For the first time in its 50-year history, the National Security Agency announced plans yesterday to lay off a substantial number of employees - more than 2,000 - and turn to private industry to run its basic computer operations.
The move toward having companies handle computer networks, phone systems, e-mail and many other basic operating functions for the more than 20,000 employees at Fort Meade comes after severe criticism that the agency has become an enormous bureaucracy lagging behind the cutting edge of technology.
But NSA Director Lt. Gen. Michael V. Hayden said the agency will handle the layoffs "in as employee-friendly a way as possible," with the private group chosen for the contract likely to pick up most of the 1,200 to 1,500 affected employees and 800 contract workers as part of the deal.
"To go to the private sector to do something as important as this is, on this kind of scale, is unprecedented," for the agency, Hayden said.
Sources estimate the value of the 10-year contract at $5 billion.
Congressional criticism flared in January when a massive computer failure at the nation's most secret spy agency left its internal communications systems frozen. An embarrassment for NSA, the event was a "catastrophic failure," according to critics, who called for more funding to bring the ailing systems up to date.
Yesterday's announcement was the agency's first public affirmation of some of those criticisms. Hayden also acknowledged yesterday that the blackout was indeed a sign of the agency's need to bring itself up to speed.
Rather than invest in the hardware and management itself, Hayden said a 15-month study group determined that it would be "more efficient" to bring in outside help. The group anticipates $1 billion savings over the span of the contract.
"This narrows our front," he said. "It's hard to be good across the whole front. This will take our energy and focus it on the things that only the agency can do," namely those things associated with intercepting other countries' communications while protecting this nation's secrets.
It is a sign of changed times for an agency which until the 1980s even made its own computers. Back then, agency officials said, nobody could build a computer as good as theirs.
NSA will turn to some of the biggest names in "information technology" to take on the job, ironically the same companies the agency battled in the early 1990s to try to prevent the emerging explosion in the field of encryption devices. The agency expects the companies to bring some of those network encryption and security tools with them as part of the contract.
NSA will keep in-house anything related to its spying mission, as well as its data centers and "support applications," which include programs to run finance, personnel evaluations and service agreements.
"You become a lot more efficient this way," said Stephen E. Tate, chief of Corporate Sourcing, which oversees agency contract workers. "Otherwise you end up Band-Aiding something broken rather than getting surgery."
Several months ago Hayden and agency officials met with 20 of the country's largest technology companies and asked them to get together in groups, because no single company was thought to have the resources to handle the job alone. Agency officials expect three such teams to present bids in December.
The agency is not looking necessarily for the lowest bid, to be awarded in April 2001, but for the most competent group that plans to retain the most employees.
"The last thing we want to do is lose these employees," Tate said. "This is a highly sophisticated, highly technical workforce and we want to make sure they're interested in coming back her to work for us."