Congress curbs NSA's power to contract with suppliers

THE BALTIMORE SUN

After three years of growing frustration with the National Security Agency's bookkeeping, Congress has voted to take away the NSA's power to sign multimillion-dollar deals with contractors helping the agency modernize.

The extraordinary measure shifts power over hundreds of millions of dollars in technology contracts from the NSA's Fort Meade headquarters to the Pentagon, where they would be subject to accounting procedures that lawmakers say are lacking at the global eavesdropping agency.

The provision is buried in the defense authorization bills approved last month by Congress. Supporters say it will impose fiscal discipline on the secretive agency, whose budget is estimated at roughly $6 billion.

But critics warn that it will hurt the NSA's quest to keep pace with the fast-moving world of electronic communications that it patrols for threats to national security.

"When you're dealing with information technology, you've got to be able to buy stuff very quickly," says Harry D. Gatanas, the NSA's senior acquisition executive from July 2000 to February 2002. At the Pentagon, he said, "it's a very bureaucratic process which takes 15 years to develop a fighter plane or 15 years to field a tank."

"It's going to make things very difficult for NSA."

In a written response to questions from The Sun, the NSA said that its "acquisition reform process has taken great strides over the past few years, but there is still work ahead. NSA will continue to work together effectively with the Congress; however, NSA opposes [the legislation] as currently written."

For most of its 50-year history, the NSA designed and built much of its computer equipment in-house, both because of concerns about espionage and because few companies understood its complex niche technologies.

But the 1990s saw a high-tech boom and, with it, an explosion in new challenges for the agency. Cell phones and e-mail accounts meant a surge in global communications. Hard-to-tap fiber-optic cables and encryption software available free over the Internet offered new tools for foreign agents to hide or encode messages.

The reform-minded NSA director, Air Force Lt. Gen. Michael V. Hayden, took the ground-breaking step of looking outside the NSA's razor-wire gates for new ideas. The NSA has since hired contractors to provide everything from nonsensitive office phones and desktop computers to sophisticated - and classified - eavesdropping and code-breaking gear.

Those efforts, aimed at overhauling the agency's bureaucratic culture, have pumped millions of dollars into Maryland's high-tech economy and won high praise.

But analysts say the current legislation is a sign that Hayden's ambitious plan to break the agency's Cold War mold - labeled "100 Days of Change" when he launched it nearly four years ago - might be a bigger job than expected.

In public at least, lawmakers have not pointed to any specific examples of financial waste or abuse - which would have been unlikely disclosures, anyway, because most NSA programs are classified. Instead, their concern appears focused on procedural problems, from the lack of a single, clear line of authority over acquisitions to inadequate coordination among various arms of the agency's sprawling and balkanized bureaucracy.

The congressional committees have also complained that the agency has not given the senior acquisition executive enough power to enforce fiscal discipline across the entire 30,000-employee agency.

NSA officials "have not been able to make the transition from the discombobulated system they had prior to 2000 to something that would meet generally accepted accounting standards today," says Matthew M. Aid, a Washington security consultant writing a book on the agency. "If you look at all the things Hayden wanted to get done and match it against all the accomplishments, this has to stand as the one significant area where the objectives have not been met."

Hayden was unavailable for comment, said an NSA spokeswoman.

House and Senate lawmakers have been meeting in conference this month to hash out differences in the larger defense authorization bill. NSA officials are using that window to seek last-minute changes to the provision. But their chances of success are limited because the House and Senate versions of the NSA measure are identical.

The measure takes aim at two pillars of the NSA's well-publicized effort to turn to private industry for new - and potentially cheaper - technology.

The first, Groundbreaker, is a 10-year, $2 billion project to farm out the purchase and maintenance of computer and phone equipment.

The second, Trailblazer, has awarded at least $480 million to contractors since 2001 to overhaul the NSA's collection and processing of the millions of phone calls, e-mails and other electronic data it rakes from the skies each day.

Lawmakers have focused increasing attention in recent years on the billions of dollars that intelligence agencies pay contractors. The scrutiny has sharpened as those agencies have sought - and received - hefty budget increases to fight terrorism.

For three years, the Senate Armed Services Committee and the Senate Select Committee on Intelligence have raised pointed questions about the way the NSA takes stock of its technology needs and awards contracts.

NSA budget on the line

Lawmakers have made it clear that nothing less than the NSA budget is at stake.

"It is very difficult for the Committee to understand what needs to be done to modernize NSA when NSA cannot provide an adequate baseline of ongoing development and acquisition programs," the Senate Intelligence Committee wrote in a May report.

"Without the knowledge of what is actually being funded at NSA, it is difficult to sustain support for increasing levels of authorization."

In 2001, lawmakers set a deadline of December 2002 for the agency to put its books in order. When that date came and went with what the Senate Armed Services Committee called "insufficient progress," the committee pushed for the legislation shifting power over acquisitions to the Pentagon's undersecretary of defense for acquisitions, technology and logistics.

The provision also gives the undersecretary "milestone decision authority" - the power to decide whether projects merit continued funding.

The measure would restore that authority to the NSA no earlier than October 2006, and only when the defense secretary certifies that the NSA has adopted a "sound, efficient acquisition enterprise."

Gordon M. Adams, a defense-contracting expert and an associate director of the Office of Management and Budget under President Bill Clinton, said that congressional pique over how intelligence agencies spend their classified, billion-dollar budgets is not new. But he said he could not remember another time that Congress had stripped an intelligence agency of so much contracting authority.

"I have not seen it happen before," said Adams, now a professor at George Washington University. "It's a strong statement."

After becoming NSA director in 1999, Hayden sought to bring corporate rigor to procurement. In July 2000, he hired Gatanas, a retired Army major general and former senior Pentagon contracting official, for the new post of senior acquisition executive.

"The disciplines of buying things to schedule, buying to cost, having adequate systems engineering and ensuring that you are buying only what you need were not practiced at this agency," Gatanas told Government Executive magazine in 2001.

Gatanas said in an interview last week that the NSA has made significant advances. It widened its pool of contractors, hired seasoned financial executives from the private sector and insisted that contracts come in on time and on budget.

Asked about congressional complaints about the pace of progress, he said, "What's slow to change is that people need to be trained in different ways of doing business. It just takes time to get people to understand new procedures."

Gatanas left the agency last year for a job as executive of a fiber-optics company.

Some of the NSA's biggest contractors under its Groundbreaker and Trailblazer projects are Science Applications International Corp., Booz Allen Hamilton, Computer Sciences Corp. and Northrop Grumman Corp. Spokesmen for those companies declined to comment.

Longer, costlier process

An executive with a major NSA contractor said the Pentagon acquisitions process is likely to cost contractors - and taxpayers - more by stretching a months-long review process into one that could take years.

At the Pentagon, "it's longer, tedious, detailed, there are milestones, reviews - it goes on forever," said the executive, who spoke on condition of anonymity for fear of retaliation from agencies with whom his company does business. "I think [Congress] went backward, not forward."

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