside of economics, including in political science and
international relations. Government can be conceptualized as a chain configuration
of principals and agents in which the ultimate principal is the electorate, whose first
agents are their elected officials, which act as principals to given legislative
committees, followed by bureaucratic agencies, and so forth (Cockanye, 2009: 210).
At each principal-‐agent transaction in the chain, the ultimate principal’s (the
electorate’s) interests undergo increased agency slack (Cockanye, 2009: 210). Public
servants’ basic mandate to promote the public or national interest is similar to
contractual incompleteness or slack. Different public actors can all pursue different
conceptions of what they claim is the public interest, and just like with incomplete
contracts, none of them are necessarily wrong because of the term’s inherent
ambiguity (Levine and Forrence, 1990: 180-‐181). Finally, the bargaining games that
occur in bureaucratic politics can be construed as a sort of marketplace exchange,
where the goods and services being offered are policy proposals being forwarded to
maximize an organization’s given interests. The consumers in this case are decision
makers and superior officials.
27
***
This section considered arguments in favor of privatization as well as some relevant
basic mechanisms of private provision, importantly the profit motive and market
discipline. This section also introduced principal-‐agent theory and its application in
contracts, which provide especially valuable tools for this paper’s purposes of
examining intelligence contracting.
28
VI. ISSUES WITH CONTRACTING INTELLIGENCE
In this section, the theories, principles, and background presented thus far are used to
determine what happens when contractors, as private actors, are involved in an
activity as lacking in oversight and intertwined with the public and national interest
as intelligence. Discussion of intelligence contracting here takes into account the
respective advantages and disadvantages of both public and private provision
considered in previous sections. Two case examples, the NSA’s Trailblazer project
and Abu Ghraib, are used to illustrate the contentious issues associated with
intelligence contracting. I discuss these issues in rough order of the increased scope
and gravity of the problems they raise. I start by revisiting the inherently
governmental standard.
What is inherently governmental? As discussed in Part V, FAR Subpart 7.5 lists
functions considered inherently governmental, for which contractors may not be used.
Listed functions particularly relevant to intelligence contracting are: “the command of
military forces,” “the conduct [and determination] of foreign policy,” “the
determination of agency policy, such as determining the content and application of
regulations,” and “the direction and control of intelligence and counter-‐intelligence
operations” (FAR, 2006). Subpart 7.5 also notes functions which “may approach
being” inherently governmental. These are predominately activities where
contractors perform in administrative and advisory capacities dealing with
regulatory compliance and contract management, which may lead to conflicts of
interest. Both of these lists, as previously noted, are “not all inclusive” (FAR, 2006).
29
This last feature of FAR Subpart 7.5 presents federal agencies slack, by letting
them make the call on functions not explicitly listed. It is understandable that federal
regulators may intend the not all inclusive disclaimer to guide agencies to proceed
more judiciously in their hiring of contractors rather than act as a loophole. However,
this hypothetical intention does not negate what the FAR actually says on paper;
agencies are still largely disposed with how to interpret the regulation. Moreover, as
discussion here and in Part VII should illustrate, there is evidence to suggest
contractors have been employed in technically restricted functions.
Two cases of contract miscarriages
Presented here are two cases of private contractor involvement in intelligence that
resulted in controversy: the NSA’s Trailblazer program and the Abu Ghraib prisoner
abuse scandal.
The NSA’s Trailblazer program. Starting in the late 1990s, as revolutionary
advancements in computing, encryption, fiber optics, and communications were
sweeping through the private sector, the NSA began exploring methods to monitor
cell phone and electronic communications and to process this information and open
source data. Michael Hayden, as director of the NSA, championed the expanded use of
contractors to develop the agency’s SIGINT capabilities (Shorrock, 2008: 201-‐202).
Well before 9/11, Hayden and agency officials were aware of the NSA’s challenges in
adapting to ongoing technological advances (Mayer, 2011); however, the attacks
greatly magnified the agency’s impetus to develop an effective SIGINT system for the
twenty-‐first century.
30
Hayden chose to pursue the Trailblazer program, over a rival in-‐house
program called ThinThread, which was purportedly simpler to understand, more
cost-‐effective, and included privacy protections for U.S. citizens (Mayer, 2011). On
October 21, 2002, Science Application International Corporation (SAIC), as the lead
member of a consortium of contractors, announced it had won a $280 million 26-‐
month contract from the NSA to build Trailblazer (Business Wire, 2002). SAIC is the
NSA’s largest contractor, has a long history with the agency (Shorrock, 2008: 215),
and ranks among the top tier of intelligence contractors, the systems integrators. The
NSA choose SAIC to lead the project in part because of data mining programs in had
developed prior to 9/11, such as TeraText, a platform for downloading, storing, and
rapidly retrieving massive amounts of textual data (Shorrock, 2008: 216).
The NSA believed SAIC would be able to deliver a silver-‐bullet solution to the
agency’s SIGINT problems. Trailblazer was intended as a replacement for the NSA’s
Cold War-‐era eavesdropping system, which could “capture communications travelling
on cell phones, fiber optics, and across the internet” (Shorrock, 2008: 214). Tasked
with overseeing Trailblazer was Deputy Director William Black, who had retired from
the NSA in 1997 to work for SAIC, and had since returned to the agency (Gorman,
2006). Long story short, Trailblazer was a sweeping failure. By the time the program
was cancelled in 2005 by Hayden’s successor, Keith Alexander, its price tag had
swelled from $280 million to $1.2 billion (Mayer, 2011). NSA and SAIC
mismanagement reportedly mired Trailblazer; the NSA in particular was criticized for
taking an essentially hands-‐off approach (Shorrock, 2008: 219). John Pike, director of
Globalsecurity.org, believes the program went afoul because of “differing
interpretations between SAIC and the NSA over data mining” as well as the
31
requirements of the project (Shorrock, 2008: 219-‐220). Nonetheless, SAIC was
awarded the contract for Trailblazer’s successor program, and continues to maintain
close ties with the NSA (Shorrock, 2008: 218).
Abu Ghraib. CACI International is among a collection of companies known as pure
plays, which earn the bulk of their revenue from one industry; in this case,
intelligence (Shorrock, 2008: 264). CACI’s involvement in the Abu Ghraib scandal
starts in 2003 when it acquired Premier Technology Group (PTG), a smaller company
with a preexisting blanket purchase agreement (BPA) with the Interior Department
“to supply ‘screening, interrogation, and support functions’ and [HUMINT] at an
unspecified site in Iraq” (Shorrock, 2008: 279-‐280).
CACI and Titan (another contracting firm, now called L-‐3) contractors arrived
at Abu Ghraib prison as it was being overhauled to mimic Guantanamo (Shorrock,
2008: 279-‐280). Private contractors were directly involved in the use of enhanced
interrogation techniques (EITs) on prisoners at Abu Ghraib. These contractors were
in Iraq to serve as translators and had no training in conducting interrogations
(Krishnan, 2011: 199). Claims of abusive practices at Abu Ghraib started to arise in
2003 with reports by Amnesty International, but it was not until spring 2004 after
several press investigations that the scandal became widely known to the public
(Hersh, 2004). Even after CACI’s improper involvement in prisoner abuse was made
known, the U.S. government not only failed “to terminate [their] contract, but actually
expanded its terms” (Dickinson, 2009: 224). No formal criminal charges were
entered against contractors involved at Abu Ghraib (Chesterman, 2008: 1063). In
June 2004, 256 Iraqis lodged a class action lawsuit against CACI and Titan under the
Alien Tort Claims Act, which bounced around the U.S. federal court system for several
32
years, ending with case’s dismissal being upheld in appeals court in 2009 (Business
and Human Rights Resource Center).
Secrecy, market problems, and accountability
SAIC’s involvement in the NSA’s Trailblazer program and CACI and Titan’s
involvement in prisoner abuse at Abu Ghraib are two extreme cases exemplifying the
serious concerns stemming from intelligence contracting. The proceeding
paragraphs discuss these issues in intelligence contracting and relate them to the
Trailblazer and Abu Ghraib cases.
Intelligence market and market discipline. As stated in Part V, the benefits of
private provision arise from the accountability fostered by market discipline
(Trebilcock and Iacobucci, 2003: 1447-‐1448). This market discipline is predicated on
the existence of competition between firms in a relatively free market. However, this
sort of market simply does not exist in the private intelligence industry. Intelligence
agencies, as clients/principals, are both unable and unwilling to promote an open
market for contracting services with more readily procurable supply (Singer, 2008:
152).
As demonstrated by the renewal of service contracts in the Trailblazer and
Abu Ghraib cases following the contracted companies’ failure to exercise due
diligence and their involvement in public controversy, there is insufficient
competition in the intelligence contracting market to reward good players and punish
bad ones. Favoritism pervades the procurement process for intelligence contracts,
33
with privileged firms often being awarded enormous contracts in a predetermined,
non-‐open bidding process (Singer, 2008: 152). It is understood in economics that
procurement favoritism can lead to adverse consequences, including “cost overruns,
production delays, and performance downgrading” (Che, 1995: 1995). All three of
these adverse consequences were clearly displayed in SAIC’s performance in
Trailblazer. NSA Deputy Director Black, who was tasked with the project’s
management, is a manifestation of the revolving door in practice (this term is
discussed later in this section). Black was hired after 40 years of NSA service by SAIC
for the singular purpose of soliciting NSA contracts (Shorrock, 2008: 216). He
returned to the agency in 2000 to lead the Trailblazer program, still in its infancy at
the time, and within two years SAIC had “won the master contract for the program”
(Shorrock, 2008: 216). As mentioned earlier, there was a genuine legitimate NSA
interest in the technical services SAIC could offer; however, it would be almost
impossible to deny SAIC was in a special bidding position because of its close
personal relationships to the agency.
Whether by intentional design, the inherent nature of the provided service, or
some combination of both, much intelligence contracting displays path dependency.
The expansion of CACI’s services to the U.S. mission in Iraq following the Abu Ghraib
scandal reflects the heavy structural dependence of the U.S. military on contractors in
the conflict (Kruck, 2014: 120-‐121). IT services – from offices’ routine computer
networks to the NSA’s highly advanced data mining operations – require standby
troubleshooting and maintenance, particularly as systems increase in size and
complexity. This creates a need to retain contractors for long-‐term technical support,
even if they were hired originally only to build a given IT system. The highly
specialized nature of advanced data mining programs and other IT systems, like
34
Trailblazer, furthermore means intelligence agencies (as principals) often face
prohibitive costs in switching agents, creating an undeniable incentive for contractors
to price gouge (Cockanye, 2009: 208).
Trailblazer and Abu Ghraib are both cases of incomplete contracts. With
Trailblazer, the NSA was tasking SAIC to construct a SIGINT platform on a scale much
greater than anything in either parties’ previous experience (Shorrock, 2008: 220).
Although it cannot be wholly confirmed here, in all likelihood, the NSA drafted the
original contract with a set of broad requirements that were both too vague to
effectively monitor and evolved over the course of the contract (Shorrock, 2008: 219-‐
220). At Abu Ghraib, CACI personnel were under a BPA, which is an especially
incomplete form of contract, for use as translators – not interrogation. Under a BPA,
the principal does not specify all required services at the original signing, but instead
enters task orders as needs arise (Dickinson, 2009: 221). The flexible terms of CACI’s
Iraqi BPA had a direct relation to the reassignment – through task orders – of
contracted translators to prisoner interrogations (Dickinson, 2009: 221). In many
intelligence activities, especially HUMINT, substantial contractual incompleteness
should be expected. Functions are often almost impossible to fully contract because
they are value-‐laden, complex, and change over time (Freeman, 2003: 1343). Most
privatization advocates agree that in situations such as these, government provision
is typically preferable to contracting, because it allows public officials to make
important judgment calls on their own behalf rather than having private agents do it
for them (Freeman, 2003: 1343; Hart, Shleifer, and Vishny, 1997: 1130).
There are valid reasons justifying the above problems with the private
intelligence market, driven by intelligence agencies’ prevailing concern for secrecy.
35
The IC’s responsibilities in national security fuel the confidentiality surrounding its
operations as well as its obtuse procurement process, which heavily favors familiar
repeat players versus firms with whom the IC has had little previous experience
(Cockanye, 203: 203). IC contract procurement tends to be a long, arduous process
due to security protocols; smaller, less familiar firms may simply lack the resources to
outlast this process (Shorrock, 2008: 27). Moreover, intelligence agencies tend to
make contracts not with a given firm, per se, but with known individuals working for
these firms, often former officials (Shorrock, 2008: 32-‐33). Former senior officials,
like William Black in the Trailblazer case, bring tremendous value to a contracting
firm. Not only do they have intimate institutional knowledge, but these individuals
also carry their connections still in government to the company (Shorrock, 2008: 31-‐
32).
Contractor cost effectiveness. In business as well as government, outsourcing is
commonly motivated by a desire to reduce costs, by lowering the overhead entailed
by in-‐house provision. In hiring a full-‐time intelligence officer, the government bears
significant costs in screening and training, as well as sustained costs in providing
salary, pension, and benefits. Additionally, intelligence agencies must make their
hiring decisions based on their present and future strategic needs in human capital,
which are contingent (RAND, 2013: 13). In this context, hiring a contractor, versus a
full-‐time public employee, can be fairly attractive. Contractors offer agencies more
flexibility in adjusting their supply of human capital and expertise to shifting needs
(ODNI, 2008). Entering the contracting business is also an alluring option for public
employees, as individuals. A contractor can expect to earn roughly double his public
counterpart’s salary: the average cost yearly cost of a government intelligence officer
36
(including pension and benefits) is $125,000, while an equivalent private contractor
averages between $200,000 and $250,000 (ODNI, 2008).
It is not clear, however, whether contracting is actually more cost-‐effective
than in-‐house provision in intelligence and defense, as well as business generally
(Singer, 2008: 157). One of the primary reasons intelligence contracting firms are
able to garnish their employees’ wages so well is their procurement costs have
already been borne by the government (Singer, 2008: 74). The majority of
intelligence contractors are former government employees, whether in intelligence or
the military, meaning the taxpayer has already footed most of their training costs
(Singer, 2008: 77). Owing to the structure of the intelligence market – importantly,
its lack of effective market discipline mechanisms, overbilling by contractors is a
significant, recurring concern (Isenberg, 2009: 23). As discussed in Part V, overbilling
in service contracting can be especially severe when compared to purchasing an
overpriced good, because overcharging can occur repeatedly over the contract’s
lifetime (Singer, 2008: 155). The existence of path dependencies and contractual
slack further multiply incentives for contractors to overbill their clients, adding to the
government’s total costs.
Contracting professionalism? An oft-‐cited concern with private contractors is they
are not upheld to the same standards of professionalism as government intelligence
officers. In The Soldier and the State, Samuel Huntington argues, “the modern military
officer corps is a professional body,” and asserts that professionalism is the military
officer’s most important quality (Huntington, 1985: 7). Huntington defines
professionalism by its three distinguishing characteristics of expertise, responsibility,
and corporateness (Huntington, 1985: 8-‐9). The professional military officer is duty-‐
37
bound to practice his expertise in the management of violence in service of the
military security of the state (Huntington, 1985: 14-‐15). Huntington plainly states
pecuniary rewards cannot be a professional’s primary motivation (Huntington, 1985:
9-‐10); this standard is used to differentiate professional officers from mercenaries
(Huntington, 1985: 15). The notional problem with pecuniary versus professional
incentives is that the loyalty and performance of individuals motivated by the first
only extends as far as the money. Robert Baer, a former CIA officer with extensive
experience in the Middle East, argues contractors, particularly in HUMINT, are
inherently risk averse. Baer explains that in conducting HUMINT, officers must be
willing to engage in potentially life-‐threatening work, “to infiltrate organizations like
Hezbollah in Lebanon and recruit spies” (Shorrock, 2008: 152). A public servant, who
has taken a professional oath and is interested in promotion within an agency, has
greater reason to take risks than a contractor, who is “just coming in and collecting a
salary,” according to Baer (Shorrock, 2008: 152).
However, it is not clear that pecuniary rewards negate professionalism or are
even a contractor’s primary motivation. Firstly, military and intelligence officers also
receive salaries; they are essentially distinguished from contractors only by being
under public oath. How this oath weighs on job performance is open to debate, but it
is an effectively weak monitoring mechanism. As noted earlier, most intelligence
contractors have a background in either military or intelligence service. Returning to
Huntington, he argues that military officers, as professionals, possess a distinct
military mind, which arises because “people who act the same way over a long period
of time tend to develop distinctive and persistent habits of thought” (Huntington,
1985: 61). Subsequently, there is no compelling reason why or explanation how an
intelligence officer would suddenly change their fundamental values and beliefs
38
simply upon exiting public service for the private sector. Most full-‐time employees
and executives of intelligence contracting firms furthermore feel they are genuinely
working in the national interest as an extension of the IC, albeit in the private sector
(Hansen, 2014; Singer, 2008: 154). Finally, the IC’s prevailing concern for security
and the stringent process of obtaining clearances protect against most rogue
intelligence contractors and incidentally give rise to certain professional norms
within the industry (Hansen, 2014: 75; Avant, 2009: 188-‐189).
Accountability. Undergirding the preceding discussion on intelligence contracting is
the question of accountability: specifically a concern that contractor involvement
undermines oversight and control of activities deeply intertwined with the national
interest. As earlier discussed, insufficient competition in the private intelligence
industry generally prevents market discipline from emerging to regulate firms’
behavior. Poor performance and shirking are difficult to punish, as they often do not
technically violate the incomplete contracts typical in intelligence.
In the case examples of Trailblazer and Abu Ghraib it is worth noting that
contractor misdeeds were only uncovered because of whistleblowers (in Trailblazer
[Mayer, 2011]) and investigations by non-‐governmental actors, like human rights
groups and the media (in Abu Ghraib) – not public regulators. These informal
oversight mechanisms are a poor basis for delivering systemic accountability.
Whistleblowing, as a primary example, is too irregular to sufficiently deter
wrongdoing; the government, on the other hand, has a valid concern that
whistleblowing, or leaks in its preferred parlance, risk real harm to national security
interests and reputation. Moreover, undue whistleblowing, as perceived by the
government, motivates it to suppress future leaks.
39
A deficit of effective formal oversight is not unique to the subject of
intelligence contracting, however. Rather, it characterizes the entirety of intelligence
activity. As highlighted in Part IV, it is largely at the intelligence agencies’ discretion
how much oversight they receive, and more basically, whether their activities
conform to the law. Not only is congressional oversight lacking, but furthermore, the
non-‐disclosure of select intelligence committees’ proceedings provides few political
incentives for senators and congressmen to engage in intensive oversight to begin
with (Halchin and Kaiser, 2012: 35). Accepting that insufficient oversight extends
across the IC, and not just its use of contractors, intelligence contracting still feels
problematic. While meaningful oversight of the IC is elusive, intelligence agencies are
at least de jure justified in democracies by their grounding in the rule of law and
governmental hierarchy (Chesterman, 2008: 1069). Contractors, on the other hand,
exist outside the formal hierarchy of public accountability. While they are subject to
federal and local regulations as any other business, contractors –as private
businesses – are not strictly bound to constitutional obligations, unlike public
agencies (Freeman, 2003: 1304-‐1305). Interestingly, it is for this precise reason that
governments might sometimes use contractors, to provide a cover of plausible
deniability (Singer, 2008: 209-‐210).
Public versus private interests
Perhaps the most vexing concerns with intelligence contracting stem from the
question of how the private interests of contractors interact with the public,
40
specifically national, interest the IC is responsible for promoting. The crux of this
question comes down to how the national interest is determined.
Conflicts of national interest. The pursuit of profit, as covered in Part V, drives the
life of private business. Intelligence contractors may insist they are acting in the
national interest in a manner free from balance-‐sheet considerations; however, this
claim is problematic. Many would argue it is fundamentally impossible for private
firms “to put the public [or national] interest before their private business” (Krishnan,
2011: 203-‐204); this is probably most valid in conflicts of interest where clearly
contradictory incentives exist for public and private actors.
However, the real problem of the claim contractors can altruistically pursue
the national interest resides in the fact, as discussed previously, that the national
interest is strikingly vague and contested even among government actors themselves.
The notion of “promoting the national interest” is non-‐contractible; it cannot be
meaningfully reduced to quantitative measures and is therefore difficult to stipulate
in contractual terms. Especially in intelligence, contractors operate in gray areas
where defining the national interest becomes increasingly complex (Singer, 2008:
154). Public and private actors in this setting must make judgment calls on what is in
the national interest. In highly complex functions, a contractor may distort the
national interest to private advantage, whether intentionally or even subconsciously
(Singer, 2008: 154). Yet it is somewhat reassuring that the national interest is vague
and frequently contested, as it suggests this interest is reached though a
harmonization of different actors’ varying conceptions. This is the basic premise of
bureaucratic politics. The problem is intelligence is considered privileged
information, and is therefore weighted differently by decision makers versus other
41
sources of information; intelligence contracting inserts distinctively private interests
into an area of government wielding substantial structural power.
Analytical work in intelligence provides opportunities for contractor
subversion of the national interest – more so than in highly visible cases of
wrongdoing like Abu Ghraib (Chesterman, 2008: 1064). The President’s Daily Brief,
an intelligence summary presented by the DNI to the White House each morning, is
one of the most sensitive documents in government (Shorrock, 2008: 189-‐190). Over
70 percent of the document’s content is furnished by the NSA (Shorrock, 2008: 189-‐
90). At the time of his writing, Shorrock estimated 50 to 75 percent of the people
working at NSA headquarters and ground stations internationally to be private
contractors (Shorrock, 2008: 188). This places private contractors very close to
highest levels of intelligence analysis in the IC as well as the United States’ top
decision makers.
The revolving door. The revolving door describes a common practice of individuals
moving between government and private sector employment (Shorrock, 2008: 32).
This practice is legal in the United States; senior public officials face only a one-‐year
prohibition from lobbying or contracting in their former field (Shorrock, 2008: 32).
Interestingly, the term first originated from growing criticism in the 1950s over the
growth of the military-‐industrial complex (Mundheim, 1980/81: 709). Since then, the
revolving door has retained its mostly pejorative connotation to describe collusion
between government regulators and the industries they are supposed to regulate
(Meghani and Kuzma, 2011: 578)
42
A central benefit of the revolving door is that it allows specialized knowledge
and expertise to be transferred between public and private sectors. In its use in
regulatory settings, industry veterans provide their institutional knowledge to
government, enhancing effective performance of their regulatory tasks (Meghani and
Kuzma, 2011: 576). Industry-‐specific expertise is a precious commodity for
government regulators, and it is necessary for good regulatory performance (Che,
1995: 379). On the industry side, regulated firms value former regulators’ expertise
to help “minimize the cost of complying with regulations” (Che, 1995: 379). In the
intelligence industry, former senior officials are crucial to a contracting firm in
establishing potential clients’ trust, which is prerequisite to obtaining big intelligence
contracts (Shorrock, 2008: 32-‐33).
While demand for expertise on both the public and private side is
understandable, the revolving door can produce damaging consequences for
oversight and industry accountability. The revolving door can bias public policy in
favor of industries’ special interests, degrade public confidence in the government’s
neutrality and authority, and give special interests an unfair advantage by providing
them an audience other policy stakeholders may not have (Meghani and Kuzma,
2011: 576-‐577, 582). Collusion between public agencies and private firms also
enhances procurement favoritism and can deepen path dependencies. The NSA’s
Trailblazer program and specifically Deputy Director Black’s former career as a vice
president at SAIC illustrate the risks towards cost overruns, poor performance, and
mismanagement created by overly close ties between industry and the IC. On
balance, SAIC emerged from the Trailblazer episode relatively unscathed. The
company received virtually no sanction for its failure to deliver on Trailblazer; its
interests prevailed at the expense of the taxpayer.
43
Capture of the national interest. The revolving door is closely linked to the notion
of regulatory capture, which appears in economics and public administration
literature. Regulatory capture argues public agencies, particularly regulators, have
life cycles, starting with a sincere interest in performing their oversight mandate
(Hill, 1991: 280). Regulators’ expertise requirements, however, eventually lead them
to recruit personnel from regulated industries, and their worldview increasingly
conforms to industry’s special interests over time. Ultimately, these public oversight
agencies are captured by industry, and the public interest is subverted to special
private interest (Hill, 1991: 280). The more slack there is between a given public
agency and its government principal/s – Congress for example, the greater risk said
agency is captured (Levine and Forrence, 1990: 190). This is because the distance
between industry and the agency is shorter than that between the agency and its
public principal, providing opportunities for hidden gaming, in the form of collusion,
between the former two. This problem is potentially acute in intelligence contracting;
public oversight of the IC is lax, and relationships between contractors and
intelligence agencies are commonly closer than those between the IC and its
government principals.
A few voices might argue that private special interest dominance of the policy
and decision-‐making process does not necessarily thwart the public and national
interest; they could in fact be construed as one in the same. However, this
proposition is limited to settings in which these two interests coincide. Special
interest is firstly self-‐regarding; the public and national interest serves the polity as a
whole, and should equitably balance different and diverging private interests (Levine
and Forrence, 1990: 176). Excessive special interest influence in governance
44
privileges select self-‐regarding interests over the polity’s general interest,
importantly in cases where they deviate. Understanding this, undue contractor
influence in the IC threatens intelligence agencies’ ability to fulfill their mandate to
promote the national interest. Furthermore, public perception that state institutions
are dominated by special interests can degrade the public’s overall trust in these
institutions and weaken their authority by calling into question their legitimacy
(Zahra and Kuzma, 2011: 581).
***
In this section, I presented various problems that can arise from the use of
contractors in intelligence. These problems supply good arguments against
intelligence contracting. In the next, penultimate section, I weigh these arguments
against the most cogent counterargument in favor of intelligence contracting: the IC’s
demand for specific expertise from the private sector.
45
VII. THE IC’S DEMAND FOR EXPERTISE Intelligence contracting peaked sometime between 2005 and 2007 after surging
dramatically following 9/11. Many of the contractors enlisted during the early 2000s
were to replenish the IC’s personnel ranks decimated by budget cuts in the 1990s
(ODNI, 2008). The effort to return more intelligence work in-‐house was spurred by
congressional and more importantly IC concern about the consequences of private
contracting (ODNI, 2008). The ODNI’s 2006 human capital plan noted in particular
“the IC [increasingly] finds itself in competition with its contractors for [its] own
employees” (ODNI, 2006: 6). In comparison to the previous two administrations, the
Obama administration has instituted policies pressuring the Pentagon and IC to be
more selective in using contractors (Isenberg, 2009: 15-‐16). Thus, it is apparent
there is some level of recognition by the U.S. government and the IC of the issues
surrounding intelligence contracting.
For its part, the IC would do well by reforming its agencies’ hiring practices to
enhance their in-‐house human capital capacity and subsequently reduce dependence
on outside contractor expertise. At present, agencies’ security protocols make them
highly risk averse in their hirings (McConnell, 2007). Even first and second-‐
generation U.S. citizens face considerable difficulty in landing a job in the IC, denying
agencies highly-‐sought foreign language skills (McConnell, 2007). Greater IC hiring
flexibility, however, still would not totally resolve the structural need for private
expertise in some areas of intelligence. The very nature of contracted work ensures it
will always be more flexible than what the best IC hiring reforms could accomplish
46
(ODNI, 2008). Flexibility is essential for intelligence agencies because of changing
threats and technologies they must adapt to, and the capabilities contractors provide
in unique skills and surge capacity to the IC are noteworthy (ODNI, 2008).
In the proceeding paragraphs, I break down intelligence activities into areas
which are: (1) inappropriate for contractor involvement, (2) appropriate for
contractor involvement, and (3) areas where the appropriateness of contractor
involvement is unclear or contingent. To do so, I weigh the risks, as discussed in this
paper, raised by contractor involvement versus the particular demand for a given
expertise, which is also evaluated by whether agencies can sufficiently procure it
internally.
Exclusively governmental functions. Subpart 7.5 of the FAR on inherently
governmental functions naturally provides a good basis for judging which activities
private contractors should be excluded from. Broadly summarized, the policy
expresses concern over contractor use in functions where they have equal or greater
discretion or command than their government principals (FAR, 2006). This applies
especially to procurement activities. I would maintain that intelligence agencies
should comply more diligently with the existing law on using contractors, and would
also designate a few more inherently governmental functions not included in FAR
Subpart 7.5, applying to intelligence.
Any direct use of lethal force in an intelligence setting should be exclusively
reserved to public actors. Before continuing further, I would underscore that this
reservation does not apply the same to principally military contractors. In drawing a
distinction between the military and IC as it relates to contracting, the military
47
possesses a clearer chain of command and greater public oversight than intelligence;
wrongdoing involving military contractors is therefore more likely to be exposed.
The lack of oversight the IC receives creates a pressing need for it – more than any
other area of government – to exercise due diligence and assume responsibility for its
actions. In the case of contractor involvement at Abu Ghraib, the fact that CACI
International and Titan have suffered no criminal or civil penalties is a failure of
accountability falling largely on their government principals. Clandestine operations
and most HUMINT functions should be provided exclusively by public agencies.
Private contractors in HUMINT have staffed up to three-‐quarters of the CIA’s
Islamabad station, held positions “as sensitive as [overseas] deputy station chief,” and
according to Robert Baer, have even determined where “CIA officers could go and
who they could meet” in Iraq (Shorrock, 2008: 118). The last two, if true, are a direct
violation of FAR Subpart 7.5, which designates “the determination and control of
intelligence and counterintelligence operations” as inherently governmental (FAR,
2006). In most HUMINT cases, there is no structural justification why intelligence
agencies, particularly the CIA, cannot furnish their own capability, as they did for the
Cold War’s duration. Recourse to the private sector here reflects more an effort to
avoid oversight and a certain indolence on the agencies’ part than it does a demand
for expertise that cannot be developed within government.
Where contractor expertise is appropriate. The IC must handle daily an immense
volume of information across 17 separate agencies. The individual agencies are often
massive organizations themselves; the NSA for example has a yearly budget
estimated at $10 billion (Shorrock, 2008: 187). Simply coordinating the office
activities both within and across agencies is a task in itself. Assuming they can be
delivered more cost effectively, the IC should outsource non-‐core functions, such as
48
maintaining workplace computer systems, custodial work, and other office logistics.
Agency resources can then be reapportioned to focus more exclusively on core
missions in intelligence (Hansen, 2014: 60-‐61); this is the logic of outsourcing in
general and the original intent of Clinton’s privatization initiatives.
In SIGINT, which is the core mission area of many IC agencies, demand for
technical expertise in computers, encryption, and databases – as examples, is a valid
reason to use private contractors. Here the first concern is not necessarily cost
effectiveness, but rather that government agencies cannot independently reproduce
the technology services available in the private sector. There is some crossover in the
core and non-‐core technical functions for which private sector expertise is sought by
the IC. To illustrate: the ODNI considers commercial satellite vendors to be
commodity contractors, rather than core (ODNI, 2008). For an agency like the NRO,
however, which devotes 95 percent of its resources to contracts (Shorrock, 2008: 16),
purchasing satellites from commodity vendors relates directly to its core mission
area of geospatial intelligence (GEOINT). This is a relatively minor nuance that does
not detract from the general point to be made about the IC looking to contractors for
technical expertise.
Even with concerted reforms to its hiring policies, it is doubtful the IC will
become the first destination for individuals gifted in IT (Harman, 2015: 104-‐105). As
Harman writes, “over the long run…Washington won’t win a digital competition with
Silicon Valley” (Harman 2015: 105). As stated in Part II, today’s technologies are two-‐
edged. Intelligence benefits greatly from the modern technology available to it.
Advanced imagery and instant communications place within reach Donald Rumsfeld’s
vision of network-‐centric warfare, in which all tactical military intelligence is
49
seamlessly integrated (Shorrock, 2008: 162, 234-‐235). The ever-‐increasing speed
and storage capacity of computers, as well as data-‐processing algorithms and other
IT, have today actualized what critics call the national surveillance state (Shorrock,
2008: 340-‐341). However, these capabilities only exist because of their broad-‐based
development in the private sector. Acquiring these capabilities and tailoring them
specifically for intelligence, mandates agencies work with private business.
Moreover, the IC has impetus for fully harnessing today’s technologies because they
are available on the open market for use by friend and foe alike (Shorrock, 2008: 340-‐
341).
This convincing intelligence demand for technical expertise outweighs the
risks of contracting as illustrated in the Trailblazer episode, but it does not mean they
should be dismissed. The IC’s contracted efforts to “modernize its computer and
software systems” have periodically resulted in costly failures (Krishnan, 2011: 198).
Although some shirking can always be expected, efforts can and should be made to
minimize the problems associated with intelligence contracting while appropriately
balancing the imperative of security. Dickinson (2009) recommends using the
contracts themselves as the best vehicle for regulating PMSCs; I would agree with her.
Contractual terms should reduce slack by including more specific terms of service
and monitoring mechanisms, and hiring agencies should enforce these terms more
vigorously – including by termination if necessary.
Contracting gray areas. The final area to consider is where the appropriateness of
using contractors is largely contingent upon case-‐by-‐case evaluation. In the
immediate aftermath of 9/11, the Bush administration tasked the CIA with
conducting interrogations of suspected terrorists and also running secret prisons
50
(Mayer, 2007). Owing to its lack of existing experience in these activities, the CIA
enlisted private contractors, many of whom were retired military psychologists, to
develop the now infamous EITs (Mayer, 2007). Earlier in this section, I argued
contractors should not be involved in most HUMINT functions; this case forms a
potential exception. Without knowing the full details, it is difficult to assess the
validity of the CIA’s claim of lacking interrogation expertise. If any organization –
public or private – has at its disposal the tools for developing interrogation
techniques, one would think it should be the CIA. Even so, this sentiment does not
exclude the possibility that a private entity might genuinely be able to furnish a
particular HUMINT skill better than the IC. Other related gray areas are mission
planning and tactical intelligence – for example, Lockheed Martin contractors
assisting with drone strikes (Krishnan, 2011: 202). These functions are indirectly but
still closely linked to the use of lethal force.
Intelligence analysis is a final gray area for two primary reasons. First, as
previously discussed, a single piece of information can be construed by way of
analysis to be read multiple ways. As profit-‐driven actors, incentive exists for
contracted intelligence analysts to present information that fashions need for their
continued services. Second, many contracted intelligence analysts are former
government analysts doing almost identical work as before, meaning the government
is essentially paying double the cost for a service it can supply in-‐house (Shorrock,
2008: 125). However, there are some justifications for using outside analysts, the
best of which is the possibility of gaining fresh perspective in an otherwise closed
bureaucracy subject to grooved thinking. This justification naturally assumes the
analyst really is an outsider, and not simply a contract rehire. More generally, and in
51
comparison to gray areas in HUMINT, most analysis work is relatively benign and
provides few opportunities for serious harm, except cost overruns potentially.
***
This concludes the paper’s exploration of intelligence contracting. While intelligence
contracting does present some significant troubling issues, a great deal of it has
emerged because of legitimate practical necessity. This section has tried to
demonstrate it may be possible to outsource certain intelligence functions in a
qualified, responsible manner. Short of this standard, however, there are simply
some demands for expertise in the IC that warrant the risks of private provision.
52
VIII. CONCLUSION In this paper, I have attempted to capture the motivations, mechanisms, and messy
problems at work in private contractor involvement in intelligence, as well as provide
some normative judgment on the topic. The recommendations I offer in Part VII on
what is and is not appropriate for contracting are informed by the particular
demands of the IC for certain expertise as well as the preceding content of the paper.
Understanding how government should work and how it does work in actuality, the
advantages and disadvantages of private provision, how the IC is structured and its
internal politics function, and finally, what role intelligence plays in government: all
of these are vital to having a balanced understanding of intelligence contracting.
Given its extent and the structural need for certain private expertise, it would appear
intelligence contracting – in some form or another – is here to stay.
I conclude on one final point. A recurring theme in this paper has been
characteristics inherent to intelligence, such as minimal oversight, secrecy, and the
need to keep pace with current technology. Discussion has focused solely on how
these factors interact with private contracting. Questions have been posed like
whether contractors should assist intelligence agencies in conducting mass electronic
surveillance. However, what has not been asked is whether intelligence agencies
should themselves be engaged in mass electronic surveillance. Many of the most
vexing issues associated with intelligence contracting have more to do with the
practice of intelligence generally, than with contracting itself. These issues are legally
and ethically challenging, and deserve critical examination in their own right.
53
APPENDIX: GLOSSARY OF ACRONYMS
BPA – blanket purchase agreement CHCO – Chief Human Capital Officer/Office (ODNI) CIA – Central Intelligence Agency DCI – Director of Central Intelligence DNI – Director of National Intelligence EIT – enhanced interrogation technique FAIR Act – Federal Activities Inventory Reform Act (1998) FAR – Federal Acquisition Regulation FBI – Federal Bureau of Investigation GEOINT – geospatial intelligence HUMINT – human intelligence IC – Intelligence Community ICD 612 – Intelligence Community Directive 612 IRTPA – Intelligence Reform and Terrorism Prevention Act (2004) IT – information technology MIP – Military Intelligence Program NGA – National Geospatial-‐Intelligence Agency NIP – National Intelligence Program NIPF – National Intelligence Priorities Framework NRO – National Reconnaissance Office NSA – National Security Agency NSS – National Security Strategy ODNI – Office of the Director of National Intelligence PMSC – private military and security company PTG – Premier Technology Group SAIC – Science Application International Corporation SIGINT – signals intelligence
54
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