Outsourcing Foreign Policy – The Reality and the Challenge

One Nation Under Contract:

The Outsourcing of American Power and the Future of Foreign Policy

By Allison Stanger

Yale University Press, 2009

Allison Stanger, the author of One Nation Under Contract, is a progressive and an optimist. In her new book she paints a shocking picture of escalating private-contractor control over the U.S. foreign policy and homeland security. But she believes that good government can reassert itself over the outsourcing process.

What is more, Stanger posits that the globalization of communications and economics creates the potential for an “empire of the willing,” which can leverage the public-private partnership in exciting new ways. This won’t be a radical break with the past “but instead a step forward in a progression initiated long ago.” It will be a globalization of an enlightened self-interest, pointing to the philanthropy of Bill Gates, the work of Greg Mortensen (author of Three Cups of Tea) in Afghanistan, the Clinton Global Initiative, and the International Campaign to Ban Landmines as trailblazers.

The “empire of the willing” inspired by its ideals – “economic freedom, equality of opportunity, and sustainability” – is no utopian notion, writes Stanger. She points to the sweep of human history that has pushed forward the “expansion of identity and empathy from local to ever more encompassing structures.” Once common and accepted, she points out that second-class rights for minorities and women, slavery, and child sweatshop labor are now widely regarded as moral transgressions and illegal.

Obstructing this new progressive empire is an outsourcing system that has recklessly shifted control of inherently government functions to private contractors and where government has been hollowed out. The empires subjects -- its willing are -- range from “the governments of liberal democracies to beleaguered individuals in distant lands,”

Although many may view skeptically the possibility that this empire of the willing could become the dominant force in global affairs, this critical examination of foreign policy outsourcing is likely to rally echoes of support and indignation among most readers. Whether one is an optimist or pessimist, democratic socialist or ardent capitalist, progressive or conservative, Stanger’s careful presentation and clear writing is bound to appeal. In addition, her big-picture thinking about the potential and pitfalls of private-public partnerships – and their essential, unavoidable role in a globalized world – is certain to provoke rethinking among all but the most dogmatic, ideological of readers.

Her central conclusion about the outsourcing boom in foreign policy and homeland security is that the private contractors who swindle, abuse, pilfer, and pervade government are not the fundamental problem. Rather, government is where the problem begins and where it must end.

Don’t scapegoat the contractors, she cautions. “The problem is the loss of good government. If the contractors in Iraq seem wildly expensive, it is not because corporate greed has dictated outcomes but because government’s aspirations there have been far too ambitious and its controls too few.” Typical of her precise formulations, Stanger writes, “Business can be hired to solve problems, but there are some problems that only government can solve, since business absent good government will always sacrifice sustainability to short-term gain.”

What’s needed, writes Stanger, is a national discussion about which functions of government should never be outsourced and on the proper ends of government. Once that theoretical base and its accompanying ground rules are established, then the public-private partnership can be a tremendous multiplier force that serves the public good. “Government cannot lead if it refuses to take responsibility for what it has been called into being to do,” she argues, while summarizing the history of the right-wing ideological forces, the downsizing/reinventing government trends, and political cronyism that have diffused the core functions of government over the past several decades.

Yet it has been the past decade when the trend became a crisis in foreign policy. “Contract spending more than doubled during President Bush’s time in office,” she observes. By 2007 “the federal government was spending more than 40 cents of every discretionary dollar on contracts with private companies.” Noting that privatization is not the creation of any single administration, Stanger goes on to say that the “Bush administration took us into uncharted territory with its laizzez-faire outsourcing practices.”

Proper attention must be given to the question of “how government should optimally collaborate with the private sector to advance its international interests” and how to set us on a course toward “strategic outsourcing with appropriate oversight.”

Although published by an academic press and benefiting from careful scholarship and extensive referencing, One Nation Under Contract is largely free of the type of academic jargon and labored arguments that burden the academic press. Stanger often comes right to the point with straightforward, hard-hitting language, such as: “In this new world, the private sector increasingly handles the everyday business of government,” leaving no doubt how serious the outsourcing crisis is.

Stanger says that government outsourcing and private contracting “have combined to replace big government with a staggeringly large shadow government.” Just how large is this shadow government?

Stanger uses the example of Lockheed Martin to give readers a sense of the monstrous scale of the shadow government that now fills the spaces left by the “hollowing out of government.” Lockheed, the largest federal contractor, the top DOD contractor (and a leading contractor for Homeland Security, intelligence, and Energy) “gets more federal money each year than the Departments of Justice or Energy.”

The book’s conclusion lays out a list of recommendations designed to ensure that government becomes the controlling party to the public-private partnership. These recommendations include calls for more transparency in contracting, more oversight and accountability, and an end to no-bid contracts. Yet Stanger, much to her credit, doesn’t stop with proposed bureaucratic reforms but goes right to the rotten core of federal government outsourcing, namely the security budgets. “American power must be demilitarized,” Stanger concludes, arguing that, among other things, “the empire of the willing’s vitality is compromised by ill-conceived wars.”

One Nation Under Contract has some weaknesses. Like many researchers and analysts, Stanger apparently came to the issue of outsourcing in the wake of DOD/contractor abuses and excesses in Iraq and thus is strongest when looking at Pentagon practices. Unfortunately, the brand new world of outsourcing intelligence is all but ignored in the book, and her chapter on outsourcing in the newly created Department of Homeland Security is the weakest in the book. It’s a new area for her and it shows in the absence of original analysis and over-reliance on secondary sources.

There have other books that expose and lament the privatization of the military, but in One Nation Under Contract Stanger gives the reader more than scandal and abuse. She convincing argues that the consolidating public-private partnership in government and global affairs has transcended the liberal international/realism dynamic that frames traditional foreign policy discussions.

While presenting us with a dismal picture of current governance, she leaves us with a path forward. Whether good government can prevail over private contractors is not known. Most would probably say doubtful. But without the hope that the voters and their representatives can reclaim government from the outsourcers and mercenaries, we will truly be living in a nation defined and directed not by its citizens but by its contracts.

Graphic: Illustration from CACI, major defense, intelligence, and homeland security contractor.

Funds are running low. With no foundation grants or institutional support, Tom Barry and the TransBorder Project of the Center for International Policy count on individual financial support to continue this investigative, analytical, and advocacy work. 

Go to the CIP online donation page, and write TransBorder Fellowship in comment section when making your donation. Or mail a check to CIP, noting this project. Thank you!

Connecting the Intelligence Dots -- It's Easy

Within the intelligence community, it’s easy to connect the dots. Corporations like IBM, CACI, and Lockheed Martin – among the main intelligence contractors -- are making it easier all the time. 

Corporate mergers, acquisitions, and the intelligence community’s revolving doors are making it easier than ever to understand who’s in control and to assess the motivations of U.S. intelligence operatives.

The effectiveness and reliability of U.S. intelligence is in increasing question. Decades of intelligence failures, abuses, politicized intelligence, and wildly wrong intelligence assessments have cast persistent doubts about the reliability and integrity of the 16 agencies that comprise the U.S. intelligence community.

Things aren’t getting much better under the Obama administration and the Democratic Congress, which, respectively, has failed to fill the CIA’s vacant inspector general position and which relies on national security sycophants like Rep. Silvestre Reyes (Texas) to provide congressional oversight as chairman of the House Select Intelligence Committee.

It’s been hard monitoring the intelligence community because its budget is classified, congressional oversight hearings are classified, and, well, they are spooks. But two factors over the past decade are making it easier at least to understand. 1) the rapid increase in outsourcing intelligence to private contractors (now constituting about 70% of the intelligence budget), and 2) the emergence of communications and information technology as the leading growth area in intelligence – and most areas of national security.

IBM’s acquisition this week of the National Interest Security Company, which is a conglomerate of intelligence, homeland security, and defense consulting firms, illustrates both these trends. According to Forbes, IBM’s “purchase of an intelligence firm signals boom time in the spy business” and “shows that the technology sector believes it can find growth servicing the government with high-end intelligence services.” Another business publication Information Week Government noted: “Big Blue's buyout of NISC deepens its presence in sensitive areas like homeland security, defense, and intelligence.”

The deal also highlights another common feature of high-tech intelligence, homeland security, and defense contracting – the critical role of high finance in configuring the new players of the national security complex.  

In this case, the key hidden player is DC Capital Partners, which describes itself as a Washington, DC investment firm whose “domain expertise provides a competitive advantage, primarily in the defense, aerospace, government services, information technology, and business services industries.”

Lately, to understand intelligence and, indeed, the entire spectrum of national security you need to follow the flows of venture capital.

Among NISC’s “continuum of services” are information systems development, datamining, cybersecurity initiatives, information assurance, and multilingual data-exploitation and mining. NISC says it is dedicated to providing innovative information technology, information management, and management technology consulting services in support of the national interest and security.”

Among the federal government departments the company “supports” include: Defense Intelligence Agency, Department of Homeland Security, National Geospatial Intelligence Agency, National Reconnaissance Office, Office of the Director of National Intelligence, Department of Defense, and “other classified agencies.”

NISC says its “main markets” are intelligence, homeland security, defense, energy, and federal health.

With more than a thousand employees, NISC is headquartered in Farifax, Virginia. The company has “$200 million in revenues and 80% of its employees hold security clearances and mostly work on classified contracts,’ according to Forbes.

According to DC Capital Partners, NISC was established through the acquisitions of a series of other high-tech companies specializing in intelligence and security. Since its establishment in a few years ago NISC, through the investment strategy of DC Capital Partners, has acquired the following intelligence-related firms: Edge Consulting, MITI, Information Manufacturing Corporation, Technology and Management Services, Omen Inc., National Intelligence Support Services, Athenyx, Kaseman, and Strategic Intelligence Group. It is unclear if all these subsidiaries will be transferred to IBM.

The company’s published descriptions of these integrated firms help illuminate the dimensions of the current merger of private contractors, intelligence operations, and intrusive technology.

Information Manufacturing Corporation provides “a wide range of information technology and knowledge management services to the Intelligence Community, the Department of Defense, and other federal agencies,” with services including data capture, convergence, manipulation, mining, and exploitation.”

Omen Inc. provides the intelligence community with analysis of communications and electronic intelligence.

Kaseman offers “critical operational support” to State Department and Homeland Security in “anti-terrorism, counter-terrorism, and counter-narcotics training,” and “technical security advisory and assessment services, and risk analysis.”

Strategic Intelligence Group is “an intelligence consulting firm specializing in the development and implementation of innovative business platforms for human, financial and technical intelligence collaboration in the public and private sectors.”

Government Insiders Come Out

NISC like most homeland security, intelligence, and DOD contractors is a home for former high government officials. NISC’s chief executive officer, for example, is Andrew Maner, who served as chief financial officer for the Department of Homeland Security (2002-2006). Maner also served as chief of staff at Customs and Border Protection, which includes the Border Patrol.

Among the members of its board of directors are General Michael Hayden, former Director of the Central Intelligence Agency and former head of the National Security Agency. Hayden is also a principal at the Chertoff Group, a national security consulting agency formed by former Homeland Security Secretary Michael Chertoff.

Other NISC board members include former Senator Chuck Hagel, Ambassador Henry Crumpton, and five former retired generals and admirals, including General Anthony Zinni and General Michael Hagel,

The Forbes’ report of IBM’s purchase (which will be completed this quarter) of NISC noted that DC Capital Partners realized “$180 million and making nine times its original investment of $19.6 million in the company in less than three years.”

In a press release, IBM said NISC "will enable IBM to expand its capabilities with federal, state and local government entities, particularly in the fast-growing areas of defense, health care, energy, logistics and security."

“THINK” is the longtime slogan of IBM. That thinking has led IBM to follow the lead of other major corporations like Lockheed Martin, CACI, and Boeing in the emerging national security complex to pursue profits in the booming business of intelligence. 

Photo: General Michael Hayden

Not Systemic Failure, But Failed System

"Systemic failure” is how President Obama on Dec. 30 described the homeland security and intelligence lapses that led to the unsuccessful terrorist attack by a Nigerian Islamist on Dec. 25. The accuracy of this assessment was underscored by another intelligence failure that resulted in the death of seven CIA agents in Afghanistan on Dec. 30.

What is to be done?

Michael Chertoff, the head of the national security consulting agency Chertoff Group and former secretary of the Department of Homeland Security, says buy and install more full-body scanners.

Indeed, that may be part of the answer. But his private-public status – and the fact under his tenure as DHS chief the department began buying scanners (at an estimated $160, 000 each) from Rapiscan (a company Chertoff Group now represents) – is cause for skepticism. Rapiscan received $26.5 million through DHS contracts in 2008, and$41.4 million from all government departments.

It’s unlikely, however, that attempts to fix our homeland security and intelligence system with new communications and screening systems can do much to improve a system that is increasingly driven more by private than public interests.

As Kate Hanni, founder of FlyersRights.org, told the Washington Post: "Mr. Chertoff should not be allowed to abuse the trust the public has placed in him as a former public servant to privately gain from the sale of full-body scanners under the pretense that the scanners would have detected this particular type of explosive."

Chertoff is one of a stream of mid- and high-level national security officials who have left homeland security, intelligence, and defense positions to join national security corporations. Tom Ridge, Chertoff’s predecessor at DHS, formed a national security consulting agency called Ridge Global.

One of the most recent national security start-ups is RiceHadley Group, founded by former Secretary of State Condoleezza Rice and former National Security Advisor Stephen Hadley.

Other new security companies formed by top Republican Party figures: Ashcroft Group founded by former Attorney General John Ashcroft; and Guiliani Group, formed by former New York City mayor and presidential candidate Rudolf Guiliani.

Chertoff is quickly becoming the most high-powered and deeply-pocketed national security consulting firms.

Other principals at Chertoff Group are also former government heavies, including:

* Former CIA director (2005-2009) Michael Hayden, who also directed the National Security Agency (NSA, 1999-2005);

* DHS deputy Paul Schneider (who prior to his position at DHS was head of acquisitions for NSA and the U.S. Navy);

* Ret. Admiral Jay Cohen, who was DHS director of science and technology and previously the Navy's technology chief; and

* Charlie Allen, who was the intelligence chief at DHS and, according to Michael Chertoff, "pretty much head of everything you could be for the CIA and head of national collections."

Financial recognition of the influential position held by Chertoff Group in homeland security policy and contracting came on Jan. 6 when Blue Star Capital a London investment company specializing in mergers and acquisitions within the homeland security sector, announced that it had entered into a “strategic relationship” with the Chertoff Group.

This new relationship also pointed to the increasing merger of the homeland security, defense, and intelligence sectors. As Blue Star explained:

"The Chertoff Group will work with Blue Star on due diligence for certain revenue generating opportunities in the homeland security, defense and intelligence markets, de-risking investments in this high-growth sector.

“The combined team brings together international experience including the U.S. Department of Homeland Security, U.S. Department of Defense, U.S. Central Intelligence Agency, and National Security Agency, plus UN security expertise, UK police, Scotland Yard counterterrorism expertise, Special Forces, security services, commercial defense companies, and global mergers and acquisitions investment banking experience."

The system that so spectacularly failed in two recent incidents is all about mergers and synergy, and little about real national security.

Chertoff applauded the value of the merger: "I believe there are many areas of opportunity within the Homeland Security, Intelligence and Defense sectors in the UK and mainland Europe where the synergies between Blue Star and the Chertoff Group will provide real value.”

The increasing merger of the homeland security, defense, and intelligence sectors is creating a new national security complex, where the leading defense contractors are now also the leading intelligence and homeland security contractors.

It is becoming quite clear that this merger of sectors and the purported synergy between public and private interests have been good for business.

But it is also becoming increasingly clear that this corporate-driven system of sector mergers and synergy of homeland security, intelligence, and defense is distorting national security priorities and putting us at risk.

It’s time to clean house and create a new system of national security – one in which our homeland security, defense, and intelligence is not overridden by the likes of Lockheed Martin, Blackwater, Halliburton, and the Chertoff Group.

The National Security Complex -- Integrating Military, Intelligence, and Homeland Security

Who’s taking care of our national security – our nation’s defense, military operations, homeland security, and intelligence?

There’s the Department of Defense, the U.S. armed forces, the Department of Homeland Security, and the “intelligence community” of agencies led by the Office of the Director of National Intelligence.

But since Sept. 11 national security has been increasingly outsourced.

Industry involvement in national security is nothing new. It became such a pervasive and influential part of national security operations in World War II and the onset of the cold war that President Dwight Eisenhower gave it a name: “military-industrial complex.”

But that’s no longer an accurate description of government/industry collaboration in shaping national security.

Since Sept. 11 a new government/industry complex has emerged – one that brings together all aspects of national security. Its formation and explosive growth are the product of three interrelated trends: 1) increased outsourcing to private contractors unleashed by the Bush administration, surge in the intelligence budget, and creation of the Department of Homeland Security.

While governmental functions are divided into departmental responsibilities, the various dimensions of post-Sept. 11 national security operations are more integrated in industry.
Who are the top homeland security contractors, the top intelligence contractors, the top military contractors?

The top ten DHS contractors in 2008 were Lockheed Martin, Northrup Grumman, IBM, L-3 Communications, Unisys, SAIC, Boeing, Booz Allen Hamilton, General Electric, and Accenture.
Other corporations that are among the top 25 DHS contractors include General Dynamics, Fluor, Computer Sciences Corp, American Eurocopter, Electronic Data Systems, and Motorola.

Who are the top intelligence contractors? There is no public list of corporations that perform work for the intelligence community.

Tim Shorrock in his new book Spies for Hire reports that based on company releases and filings with the Securities and Exchange Commission the top five intelligence contractors are likely: Lockheed Martin, Northrup Grumman, SAIC, General Dynamics, and L-3 Communications. Other major intelligence contractors include Booz Allen Hamilton, CACI International, DRS Technologies and ManTech International. As chairman of the House Intelligence Committee and a key member of the House Appropriations Select Intelligence Oversight Panel, U.S. Rep. Silvestre Reyes (D-Tx.) exercises oversight and control over the ballooning intelligence budget. Since Sept. 11, the 16 agencies that comprise the intelligence community along with the Office of the Director of National Intelligence have experience two main trends: the doubling of the intelligence budget and the rapid increase in private outsourcing. Within the past eight years – since Sept. 11 2001 – the intelligence budget has soared, rising from an estimated $30 billion at the turn of the century to an estimated $66.5 billion today. Just as the White House and Congress have cooperated to ramp up the intelligence budgets, the intelligence community has channeled most of the new funding to private intelligence contractors, both major companies like CACI and individual contractors. An estimated 70% of the intelligence budget now is channeled to the private sector. Who are the top defense contractors? The top ten are: Lockheed Martin, Boeing, Northrup Grumman, General Dynamics, Raytheon, BAE Systems, L-3 Communications, United Technologies, KBR, and SAIC. Others within the top 25 include Computer Sciences Corp., General Electric, ITT, Electronic Data Systems, DRS Technologies, Textron, Honeywell, and Booz Allen Hamiliton. Generally, the top military contractors, like Lockheed Martin and Northrup Grumman, are also the top intelligence and homeland security contractors. The military-industrial complex has become the military/homeland security/intelligence complex. In his farewell address President Eisenhower warned:

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”

That warning, while still well-advised, is now badly out of date. The power of this complex has become so pervasive that it is difficult to determine what remains a purely governmental function in national security. Corporate hires perform soldiering and intelligence collection, and even hiring and management are now outsourced to the private sector. Most major military contractors have homeland security and intelligence divisions that are much larger than the progenitor defense corporations of the 1960s. It’s no longer entirely accurate to call corporations like Lockheed Martin defense or military contractors. Doing so ignores their central place in both homeland security and intelligence operations.

What we now have might be more accurately termed a national security complex where intelligence, defense, and homeland security are closely linked and integrated.