Last year's embarrassing leak of spy-budget details gave insight into just how lucrative the business of federal contracting has become since the 2001 terrorist attacks and the 2003 start of the Iraq war.
At a Colorado conference sponsored by the Defense Intelligence Agency, a PowerPoint slide revealed that 70 percent of intelligence dollars go not to government employees or agencies, but to private companies such as SAIC and Booz Allen Hamilton.
On her blog, The Spy Who Billed Me, journalist and novelist R.J. Hillhouse used conference information to figure that the U.S. intelligence budget is $60 billion - almost a fourth higher than people thought.
The question now for Maryland and other regions swimming in the money is: How long can it continue? The apparent answer from the politically connected Carlyle Group: A while.
Washington-based Carlyle is buying a majority stake in Booz Allen's government contracting arm, which does secret work for the National Security Agency at Fort Meade and has been called "the shadow intelligence community," for $2.5 billion.
"We like it and think budgets will continue to grow," Peter Clare, head of Carlyle's aerospace and defense business, says of the kind of high-tech intelligence and security work that Booz does. "We'd like to invest further in this area."
The contracting bonanza has helped Maryland's economy grow substantially faster than the nation's. Not only have companies been given a defense boom to rival the Reagan buildup of the 1980s, they got an administration bent on outsourcing huge e portions of it.
Federal dollars spent through Maryland contractors doubled from 2001 to 2006 to $22 billion, according to the Census Bureau. Overall federal outlays in the state zoomed from $48 billion to $75 billion in the period - even as Labor Department figures show that the number of Maryland-based federal employees fell 4 percent.
Privately held Booz blossomed along with the defense budget, booking annual sales increases well into double-digit percentages the last five years, Carlyle officials say. It won huge computer-support and data analysis contracts from electronic spy agency NSA, the Pentagon, the Department of Homeland Security and other agencies.
A black eye
A black eye involved Booz's role in advising Project Groundbreaker, an effort to upgrade NSA's computers. After years of work and billions in spending, "agency computers have trouble talking to each other and frequently crash, key bits of data are sometimes lost, and vital intelligence can be overlooked," The Sun reported two years ago. Initially budgeted at $2 billion, Groundbreaker's running cost as of 2006 was estimated to be $4 billion, The Sun found.
The spook spending boom has also benefited SafeNet, Sourcefire and numerous other Maryland companies. But given the cyclical nature of spending sprees, the war's uncertain longevity and Washington's pinched finances, Maryland economists wonder if such vendors are about to hit a wall.
Anything connected with Iraq looks risky, especially if a Democrat wins the White House in November. Both Democratic candidates, Barack Obama and Hillary Clinton, have pledged to get out. It's also hard to imagine how workaday federal contracting - accounting support, low-tech computing, etc. - can grow much more.
No contract crash
But Carlyle's $2.5 billion at least says that there won't be a contracting crash like there was in the early 1990s and that the spook side of the business will continue to thrive.
True, McLean, Va.-based Booz isn't just any firm, and neither is Carlyle. Their connections will probably snag business when others flag. Michael McConnell worked for Booz before he became National Intelligence director. Former CIA director James Woolsey works for Booz. Booz did well even in the 1990s drought.
The firm's growth "has not just come in the last five years," said Clare. "In both good times and bad times of spending for DoD, their business has growth at double-digit rates. Everybody we talked to had good things to say about them."
Even so, things also look bullish for whole sector of government data collection and analysis, which has become a Maryland specialty. A good chunk of the thousands of defense-realignment jobs moving here are connected with this line of work.
Whether or not a Democratic president ends domestic NSA eavesdropping, there is still a mountain of work to be done monitoring the rest of the world's airwaves and wires. "Data mining" and other techniques for sifting NSA intercepts is probably still in its infancy. As expensive as it is, preventive spying and analysis from Maryland is cheaper than shipping Bradley Fighting Vehicles to Baghdad or coping with another terrible attack.
Clare sees growth in cybersecurity, counterterrorism and electronic surveillance and intelligence.
'The key part'
"The key part of the analysis for us is: For the core services the company provides, what's the long-term demand going to be?" he said. "And there, no matter who sits in the White House, we think there will be a strong level of demand for Booz Allen's services."
Given the long boom in federal contracting, you might think Carlyle is purchasing something of a Nevada McMansion. Clare seems to think he's buying oil at $60 a barrel.