Business
11:22 am
Tue June 11, 2013

Data Leak Could Undermine Trust In Government Contractor

Originally published on Tue June 11, 2013 11:56 am

In recent decades, a quiet revolution has been transforming the way Washington works.

Because the U.S. government does not have the workforce to complete all of its tasks, it employs private companies like Booz Allen Hamilton to do the work for it. Booz Allen is the company where Edward Snowden, who said he leaked secrets about the National Security Agency, most recently worked.

Over the past 25 years, this contract workforce has grown and plays a major role in the U.S. government, says Paul Light, a professor of public service at New York University.

"We've become highly dependent on it," he says.

Booz Allen is just one of the numerous companies that have ridden the privatization wave to great success. For years the company earned much of its profits by selling management services to the private sector. But in 2008, the company split up, and part of it was sold to the private equity firm The Carlyle Group. That part makes virtually all of its revenue working for the government.

George Price, an analyst at BB&T Capital Markets, says Booz Allen is a good example of this growing workforce.

"I would say Booz Allen is probably, if not actively working, has worked for most major agencies in the federal government," Price says.

Booz Allen specializes in IT work, especially in the hot area of cybersecurity. Some of its biggest contracts are with military and intelligence services like the National Security Agency. Many of the firm's 25,000 employees are people who, like Snowden, are former government workers who come with security clearances.

One of the reasons Booz Allen prospers is because people with strong ties to the intelligence community who know their way around the government end up working for the firm. For example, James Clapper, the current director of national intelligence for the Obama administration, used to work at Booz Allen. The man who held the same job in the Bush administration, Mike McConnell, now works at the firm. McConnell spoke in a video produced by Booz Allen about the importance of cybersecurity.

"Nation-states are building cyberwarfare tools," McConnell said in the video. "They will use the same means to get into a system that they would use for espionage or exploitation."

People like McConnell and Clapper helped Booz Allen quietly earn the confidence of government officials, says Tom Rodenhauser, the managing director at Kennedy Consulting Research and Advisory.

"There's a high degree of, I would call it, professionalism and confidentiality that permeates the company," Rodenhauser says of Booz Allen. "Part of its bedrock principles is having that confidentiality aspect. That's how consultants work."

The question now is whether the Snowden incident will undermine that trust. Rodenhauser says he thinks this will lead the government to question the company.

"I think the larger impact might be whether the government, as a client, comes back to Booz Allen and says, you know, 'We don't know if we can trust you with your people,' " Rodenhauser says.

For its part, Booz Allen has expressed shock about the revelations and promised to cooperate with the investigation. (On Tuesday, the firm said Snowden had been fired on Monday, one day after he went public about his claims.) Snowden worked at Booz Allen for just a few months after stints at the NSA and CIA.

A lot of people in and out of government apparently worked alongside Snowden over the years without voicing suspicions of him. Unless something more comes out about Booz Allen's vetting practices, says Price of BB&T Capital Markets, it's unfair to pin the blame on the company.

"I think this is going to be viewed more as a rogue incident and an unfortunate perceptual incident in terms of publicity," he says. "But I don't think it's going to amount to much more than that."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

LINDA WERTHEIMER, HOST:

The NSA leaker, Edward Snowden, worked most recently for Booz Allen Hamilton, a private federal contracting company based in McLean, Virginia. Booz Allen had revenue of almost $6 billion last year from selling services to federal government agencies, including highly secretive ones like the CIA. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: In recent decades, a quiet revolution has been transforming the way Washington works. Paul Light, a professor of public service at NYU, says the federal government simply can't do all it's supposed to do with the workforce it has.

PAUL LIGHT: So we contract out, and that contract workforce has been growing for the past 25 years at least, and we've become highly dependent on it.

ZARROLI: Booz Allen Hamilton is one of numerous companies that have ridden that privatization wave great success. For years, the company earned much of its profits by selling management services to the private sector. But a few years ago, the company was split up, and part of it was sold to the private equity firm the Carlyle Group. That part makes virtually all of its revenue working for the government.

George Price is an analyst at BB&T Capital Markets.

GEORGE PRICE: I would say Booz Allen is probably, if not actively working, has worked for most major agencies in the federal government.

ZARROLI: Booz Allen specializes in IT work, especially in the hot area of cyber security. Some of its biggest contracts are with military and intelligence services, like the National Security Agency. Many of its 25,000 employees are people like Edward Snowden, former government workers who come with security clearances.

The Obama administration's intelligence chief, James Clapper, used to work at Booz Allen. And the man who held that job in the Bush administration, Mike McConnell, now works there. McConnell spoke about cyber security in a video produced by the company.

(SOUNDBITE OF VIDEO)

MIKE MCCONNELL: Nation-states are building cyber-warfare tools. They will use the same means to get into a system that they would use for espionage or exploitation.

ZARROLI: People like McConnell are one reason Booz Allen has prospered, people with strong ties to the intelligence community who know their way around government. Tom Rodenhauser is managing director at Kennedy Information, which follows the consulting industry. He says Booz Allen has quietly managed to earn the confidence of government officials.

TOM RODENHAUSER: There's a high degree of - I would call it - professionalism and confidentiality that permeates the company. Part of its bedrock principles is having that confidentiality aspect. That's how consultants work.

ZARROLI: The question now is whether the Snowden incident will undermine that trust. Rodenhauser says the incident will inevitably lead to questions about the company.

RODENHAUSER: I think the larger impact might be whether the government as a client comes back to Booz Allen and says, you know, we don't know if we can trust you with your people.

ZARROLI: For its part, Booz Allen has expressed shock about the revelations and promised to cooperate with the investigation. Snowden worked at Booz Allen for just a few months after stints at the NSA and CIA. George Price says a lot of people in and out of government apparently worked alongside him over the years without voicing suspicions of him.

Unless something more comes out about Booz Allen's vetting practices, Price says, it's unfair to pin the blame on the company.

PRICE: I think this is going to viewed more as a rogue incident and, you know, an unfortunate perceptual incident in terms of publicity, but I don't think it's going to amount to much more than that.

ZARROLI: There's also the uncomfortable fact that the government has come to depend on companies like Booz Allen, especially in highly complex fields like cyber security. And right now, at least, the government may need these companies as much as they need it. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.