Spy Agencies Outsourcing to Fill Key Jobs

Contractors, many of them former employees, are doing sensitive work, such as handling agents. A review of the practice has been ordered.

By Greg Miller

Los Angeles Times

September 17, 2006

WASHINGTON — At the National Counterterrorism Center — the agency created two years ago to prevent another attack like Sept. 11 — more than half of the employees are not U.S. government analysts or terrorism experts. Instead, they are outside contractors.

At CIA headquarters in Langley, Va., senior officials say it is routine for career officers to look around the table during meetings on secret operations and be surrounded by so-called green-badgers — nonagency employees who carry special-colored IDs.

Some of the work being outsourced is extremely sensitive. Abraxas Corp., a private company in McLean, Va., founded by a group of CIA veterans, devises "covers," or false identities, for an elite group of overseas case officers, according to current and former U.S. intelligence officials familiar with the arrangement.

Contractors also are turning up in increasing numbers in clandestine facilities around the world. At the CIA station in Islamabad, Pakistan, as many as three-quarters of those on hand since the Sept. 11 attacks have been contractors. In Baghdad, site of the agency's largest overseas presence, contractors have at times outnumbered full-time CIA employees, according to officials who have held senior positions in the station.

The post-9/11 period has brought sweeping changes to the U.S. intelligence community. Spy budgets have swelled by more than $10 billion a year, and agencies have seen their roles and authorities altered by legislation.

Largely because of the demands of the war on terrorism and the drawn-out conflict in Iraq, U.S. spy agencies have turned to unprecedented numbers of outside contractors to perform jobs once the domain of government-employed analysts and secret agents.

The proliferation of contractors has outstripped the intelligence community's ability to keep track of them.

Former intelligence officials said most U.S. spy agencies did not have even approximate counts of the numbers of contractors they were employing — although several officials said the number at the CIA had nearly doubled in the last five years and now surpassed the full-time workforce of about 17,500. Often, the contract employees had previous ties to the agencies.

Concerned by the lack of data and direction, Director of National Intelligence John D. Negroponte this year ordered a comprehensive study of the use of contractors.

Ronald Sanders, a senior intelligence official in charge of the examination, said that all 16 U.S. intelligence agencies had been instructed to turn over records on contractors, and that one focus of the study would be whether outsourcing highly sensitive jobs was appropriate.

"We have to come to some conclusion about what our core intelligence mission is and how many [full-time employees] it's going to take to accomplish that mission," Sanders said, adding that the growth in contracting over the last five years had been driven by necessity and was extremely haphazard.

"I wish I could tell you it's by design," he said. "But I think it's been by default."

Senior U.S. intelligence officials said that the reliance on contractors was so deep that agencies couldn't function without them.

"If you took away the contractor support, they'd have to put yellow tape around the building and close it down," said a former senior CIA official who was responsible for overseeing contracts before leaving the agency earlier this year.

This former official and more than a dozen other current and former U.S. intelligence officials interviewed for this story spoke on condition of anonymity because of the classified nature of intelligence contracting work.

The use of outside firms has enabled spy agencies to tap a deep reservoir of talent during a period of unprecedented demand. Many of those hired have been retired case officers and analysts who were eager to contribute to the response to the Sept. 11 attacks and who have more expertise and operational experience than agency insiders. In fact, the CIA has created its own roster of retired case officers — known as the "cadre" — who are eligible to be hired as independent contractors for temporary assignments.

Even so, the trend has alarmed some intelligence professionals, who are concerned that using contractors to do spying work carries security risks and higher costs. They point to soaring profits being made by contracting firms, and a parade of veteran officers who have left intelligence agencies only to return with green badges and higher salaries.

Even those quick to praise the contributions of contractors express discomfort with the mercenary aspect of modern intelligence work.

"There's a commercial side to it that I frankly don't like," said James L. Pavitt, who retired in 2004 as head of the CIA's clandestine service. "I would much prefer to see staff case officers who are in the chain of command and making a day-in and day-out conscious decision as civil servants in the intelligence business."

The CIA declined to comment on specific contracts but defended the use of contractors for intelligence work.

"Contractors give the agency enormous flexibility and are an important part of our workforce," said Paul Gimigliano, a spokesman for the CIA. "As partners, they help us build or enhance specific capabilities we need for a finite period."

U.S. intelligence agencies have used contractors for decades. Corporate giants such as Lockheed Martin Corp. have long competed for classified contracts to build spy planes and satellites. Spy services routinely use private companies to handle support functions, such as providing security or building classified computer networks.

In fact, two-thirds of the contractors at the counter-terrorism center are information technology workers who manage computer systems. And independent contractors have at times played significant roles in overseas operations, including pilots who flew clandestine supply runs for the CIA in Vietnam.

But current and former officials said spy agencies now depended on contractors to a greater extent than ever envisioned to carry out their basic spying missions.

The trend is particularly pronounced at the CIA. Whereas other intelligence agencies can take advantage of employees detailed to them from branches of the military, the CIA is more dependent on a civilian workforce.

The CIA has been hiring at a record pace in recent years. But it takes years to train new case officers, let alone to develop seasoned operatives capable of delicate missions in global hot spots. The agency has also turned to contractors to plug deep holes left by staff cuts and hiring freezes in the 1990s.

Meanwhile, new intelligence entities created to fix Sept. 11-related failures — including the intelligence director's office and centers tracking terrorism and weapons proliferation — have created thousands of new positions and cannibalized the ranks of the CIA and other agencies.

One former senior CIA official said the agency had outsourced an array of core jobs in its own counter-terrorism center, including the task of posting names of new terrorism suspects to immigration and law enforcement watch lists.

And despite restrictions that bar contractors from holding positions of authority over agency personnel, current and former U.S. intelligence officials said that contractors functioned as de facto team leaders in numerous stations around the world, and routinely handled clandestine meetings with CIA sources.

In Baghdad, contractors "do everything, especially 'ops' work," a former CIA officer who has served extensively in Iraq said of the operations functions. "They're recruiting [informants], managing the major relationships we have with the military, handling agents in support of frontline combat units. The guys doing that work are contractors. They're not staff officers."

Contractors have played similarly significant roles in Afghanistan. Gary C. Schroen, who was among the first CIA employees to enter the country after the Sept. 11 attacks, continued to travel to Pakistan and Afghanistan after retiring and going to work as a CIA contractor. Among his assignments was to monitor relationships with regional warlords as well as the head of the Afghan government's intelligence service.

There are other restrictions on contract employees. At the CIA, contractors cannot disburse money or handle personnel matters such as filling out employee evaluation forms. For high-ranking officials who leave, there are other restrictions, including a required "cool down" period of one year during which they are barred from returning to the agency to solicit business.

But former CIA leaders are in high demand and frequently serve as officers in companies that have contracts with their former agencies.

John Brennan, for example, retired last year as head of the National Counterterrorism Center and is now chief executive of the Analysis Corp., which supplies contract analysts to the center. In an interview, Brennan said that any contracts with the counter-terrorism center predated his arrival at the Analysis Corp.

Contractors are subject to the same background checks and security clearance requirements as full-time employees, officials said. But some of that clearance work itself has been outsourced, officials said, and even the screening done by the CIA hasn't been infallible.

In one well-known case, David A. Passaro was hired as a contractor with the CIA's paramilitary service even though he had a record of abusive behavior and had been fired by a Connecticut police department. Passaro was convicted of felony assault earlier this year in federal court in North Carolina for his role in the beating of a detainee who died in Afghanistan in 2003.

U.S. intelligence officials said that Passaro's case was an aberration and that security problems had not been more frequent among contractors than among career officers.

In another high-profile case, the CIA inspector general is investigating whether the agency's former No. 3 official, Kyle Dustin "Dusty" Foggo, improperly accepted expensive vacations and other rewards for awarding CIA contracts to a lifelong friend who is linked to the bribery scandal surrounding ex-Rep. Randy "Duke" Cunningham.

Some officials fear that the growth in contracting is fueling a so-called spy drain, in which talented officers are being lured to the private sector by firms offering pay increases of 50% or more.

At the CIA, poaching became such a problem that former Director Porter J. Goss had to warn several firms to stop recruiting employees in the agency cafeteria, according to former officials familiar with the matter. One recently retired case officer said he had been approached twice while in line for coffee.

"It's like sharks in the water," said the officer, an overseas veteran who has handled assignments in Iraq and elsewhere in the Middle East. "As soon as the word went around that I was leaving, my e-mail in-box was pinging. People were calling me at home."

Sanders, the official in Negroponte's office, said it was unclear whether the spy drain problem was real. Anecdotal evidence suggests that some officers are leaving early, he said, but attrition rates have not risen in recent years.

Another worry is that the reliance on contractors is eroding agency budgets. Sanders said a recent personnel study by the Senate Intelligence Committee found that contractors were typically paid 50% to 100% more than staff officers to perform comparable work — a disparity that can create internal tensions.

"It's a serious morale problem when you've got a guy in the field making $80,000 and a contractor making $150,000," said the former case officer who served in Iraq. "And the [staff employee] is supposed to supervise the guy making twice the money."

The spike in the use of contractors is likely to diminish as the bumper crop of recruits at the CIA and other agencies rises through the ranks. However, officials said that was a process that would take years.