Spies for Hire

by Tim Shorrock

  In practical terms, that meant tearing down the wall that had separated intelligence from the commercial worlds and adapting the same technologies that now dominated the World Wide Web. At his headquarters in Fort Meade, NSA director Hayden began taking measures to reorganize the agency and create a SIGINT system that would work as effectively against cell phones, fiber optics, and other advanced communications as it did against the Soviet military. To accomplish that goal, he and his staff decided to radically expand the agency’s dependence on the private sector. After all, the high-tech capitalism churning in the computer industry and the Internet was the source for most of the new technologies coming online; if the NSA couldn’t beat them, it would join them.

  “The NSA had two choices,” recalls Stan Soloway, a Washington lobbyist for contractors who worked as a Pentagon acquisition official during the Clinton administration, when these changes took place. “Let those networks atrophy because they didn’t have any money to develop the people, or get the hell out of the business of managing the networks and put resources toward the intelligence side—the core mission that they had. And that’s what they’ve done.”28

  In the mid-1990s, twenty companies accounted for 85 percent of the NSA’s contracting. But starting in the last years of the Clinton administration, the NSA began to expand its contractor base and outsource on a massive scale. From 2000 to 2004, the NSA doubled its procurement spending, and increased the number of contractors to more than 2, 690. What this would mean for the NSA was spelled out in 2002 by Michael Hayden in a cryptic statement to Congress. In terms of “buy vs. make”—the percentage of the NSA budget spent on buying technology versus making it—“we spent about a third of our SIGINT development money this year making things ourselves,” he said. “Next year the number will be 17 percent.” In other words, 83 percent of the NSA’s signals intelligence development budget was spent on contractors. That was five years ago; as outsourcing has increased, that percentage has probably grown considerably. In any case, the number of NSA suppliers now exceeds 5, 400.29 That marks an astounding shift for an agency that helped bring the modern computer age into being.

  To cushion the blow to NSA employees who were being laid off, the NSA created a program called Soft Landing, which helped NSA workers find jobs with the contractors. “The idea was to transfer the employees to jobs within the crypto-industrial complex—jobs with defense firms that had significant contracts with the NSA,” James Bamford wrote in Body of Secrets, his second book on the agency.30 Many of these contracts called for the former NSA employees “to remain right at NSA, although in a different job and in a different office.” Companies participating in that early program included Allied Signal, TRW, SAIC, and Lockheed Martin. By 1998, the NSA’s Soft Landing office had placed more than three hundred retirees at eight contractors, saving the NSA $25 million. In July 2000, hoping to bring “corporate rigor” to the NSA’s operations, Hayden hired Harry Gatanas, a former senior Pentagon contracting official, for the new post of senior acquisition executive.31 Other managers were brought in from Legg Mason, the financial services company, and Walt Disney Corporation.

  Gatanas and Hayden also organized a PR campaign to drum up congressional support for their outsourcing plans. In June 2004, Ellen McCarthy, the Washington Post’s technology correspondent, took the bait and wrote a flattering profile of Gatanas that captured the spirit of the times. “Sitting in a dark boardroom and flanked by World War II spy posters,” she began, “Harry D. Gatanas is blunt about what’s happened at the National Security Agency over the past 15 years: The code-breaking organization has lost its technological edge…. To keep up with the world around it, the secretive organization based at Fort Meade has been forced to open its doors and do business with the private sector.”32 Later, in a highly unusual step, Gatanas and other acquisition executives held a press conference to explain their buying procedures, and even announced a partnership with the state of Maryland intended to help companies develop ties with the agency. “This revolution in information technology is far more than we can handle,” Gatanas told the briefing. “We’ve got to have the support of industry.”33 Eric Haseltine, the Disney executive hired as the NSA’s director of research, expounded on this theme. “We in the NSA are encountering problems with the flood of information that people [in the outside world] won’t see for a generation or two,” he declared. “We can either be drowned by it or we can get on our surfboard and surf it and let it propel us.”34*

  The story of Essex Corporation, an NSA contractor now owned by Northrop Grumman, is emblematic of the outsourcing revolution that transformed the NSA. Earlier, we met Leonard Moodispaw, its CEO, who was one of the founders of the Intelligence and National Security Alliance. Like many of his colleagues in the intelligence industry, he began his career working for the NSA, where he was employed for more than fifteen years as a senior manager in the Signals Intelligence Directorate. In 1978, at a time when NSA was under fire in Congress for monitoring the phone calls and telegrams of American citizens, Moodispaw said goodbye to the agency and set off to use the law degree he had earned in night school. Over time, he built a flourishing practice in Annapolis, where he did some civil liberties work and represented former NSA colleagues in their private legal matters.

  Ten years later, a group of NSA scientists Moodispaw had known formed a company called System Engineering & Development Corp. (SEDC). Their goal was to commercialize a new optical technology they had invented while at the NSA, which used light beams to process images from satellites. Moodispaw was invited to join them, and he eventually rose to the position of vice president and general counsel. He was soon recruited away to another company, ManTech International; but he didn’t like the hyper-competitive atmosphere there, and within a few years had rejoined his colleagues at SEDC. By that time, the Cold War was over and the defense industry was moribund. SEDC, now owned by an engineering company called Essex Corporation, was floundering. It needed Moodispaw’s executive leadership and his experience working in the government.

  At the time, Essex was marketing its laser technology primarily to private companies. One of its clients was the electronics giant Motorola, which had launched an ambitious and expensive project—known as the Iridium project—to build a global constellation of satellites for the new mobile phones that were just coming on the market. But the Iridium project was an idea before its time, and eventually floundered. At that point, Moodispaw and his team decided to focus on government markets, which had the potential to provide the R&D money that could turn their optical technology into a commercial success. Their first government customer was the Pentagon’s Ballistic Missile Defense Organization, which saw potential in optical technology for missile-detecting radar.

  Then, in 1999, the NSA came calling. Under the leadership of Michael Hayden, Moodispaw’s old employer was turning to the private sector for new ideas that could help it stay ahead of the technological revolution under way in IT and communications. Optical processing, NSA analysts believed, had the potential to vastly improve NSA’s ability to collect and analyze the oceans of signals intelligence it was scooping up from its global network of satellites and listening posts. With seed money from NSA, Essex and its team of scientists, led by NSA veteran Terry Turpin, slowly began to expand. But success was still a long shot. “I just hope they can stay in business long enough so the Defense Department gets to leverage off what they’re doing in the commercial world,” a U.S. official told the Baltimore Sun.35

  The events of September 11, 2001, erased all doubts about the company’s future. The NSA, which had captured but failed to translate several crucial Al Qaeda messages that might have alerted officials to the attacks, came under intense pressure from Congress and the Bush administration to apply its technical skills to find terrorists before they had a chance to strike again. Essex was in the right place at the right time, and the work started pouring in. Shortly after 9/11, for example, the NSA and the Department of Defense became very interested
in how Essex was using optical technology to build three-dimensional images from data transmitted from reconnaissance planes and spy satellites. The projections allowed intelligence analysts to see objects normally blocked by clouds, trees, foliage, and the ground—things like mines, improvised explosive devices, and the insurgents using them—that are often hard to spot from five miles in the air.

  Soon the classified contracts were flowing in almost as fast as Essex could sign them. One contract, for a secret project called Thunder, started at $57 million in 2003, and was increased by $225 million in 2004 and by $160 million in 2006 (in the arcane language of NSA contractors, Essex CEO Moodispaw would only say that the rapid expansion “reflects the urgent requirements of our customer”).36 By the end of 2006, Essex’s earnings had increased from $2.6 million in 2002 to over $250 million, capping an astounding five-year span of growth in which its revenues increased by 156 percent every year. Over that time, Essex grew from a staff of fifty to over one thousand. Now it is part of the Mission Systems division of Northrop Grumman, which paid $580 million for the company. (With the acquisition, Defense News observed, “Northrop Grumman gains entrée to several key classified programs under the aegis of the NSA, the Missile Defense Agency and other Washington-area government clients.”)37 The NSA is now responsible for 90 percent of its business, and the company’s lightning-fast optical processors are now employed throughout the Intelligence Community. But the way Moodispaw tells it, it’s in signals intelligence where Essex has made its mark. Essex, he told me shortly before his company was sold, “provides the right tools to use in different signals environments. We put together the teams to work closely with agencies so they can figure out how to intercept calls, analyze things, and locate people. And the more successful we are, the less they want us to talk about it.”38

  Essex was also involved in the NSA’s largest outsourcing project to date: Project Groundbreaker, a ten-year, $5 billion project to rebuild and operate the NSA’s internal telephone and computer networking systems. The project was managed by a vendor team led by Computer Sciences Corporation and Logicon, the IT subsidiary of Northrop Grumman, and remains the largest outsourcing project ever attempted by the federal government. The “outsourcing partnership” with CSC and Northrop Grumman, Hayden said in announcing the contract award on July 31, 2001, will allow the NSA to “refocus assets” on its “core missions of providing foreign signals intelligence and protecting U.S. national security-related information systems” by turning over key IT services “for industry’s purview.”39 He added: “The ability of NSA to perform its mission depends on an efficient and stable Information Technology Infrastructure, one that is secure, agile, and responsive to evolving mission needs in balance with the requirements to recapitalize and refresh technology.”

  CSC had been in the government contracting business for nearly half a century when it was selected to manage the Groundbreaker project. It was founded in 1959 to write software for defense manufacturers and in 1963 became the first software company to go public. Over the years, it built a multibillion-dollar business as a systems integrator for companies and government agencies, starting with computer contracts with the National Aeronautics and Space Administration. After 9/11, CSC formed a new business unit to go after homeland security and intelligence work (“One reason we did this was the wealth of discussion about sharing data among the agencies and the first responders, especially when it comes to terrorist threats,” said Pat Ways, CSC’s vice president for federal sector business development).40 By 2004, largely as a result of Groundbreaker, CSC had become the nation’s third-largest federal contractor, with prime contracts worth more than $4 billion.41 Northrop Grumman, CSC’s partner in the Groundbreaker project, is best known as a designer and manufacturer of military surveillance and combat aircraft, defense electronics and systems, as well as large naval combat ships. It first became an important intelligence contractor in 1999 when it acquired DPC Technologies, a Maryland IT company with close contractual ties to the NSA. It moved deeper into intelligence in 2002 when it acquired TRW, a longtime CIA and NSA contractor. Those acquisitions, plus its recent takeover of Essex Corporation, have greatly expanded Northrop Grumman’s presence at Fort Meade.

  In managing the project for the NSA, CSC and Logicon drew in practically every major company involved in defense and intelligence outsourcing and called the consortium the Eagle Alliance. Subcontractors included General Dynamics, BAE Systems, Titan Corp., CACI International, TRW, ManTech, Lockheed Martin, and Verizon (one of the companies that allegedly granted the NSA access to its consumer database under the Terrorist Surveillance Program), as well as Dell, Hewlett-Packard, and Nortel Networks. Under the NSA’s “employee-friendly approach,” contractors received monetary incentives to hire NSA employees.42 The companies involved were delighted with the project. “This type of outsourcing program hits our sweet spot,” boasted Frank Derwin, Logicon’s vice president.43

  Groundbreaker, however, was marred from the start by technical and managerial problems. Moodispaw, whose company was a subcontractor on the project, told me that CSC had badly mismanaged the project from the beginning. “CSC is the absolute worst prime in the world to work for,” he said. “They’ll screw you right and left. And I’m not asking to be off the record.”44 (CSC would not comment.) In 2006, Siobhan Gorman, the Baltimore Sun’s intelligence reporter, interviewed dozens of NSA officials and contractors involved in the project. She found that Groundbreaker’s $2-billion price tag had doubled, and that technical problems with the system were legion.

  “Computers are integral to everything NSA does, yet it is not uncommon for the agency’s unstable computer system to freeze for hours, unlike the previous system, which had a backup mechanism that enabled analysts to continue their work,” she wrote. “When the agency’s communications lines become overloaded, the Groundbreaker system has been known to deliver garbled intelligence reports.” Worse, agency linguists told Gorman that the number of conversation segments they could translate in a day had dropped significantly under Groundbreaker. The NSA, she concluded, “has no mechanism to systematically assess whether it is spending its money effectively and getting what it has paid for.”45

  In June 2007, the NSA exercised its options in the original contract and extended Project Groundbreaker for another three years. The new contract is worth $528 million.46 The NSA’s action “underscores NSA’s confidence in the Eagle Alliance’s experience and ability to deliver state-of-the-art information technology solutions that result in sound operational performance for the agency,” James W. Sheaffer, the president of CSC’s North American Public Sector division, announced in a press release. Chuck Taylor, CSC’s director of North American communications, said the company would not answer any questions about the Groundbreaker project because its details are classified. “Generally we’re not at liberty to discuss this contract at all,” he told me.

  Project Groundbreaker spawned an industrial renaissance near the NSA, and the results can still be seen today in an innocuous-looking cul-de-sac called National Business Parkway less than a mile from the NSA’s headquarters in Fort Meade. Here, you can see the entire panoply of companies involved in the Intelligence-Industrial Complex.

  Driving in from the south, one of the first buildings on the parkway is the regional headquarters for Boeing, a key NRO and NSA contractor. Boeing is deeply involved in signals intelligence through its Integrated Defense Systems unit, based in St. Louis. In 2006, it began testing for its defense and intelligence clients a new product that downloads signals and imagery from military satellites and sends it instantly to analysts in ground stations. “For the first time,” said Boeing, “signal intelligence receivers proved that they could automatically identify the target—a mock terrorist—and trigger airborne surveillance assets to track the target on the ground, while capturing full-motion imagery and broadcasting it instantly to analysts several hundred miles away.” The system will eventually become part of the U.S. Army’s arr
ay of high-tech weaponry.47

  Next to the Boeing site is a large building carrying the logo of Lockheed Martin, the nation’s largest defense contractor. Lockheed’s ties to the NSA go way back: in the mid-1950s it built the U-2, the spy plane that played a key role in the Cold War, and conducted some of the NSA’s initial research in signals collection. “Some of our work you will never hear about,” the company says on its Web site. “Our classified work has supported the Defense Intelligence Agency (DIA) and National Security Agency (NSA) as they dealt with the most high-visibility situations in recent U.S. history and many others you never saw on the news.” Under a contract signed in 2005, Lockheed Martin provides an integrated electronic security system to protect NSA facilities in the Washington area. A similar system is in place at the Pentagon and dozens of U.S. military facilities abroad.

  Adjacent to Lockheed Martin sit the Washington offices of Titan Corp., a $2 billion contractor that provides technical support for many of the UAVs deployed by the Intelligence Community over Iraq and Afghanistan. In 2005, L-3 Communications acquired Titan for $2.6 billion, instantly transforming itself into the nation’s sixth-largest defense contractor and a major force in intelligence. Titan’s office, which includes over 15, 000 square meters of floor space, houses six hundred workers and is the headquarters for Titan’s National Intelligence Solutions Group, which works closely with the NSA. Titan contracts included a $300 million, five-year contract for program management and planning, and a $36 million, four-year contract for translation and analysis services at Fort Meade and two of the NSA’s regional centers.48 In 2007, after Titan had been absorbed, L-3 began working on a new $35 million, five-year contract to supply online network encryptor cards to national security agencies. The cards allow intelligence and defense agencies to link up with other classified networks.49