Outsourcing Defense 6/04

The Quiet Rise of National Security, Inc.


Four years ago, candidate George W. Bush promised to make government more efficient, lean, and responsive by looking at whether some federal agencies should be privatized or abolished. On the record, the plan was to start with almost one million federal positions, those said to be “commercially replaceable,” and open them up for private bidding. Shortly after taking office, he took the idea a step further, stating his preference for privatized peacekeeping operations.


Like many Bush statements, these too have turned out to be dangerously misleading. Although the candidate talked up competitive bidding and a Sunset Review Board to recommend which “duplicative and ineffective programs” should be eliminated, the president has presided over enormous no-bid contracts to Halliburton and other corporate friends, and – even more unsettling – the wholesale “outsourcing” of key military operations and information technology (IT) services.


In Iraq, private military contractors supply more trainers and security forces than all remaining members of the “coalition of the willing” except the US.  According to the April 10, 2004 Economist, approximately 15,000 civilian security guards are currently stationed there, at least 6000 of them armed. Some contractors maintain sophisticated weapons systems that used to be handled by the army. The results haven’t been impressive. The country remains violent and unstable, the human and financial costs keep rising, and the privately-trained Iraqi police haven’t performed that well.


Using contractors keeps down the casualty counts of US troops, so there is usually less outcry. “It almost puts a layer between political bosses and events on the ground,” explains Mark Burgess of the Center for Defense Information, quoted in the March 31 Charlotte Observer. But giving contractors prominent roles poses risks. For example, two contractors, Caci International and the Titan Corporation, were implicated in charges of torture, humiliation and rape leveled at the US military in Iraq. Private military intelligence specialists “played an important role” in interrogations at Abu Ghraib prison, the UK Guardian reported on April 30. In addition, giving high-paying jobs to foreigners also tends to inflame Iraqis, much the same as US workers get upset when their jobs are outsourced. More than $20 billion – a third of the Army’s budget for Iraq and Afghanistan – currently goes to contractors.


Still, the recent acquisition of DynCorp, a leading private military company (PMC), by Computer Sciences Corp. (CSC) takes military-intelligence privatization to a new level: turning over major aspects of government’s domestic security apparatus and its military operations around the world to the same corporation.


With 92,000 employees worldwide, CSC has more employees than the CIA and works with virtually every major US agency. Through its State and Defense Department contracts, it implements foreign policy by proxy and in secret. Its “private security personnel” are effectively immune from criminal sanctions; as The Economist put it, they are “outside the chain of command” and “not subject to military discipline.” Through its crucial IT work with the National Security Agency (NSA) – the government’s global eyes and ears- it upgrades and maintains the world’s most expansive and highly secure surveillance and communication systems. It also manages Air Force bases and information warfare planning, Army weapons systems, naval security, most of NASA’s air fleet, and Department of Homeland Security (DHS) border crossing technology. In short, it’s a full-service national defense and homeland security company, a veritable National Security, Inc.


“The global trade in hired military services is booming, and we’re only just now catching up,” notes Peter Singer, who works with the Brookings Institution. “It runs the gamut from cooks whose services have been privatized through to the maintenance people on fighter jets, to communications technicians, to trainers and recruiters, to generals providing strategic expertise, to fighter pilots and commandos. The entire spectrum of military services has been privatized in some way or another.” According to some estimates, PMCs will double their business by the end of the decade, reaching $200 billion a year.


Although PMCs like DynCorp, Vinnell (which trains Saudi Arabia’s national guard), and Military Professional Resources, Inc. (MPRI) provide the training, expertise, and strategic analysis vital for waging war, they reject the mercenary label and claim they don’t participate in battles. MPRI, for example, says that its people don’t carry guns. But as Singer notes, it may be an empty distinction when “a person pushing a computer button can be just as lethal as another person pulling a trigger.”


Low Profile, High Stakes


In late March, Blackwater Security, a North Carolina firm with a $35.7 million Iraq contract to train troops and guard high-risk targets such as oil facilities and US administrator Paul Bremer, attracted public notice when four of its employees- three ex-Navy Seals and an ex-Army Ranger – were ambushed, murdered, and mutilated in Fallujah. Non-military casualties aren’t included in official Pentagon reports, although Singer, a North Carolina native who also wrote the book Corporate Warriors, estimates that at least 30 contractors have been killed so far in Iraq, and about 180 have been wounded.


Yet, DynCorp, the largest PMC operating in Iraq, has stayed under the radar. It currently has Department of Defense (DOD) contracts worth more than $2 billion to provide “post-conflict police training” and other tasks around the world — and that’s merely the tip of this spear-for-hire. Over the last decade, DynCorp has dispatched its “trainers” to Haiti, Bosnia-Herzegovina, Kosovo, Liberia, East Timor, Afghanistan, and now Iraq. It also has handled aviation services for drug eradication programs in Latin America as part of Plan Colombia; updated e-mail and information systems for the State and Justice departments, DOD, FBI, Internal Revenue Service (IRS), Security and Exchange Commission, and Drug Enforcement Agency; maintained and managed US border posts, weapons testing ranges, Air Force bases in the Middle East, and the president’s fleet of planes and helicopters. As if that’s not enough, it also reviews security clearance applications for the Navy. 


In the Middle East, it even profited from the buildup to war with Iraq. In May 2000, DynCorp’s Fort Worth-based Technical Services division was given a $180 million DOD contract to work on the Air Force’s Prepositioned War Reserve Materiel program for the region. According to the company’s Website, DynCorp provided “support to bare base systems, medical, munitions, fuels mobility support equipment, vehicles, rations, aerospace ground equipment, air base operability equipment, and associated spares and other consumables at designated locations.”


All this government work made DynCorp an attractive acquisition target for CSC, an early software company that successfully branched out into federal contracts. Between 1990 and 2002, CSC won more than 1000 government contracts worth an estimated $15.8 billion. One of its key clients became the NSA. Shortly after Bush took office, it won a $2 billion, 10-year contract to revamp the NSA’s computer networks. In 2002, it added work for the Immigration and Naturalization Service (INS), Customs, and the new DHS, including software development and processing international travelers.  


Acquiring DynCorp cost CSC $950 million, but meant that one of the leading IT firms was joining forces with one of the largest PMCs, making it a major force in the military-intelligence-industrial complex. On the surface, the play looked slightly risky, since CSC lost $150 million in 2001 and cut 4000 US jobs. But the NSA deal provided a timely bailout, and the March 2003 merger immediately increased CSC’s government revenue to at least $6 billion a year, making it one of the 10 largest contractors. When the acquisition was announced in December 2002, CSC shares were going for $34.50. As of April 22, 2004, the price was $42.25, a 25 percent increase in less than 18 months.


But the biggest prize to date was still out there. Government IT spending has been immune to budget pressures, and the DHS has become the single largest federal department, with a colossal $36 billion budget. Of that, at least $3 billion a year is earmarked for IT services, most of them outsourced. This Spring, CSC was one of the three leading contenders for US-VISIT, a staggering $10 billion multi-year contract which will implement biometric security services like fingerprint-recognition scanners and digital photography. The winner would also help consolidate the 22 departments that are now part of the DHS.  In the long run, up to $80 billion is at stake. Although Lockheed Martin and Accenture were the other contenders, CSC seemed to have the early edge, since DynCorp’s past work in iris and facial recognition technology meshes well with CSC’s computer expertise. For this and other reasons, Wired has already dubbed CSC “Homeland Security, Inc.”


But on May 28, in a move that surprised man, DHS gave Accenture the prize. Part of the reason may have been the team of subcontractors it assembled: AT&T, Datatrac Information Services, Dell, Deloitte Consulting, Raytheon, Sprint, SRA International, and the recently controversial PMC, Titan Corp. But it also came in with the lowest price, and is already prime contractor on a $400 million project to modernize business systems for the Defense Logistics Agency. Two years ago, the General Accounting Office criticized Accenture and other companies for using offshore locations as a tax dodge. Accenture’s HQ is in Hamilton, Bermuda.


Selling Cybersecurity


CSC became the first publicly traded software corporation in 1963, and started to diversify in the mid-1980s. Eventually, it picked up some government IT responsibilities from General Dynamics. By 2000, it had become one of the top 10 IT contractors, taking in 8.3 billion annually. The next year, the total topped $10 billion, largely thanks to a joint venture with Northrop Grumman called Groundbreaker, a long-term NSA contract to provide a new, high security computer and telephone network, along with state-of-the-art desktops, office automation tools, and voice and video services. 


To smooth the way, the corporation has spent millions: in 2001 alone, $520,000 to directly make its case to Congress and various government agencies, plus an $580,000 to lobbying firms in hopes of influencing appropriation and procurement bills. According to documents filed with Congress, CSC lobbied on “legislative proposals for privatization and commercialization of federal services.” The next year, it spent another $1.1 million to influence Congress and the administration on similar issues. In 2001, 10 private military companies spent more than $32 million on lobbying.


In 2002, Bush released a National Strategy to Secure Cyberspace, developed by former counter-terrorism chief Richard Clarke. The work had begun two years before, with CSC Vice President Guy Copeland as a major contributor. Copeland has been developing public-private IT policy since the Reagan years, and drafted much of the language in the Bush plan as co-chair of the Information Security Committee of the Information Technology Association of America (ITAA).


Other key CSC personnel include Mark Brown, vice president of the aerospace division, a retired Air Force colonel and fighter pilot who spent 12 years with NASA; general counsel Hayward D. Fisk, who once served on the FCC’s advisory council and worked closely with Vice President Dan Quayle and Attorney General William Barr; and Tim Sheahan, head of enforcement, security, and intelligence, who worked in the federal government for eight years before joining CSC.


But the man of the moment may be Ronald L. Dick, who joined CSC in early 2003 as director of information assurance strategic initiatives after serving in various positions with the FBI. In 2001, this “cyberwarrior” became director of the FBI’s National Infrastructure Protection Center (NPIC), charged with protecting US network and computer infrastructure. He was considered a leading contender for a top security job at the DHS before leaving the government. His presence helps consolidate CSC’s cybersecurity edge.


On April 28, 2004 CSC proudly announced completion of another key phase in the Trilogy program, an overhaul of the FBI, moving it from a paper-driven organization to one that employs the latest, most powerful technology. Trilogy began in May 2001. Coordinating with the FBI and the General Services Administration’s Federal Systems Integration and Management Center, CSC designed and deployed a modern government IT infrastructure. After 9/11, it installed the Bureau’s new high-tech computers. By March 2003, it had completed a new transportation network, a “wide area network architecture” that provides secure communications within and between all FBI offices worldwide.


Working with CSC, the NSA began testing the waters of outsourcing in 1998, awarding the company a $20 million contract called Breakthrough. This brought CSC into the daily operation and maintenance of NSA computer systems.  Facing personnel cuts in 1999, the agency offered over 4000 employees “soft landing” buyouts to help them secure jobs with defense firms that had major NSA contracts. In 2000, several hundred government employees moved over to CSC as part of a $680 million Logistics Modernization contract. The next year, the company “transitioned” more than 1000 federal employees to the private sector as part of another NSA contract. Meanwhile, the new Bush administration pushed the privatization of more IT functions.


According to an August 1, 2001 Washington Post report, such moves represented “a clear acknowledgement by NSA officials that the agency has fallen behind the technological curve.” For an agency that long prided itself on developing and controlling much of its own technology, this was a major admission. A month before 9/11, NSA director Michael Hayden tried to put a positive spin on the situation. Turning over IT systems to a private company would allow the NSA “to refocus assets on the agency’s core mission of providing foreign signals intelligence and protecting US national security-related information systems,” he said.  


But that rationale doesn’t fully explain the $88 million CSC received in 2002 to take charge of systems that process travelers crossing US borders, not to mention $88 million from NASA for project planning and management at the Goddard Space Flight Center in Maryland, another $228 million from NASA to maintain 80 percent of NASA’s aircraft fleet, or $950 million for a multi-year SeaPort Enhanced contract awarded on April 13, covering all seven Navy Warfare Center Zones along the US coastline, as well as Navy clients domestically and at overseas locations.


Nor does the decision to “refocus assets” address the long-term impact of this wholesale outsourcing – the export of skilled jobs. After eliminating 4000 US “consulting” positions in 2001, then scoring a record $16.8 billion in contracts by March 2004, CSC announced that it plans to triple its staff in India to 5000 within two years, turning CSC India Pvt. Ltd. into a “strategic hub.” Not coincidentally, the Indian operation was launched in 2001, precisely to tap that country’s pool of low-cost engineering and IT talent.


Sub-Contracting Conflicts 


On behalf of the United States Department of States, Bureau of International Narcotics and Law Enforcement Affairs, DynCorp Aerospace Operations Ltd., a CSC Company, is seeking individuals with appropriate experience and expertise to participate in an international effort to re-establish police, justice and prison functions in post-conflict Iraq. Interested applicants must be active duty, retired or recently separated sworn police officers, correctional officers or experienced judicial experts. US citizenship is required.

     — DynCorp recruitment ad on policemission.com


Since its 1946 takeoff, DynCorp has been through a remarkable transformation. It began as the employee-owned air cargo business California Eastern Airways, flying in supplies for the Korean War. This and later government work led to charges that it was a CIA front company. Whatever the truth, it has become a leading PMC, hiring former soldiers and police officers to implement US foreign policy beyond the reach of public or congressional accountability.


The push to privatize war gained traction during the first Bush administration. After the Gulf War, the Pentagon, then headed by Defense Secretary Dick Cheney, paid a Halliburton subsidiary nearly $9 million to study how PMCs could support American soldiers in combat zones, according to a May 2003 Mother Jones investigation. Cheney subsequently became CEO of Halliburton, and Brown & Root, now known as Halliburton KBR, has since won at least $2.5 billion to construct and run military bases, some in secret locations, as part of the Army’s Logistics Civil Augmentation Program.


In the early 1990s, one of DynCorp’s earliest “police” contracts involved the protection of Haitian President Jean-Bertrand Aristide, and, after he was ousted, providing the “technical advice” that brought military officers involved that coup into the Haiti’s National Police. Despite this dodgy record, in 2002, it won the contract to protect another new president, Afghanistan’s Hamid Karzai. By then, of course, it was a top IT federal contractor specializing in computer systems development, and also providing the government with aviation services, general military management, and security expertise. 


During this growth spurt, a key figure was Herbert S. (Pug) Winokur, chair of DynCorp’s board from 1988 to 1997. He was also on Enron’s board, and chaired its finance committee, approving the creation of more than 3000 offshore limited partnerships and subsidiaries. As chairman and CEO of Capricorn Holdings, Inc., a “private investment company,” and managing general partner of three Capricorn partnerships “concentrating on investments in restructure situations,” Winokur specialized in moving money in and out of offshore accounts with little public supervision. His close associate, Dudley Mecum, also a DynCorp director, was Capricorn’s managing director.


Acquisition of GTE information systems in 1999 helped the company win more government mega-projects, building on its previous experience in managing e-mail, databases, and information systems for several investigative agencies. It also established an operating center at Patrick Air Force Base in Florida, sharing space with the State Department. In South America today, it is known as State’s private air force, with access to satellites and mapping.


The main danger it faces is the risk of public exposure. Under one contract, for example, DynCorp has sprayed vast quantities of herbicides over Colombia to kill the cocaine crop. In September 2001, Ecuadorian Indians filed a class action lawsuit, charging that DynCorp recklessly sprayed their homes and farms, causing illnesses and deaths and destroying crops. In Bosnia, private police provided by DynCorp for the UN were accused of buying and selling prostitutes, including a 12-year-old girl. Others were charged with videotaping a rape.


Executive Outcomes, a leading PMC in the 1990s, was disbanded after accusations that it stirred up African conflicts to win diamond concessions, but companies like Sandline International and Military Professional Resources, Inc. (MPRI) picked up some of its contracts. So far, DynCorp has avoided such a public scandal. In Ecuador, where it has developed military logistics centers and coordinated “anti-terror” police training, the exposure of a secret covenant it signed with the Aeronautics Industries Directorate of the Ecuadorian Air Force briefly threatened to make waves. According to a November 2003 exposé in Quito’s El Comercio, the arrangement, hidden from the National Defense Council, made DynCorp’s people part of the US diplomatic mission.


In Colombia, DynCorp’s coca eradication and search-and-rescue missions have led to controversial pitched battles with rebels. US contract pilots fly Black Hawk helicopters carrying Colombian police officers who rake the countryside with machine gun fire to protect the missions against attacks. According to investigative reporter Jason Vest, DynCorp employees have also been implicated in narcotics trafficking. But such stories don’t circulated far, and, in any case, DynCorp’s “trainers” can ignore congressional rules, including those that restrict the US from aiding Colombian military units linked to human rights abuses.


Announcing the CSC-DynCorp acquisition, Van B. Honeycutt, CSC chairman and CEO, said that the goals were to “strengthen our leadership position in the US federal marketplace, augment our capabilities to support the requirements of the new Homeland Security Department and respond to the federal government’s initiative to increase its reliance on service providers.” It was a timely move. In April 2003, just a month after the deal with completed, DynCorp won a multimillion-dollar contract to build a private police force in post-Saddam Iraq, with some of the funding diverted from an anti-drug program for Afghanistan. As Honeycutt clearly understood, war was straining the government’s resources, but also rapidly accelerating the privatization of military operations. One estimate, cited by Nelson Schwartz in Fortune magazine, noted that 8 percent, or $30 billion, of the Pentagon’s total 2003 budget would go to private companies.


In early 2004, the State Department further expanded DynCorp’s role as a global US surrogate with a $1.75 billion, five year contract to provide law enforcement personnel for civilian policing operations in “post-conflict areas” around the world. In March, the company also got a $406 million Army contract to support UH-1 and AH-1 helicopters sold to foreign countries. The work, described as “turnkey” services, includes program management, logistics support, maintenance and aircrew training, aircraft maintenance and refurbishment, repair and overhaul of aircraft components and engines, airframe and engine upgrades, and the production of technical publications. Meanwhile, CSC was given $60 million to assist the Air Force’s Information Warfare Center at Lackland Air Force Base in Texas for the next five years.


Corporate Dependence 


“For the past decade, private military services have been a growth industry globally. However, the United States Department of Defense has gone the furthest in privatizing many of its traditional tasks. In the Balkans, private firms are used instead of regular military units for training, mine removal, policing, supply and logistics. Private firms minimize the commitment and exposure of US military personnel. Increasing US involvement in Colombia has included the use of DynCorp for aerial surveillance and intelligence. International observers provided by the US to multinational operations are as likely to come from private companies as the regular military.”

   – James Larry Taulbee, from In Defense of the Mercenary Option, 2001 


Most governments, including the US, rarely admit to using mercenaries. But today’s private contractors perform almost every function essential to military operations, what the August 10, 2003, UK Financial Times called “a creeping privatization of the business of war.” In the first Gulf War, about two percent of US personnel were contractors. In 2003, it was 10 percent, and the Pentagon currently employs more than 700,000 private contractors.


What happened? In 1969, the US Army had about 1.5 million active duty soldiers. By 1992, the figure had been cut by half. In the last decade, however, the US has mobilized militarily to intervene in several significant conflicts, and a corporate “foreign legion” has filled the gap between foreign policy imperatives and what a downsized, increasingly over-stretched military can provide. Although the number of active duty troops has since climbed back to 1.4 million, Defense Secretary Donald Rumsfeld’s desire to make US forces lighter and more agile has helped to accelerate the trend. The Pentagon hopes to privatize an additional 10,000 jobs before the end of the year.


Use of high technology equipment feeds the process. Private companies have technical capabilities that the military needs, but doesn’t possess. Contractors maintain the B2 stealth bomber and F-117 stealth fighter, and operate some of the newer weapons systems, such as the Global Hawk and Predator unmanned drones used in Afghanistan and Iraq. Military systems like a new Marine truck and the Army’s Guardrail surveillance aircraft are specifically designed to be operated and maintained by private companies.


In Britain, the debate over military privatization has been public and sensitive, since the activities of the UK company Sandline in Sierra Leone and Papua New Guinea embarrassed the government in the late 1990s. No country has clear policies to regulate PMCs, and the limited oversight that does exist rarely works. In the US, however, they have escaped notice, except when US contract workers in conflict zones are kidnapped or killed.


According to CSC’s Copeland, “The private sector must play an integral role in improving our national cybersecurity.” After all, he notes, private interests own and operate 85 percent of the nation’s critical IT infrastructure. But when the federal government becomes dependent on unaccountable, private companies like CSC, Lockheed Martin, Northrop Grumman, and TRW (parent company of Vinnell, another prominent PMC) for so many key security services, as well as for military logistics, management, strategy, expertise and “training,” fundamental parts of US defense have been outsourced. This makes it look less like an “integral role” than a corporate takeover.


Greg Guma is Toward Freedom’s editor and the author of Uneasy Empire: Repression, Globalization, and What We Can Do. For a footnoted print version (over 40 citations), send $4 to TF, POB 468, Burlington, VT 05402.




Background on DynCorp is available from the Center for Public Integrity at www.publicintegrity.org. Al Giordano provides ongoing coverage at www.NarcoNews.com. To track CSC’s activities, try Prime Zone at www.primezone.com, Computer Business Online at www.cbronline.com, Washington Technology Magazine at www.washingtontechnology.com,  and CSC’s Website at www.csc.com. On TF’s Website, previous stories by Greg Guma, “Fire Sale Earth,” August 2000 (Vol. 49, No. 4), and “Secrets R US,” August 2001 (Vol. 50, No. 4), provide more details. Also recommended is Stefan Wray’s “Austin and "Homeland Security, Inc.,” in Southern Exposure, Spring 2003.