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Washington Technology Top 100: #11
Defense News Top 100: #23
Booz Allen Hamilton was founded in 1914 in Chicago by three businessmen who gave the firm its name. In 1940, after more than three decades as a consultant to the top-ranking companies in America’s manufacturing and service economy, including Montgomery Ward, Goodyear Tire, and the Illinois State Railroad, it started working for the U.S. military, where its clients included the Navy, Army, and, after the war, the Air Force and Department of Defense. Its initial contracts with the Navy set the pace for its defense work: As a management consultant, Booz Allen helped the Navy restructure for World War II, and permeated its ranks with contractors (“Each Navy bureau had a Booz rep,” Investors Daily reported in a 2005 profile of the firm). That relationship served as a template for Booz Allen’s later work in intelligence and national security.
Corporate Information
Booz Allen Hamilton, like its rival SAIC, is involved in virtually every aspect of the modern intelligence enterprise, from advising top officials on how to integrate the 16 agencies within the Intelligence Community (IC), to detailed analysis of signals intelligence, imagery and other critical collections technologies. The company’s strategic role in the IC was best described in 2003 by Joan Dempsey, then the top assistant to CIA Director George Tenet for community management. “I like to call Booz Allen the Shadow IC," she said when receiving a lifetime achievement award from a contractor group, because it has "more former secretaries of this and directors of that" than the entire government. Dempsey is now a senior vice president at Booz Allen, responsible for many of the programs she managed while at the CIA. Booz itself it now owned by the Carlyle Group, one of the nation’s most politically-connected private equity funds.
THE CARLYLE GROUP. In July 2008 Booz Allen completed a previously announced separation of its U.S. government and global commercial businesses, and announced the $2.54 sale of a majority stake in its government unit to the Carlyle Group. The Carlyle unit retained the name Booz Allen Hamilton, while the firm’s commercial and international unit, still owned by Booz Allen executives, now operates as Booz & Company. Booz Allen Hamilton earns about $4 billion a year from its government contracts, the firm claims. But company insiders say the actual figure is closer to $5 billion, and that BAH earns at least $1 billion a year from classified contracts.
BAH is one of the NSA’s most important contractors, and owes its strategic role there in part to Mike McConnell, who was Bush’s director of national intelligence. McConnell was the director of the NSA from 1992 to 1995, and on leaving government, was hired by Booz Allen to run its military intelligence programs. In that capacity, McConnell and Booz Allen were involved in some of the Bush administration’s most sensitive intelligence operations, including the infamous Total Information Awareness (TIA) program run by former Navy Admiral John Poindexter of Iran-Contra fame. Now, after leaving the Bush administration, McConnell is back at his old company running its entire national security unit.
Booz Allen is a key adviser and prime contractor to all of the major US collection agencies – the CIA, NSA, NGA, NRO, and Defense Intelligence Agency – as well as the Department of Homeland Security, National Counterterrorism Center, Department of Defense, and most of the Pentagon’s combatant commands. Since the late-1990s, Booz Allen has forged a particularly close relationship with the NSA, which hired Booz Allen as its chief outside consultant on Project Groundbreaker, a $4 billion project in which the NSA outsourced its “non-mission critical” internal communications systems to a private sector consortium led by Computer Sciences Corporation and the IT unit of Northrop Grumman.
On its website, Booz Allen describes its intelligence work as part of its broader expertise in information technology. “Whether dealing with homeland security, peacekeeping operations, or the battlefield, success depends on the ability to collect, safeguard, store, distribute, fuse, and share information – on getting the right information to the right place at the right time,” it says. “Our security professionals work in partnership with clients to develop capabilities, share best practices, and leverage the best thinking and most effective integrated solutions for protecting information and networks against cyber and physical threats.”
Among the many services Booz Allen provides to intelligence agencies, according to the website, are wargaming (simulated drills in which military and intelligence officials test their response to potential threats like terrorist attacks), as well as data-mining and data analysis, signals intelligence systems engineering (an NSA specialty), intelligence analysis and operations support, the design and analysis of cryptographic or code-breaking systems (another NSA specialty), and “outsourcing/privatization strategy and planning.” The company’s 2007 annual report spells out several other areas of expertise, including “all source analysis,” an intelligence specialty managed by the CIA and the Office of the DNI that draws on public sources of information, such as foreign newspapers and textbooks, to add texture to data gathered by spies and electronic surveillance.
Booz Allen is also working on one of the most important initiatives the intelligence community has launched in recent years: the Cryptographic Modernization Program. It is a multiyear effort being managed by the Air Force Intelligence, Surveillance and Reconnaissance Agency, an affiliate of the NSA once known as the Air Intelligency Agency. Last fall, during a presentation to an intelligence conference in San Antonio, Air Force Gen. John C. Koziol, the commander of the agency, described the project as an attempt to combine signals intelligence, imagery, and measures and signatures intelligence – a discipline known as MASINT that uses sensors to pick up tell-tale signs of chemicals and other substances – into a single electronic package that can be used by combat and special operations commanders to track the enemy.
When completed, Koziol said, the modernization program will improve intelligence gathered by unmanned aerial vehicles and satellites and transmit it to “cryptographic centers” that his agency manages around the world. Booz Allen, according to its website, is contributing to the project by “analyzing design trade-offs; planning acquisition programs; and supporting the fielding of hundreds of thousands of modernized air, space, and ground cryptographic devices.” That makes Booz Allen a full partner in the project, which, according to Koziol, has been “fully endorsed” by Adm. McConnell at the Office of the DNI.
CorpWatch Analysis
To carry out its tasks at the intelligence agencies, Booz Allen has hired a dazzling array of former national security officials and foot soldiers. In 2002, Information Week reported that Booz Allen had more than 1,000 former intelligence officers on its payroll. In 2007, as I was writing a chapter about Booz Allen for Spies for Hire, my 2008 book on outsourced intelligence, I asked the company if it could confirm that number or provide a more accurate one. Spokesman George Farrar e-mailed: "It is certainly possible, but as a privately held corporation we consider that information to be proprietary and do not disclose."
Unlike many of its competitors in the intelligence industry, Booz Allen is a privately held company whose shares are owned by its 300 vice presidents. The vast majority of them work for the commercial division, about 80 are in "government support,” with the rest focused on Booz Allen’s corporate and international work, Booz Allen’s Farrar told CorpWatch.
Most of these vice presidents have long and deep experience in the intelligence community, and are beginning to act as a training cadre for senior jobs back in government. Booz Allen’s most illustrious alumnus, for example, is Michael McConnell, current director of National Intelligence. Before President George W. Bush appointed him to run the intelligence community in January 2007, McConnell, the former director of the NSA during the Clinton administration, spent more than 10 years as a Booz Allen senior vice president in charge of the company’s extensive contracts in military intelligence and information operations for the Department of Defense.
In that work, his official biography states, McConnell provided intelligence support to "the U.S. Unified Combatant Commanders, the director of National Intelligence Agencies, and the Military Service Intelligence directors." That made him a close colleague of not only Donald Rumsfeld, Pentagon chief from 2001 to 2007, but of Vice President Dick Cheney, who served Bush as a kind of intelligence godfather from the earliest days of the administration. During the first Bush administration and the first Gulf War, McConnell had worked for Cheney, then the secretary of defense, as the chief intelligence adviser to Gen. Colin Powell, the chairman of the Joint Chiefs of Staff. Cheney was so impressed with McConnell’s work during the war that he appointed him to head the NSA in 1993. (He later intervened personally to convince McConnell to take the DNI job.) As Booz Allen’s chief intelligence liaison to the Pentagon, McConnell was at the center of action, both before and after 9/11.
During the first six years of the Bush administration, Booz Allen’s contracts with the US government rose dramatically, from $626,000 in 2000 to $1.6 billion in 2006. And as I reported last year in Salon, McConnell and his staff at Booz Allen were deeply involved in some of the Bush administration’s most controversial counterterrorism programs. They included the Pentagon’s infamous Total Information Awareness (TIA) data-mining scheme run, by former Navy Adm. John Poindexter. TIA was an attempt to collect information on potential terrorists in America from phone records, credit card receipts, and other databases. Congress cancelled TIA over civil liberties concerns, but much of the work was transferred to the NSA, where Booz Allen continued to receive the contracts. In 2002, when the CIA launched a financial intelligence project to track terrorist financing with the secret cooperation of SWIFT, the Brussels-based international banking consortium, Booz Allen won a contract to serve as an “outside” auditor of the project.
SHRADER/CEO. The man most responsible for Booz Allen’s growth as an intelligence contractor is Keith Shrader, who has been running the company as chairman and CEO since 1998. Shrader, an electrical engineer by training, came to Booz Allen in 1974 after serving at the senior management level at two prominent telecommunications firms: Western Union, where he was national director of advanced systems planning; and RCA, where he served in the company’s government communications system division. These positions prepared him well for his later work at Booz Allen as a consultant to the telecom industry. According to his official biography, he “led major assignments” for the industry as a Booz Allen consultant, and was deeply involved in the company’s “landmark work for AT&T” when the government broke up that firm.
In those assignments, Shrader may have been exposed to the telecom industry’s close ties to U.S. intelligence. During the years he worked for Western Union and RCA, those firms, along with ITT World Communications, were part of a secret surveillance program known as Minaret. Under that scheme, telecom companies, with the concurrence of a handful of high-ranking executives, handed over to the NSA information on all incoming and outgoing U.S. telephone calls and telegrams. Minaret was an early version of the NSA’s warrantless surveillance program launched by the Bush administration after 9/11. Minaret, and the involvement of the private companies in NSA spying, was exposed by the congressional committees investigating intelligence abuse in the mid-1970s, and was the inspiration behind the 1978 Foreign Intelligence Surveillance Act (FISA), which set the rules—including the important requirement for warrants—for the domestic surveillance of telephone traffic.
None of this history is alluded to in Booz Allen’s official propaganda, but Shrader, on his appointment as CEO in 1998, mentioned in a rare press interview with the Financial Times that the most relevant background for his new position of chief executive was his experience working for telecommunications clients and doing classified defense work for the U.S. government – “something of a Booz specialty,” the FT pointed out.
Booz Allen adds on its website that Shrader, as CEO, has also “led important programs for the U.S. National Communications System and the Defense Information Systems Agency,” two of the most important classified intelligence networks in use by the federal government. Under Shrader, Booz Allen also became the NSA’s most important outside consultant, culminating in its advisory role in Project Groundbreaker. That project, which awarded its first contracts in the summer of 2001, put Booz Allen in a prime position to capture NSA and other intelligence work in the aftermath of the 9/11 attacks, when intelligence budgets, and NSA spying, increased substantially.
After 9/11, by Booz Allen’s account, the firm helped the Bush administration and the Intelligence Community reshape their spying capabilities to match the new era of counterinsurgencies and terrorist threats. “The nature of intelligence changed dramatically in the wake of 9/11,” Christopher Ling, a Booz Allen vice president, explained in the company’s most recent annual report. “An entire analytic production system geared to detect large-scale cold war adversarial capabilities was suddenly required to transform.” At Booz Allen, he added, “We are finding innovative ways to integrate intelligence and operations, enabled by advanced visualization and data management capabilities, which has allowed us to pioneer tactics, techniques, and procedures.”
In addition to serving as a prime contractor on Poindexter’s Total Information Awareness project, Booz Allen was active on both the military and economic fronts on the “war on terror.” For the Pentagon, it helped develop the “blue force”” tracking system that allows soldiers and commanders in Iraq and other battlegrounds the ability to electronically identify friendly troops. And in the weeks leading up to the invasion of Iraq, Booz Allen sponsored and organized several conferences aimed at helping US corporations secure contracts in occupied Baghdad. Former CIA Director James Woolsey, one of the most ardent backers of the war, was a keynote speaker at one of these conferences.
KING OF THE REVOLVING DOOR. Booz Allen prides itself on its dedication to the agencies it works for and on the personal relationships it has forged between its personnel and their defense and intelligence clients. “We stay for a lifetime,” Mark J. Gerencser, senior vice president in charge of Booz Allen’s government contracting division, remarked in 2006. The best guide to its intelligence work, therefore, is its executive leadership – the vice presidents who are each poised to profit personally from a corporate takeover by the Carlyle Group. A quick study of their biographies posted on Booz Allen’s website provides an excellent guide to the company’s extensive relationships with the intelligence community.
As the director of Booz Allen’s U.S. government business, for example, Gerencser serves in “several broad-based roles,” including “representing industry” to the Office of the secretary of defense and the Joint Chiefs of Staff, which manage the Pentagon’s vast intelligence operations. He is also a member of Booz Allen’s leadership team that sets the strategic direction of the company, and has run many of the war games Booz Allen staged for its government clients.
Just below Gerenscser in the company’s intelligence hierarchy is Ken Wiegand, another senior vice president. Weigand came to Booz Allen in 1983 after working for a decade in Air Force intelligence, and he now leads the firm’s work for national intelligence and law enforcement agencies and the Department of Homeland Security. His specialty, the website says, includes imagery intelligence operations, which are managed by the NGA, one of Booz Allen’s most important clients.
Senior Vice President Joseph W. Mahaffee, a veteran of naval intelligence, is the leader of Booz Allen’s Maryland procurement office business, which puts him in charge of the company’s contracts with the National Security Agency in Fort Meade. He focuses on “meeting the SIGINT and Information Assurance mission objectives” of the NSA with various technology services, including systems engineering, software development, and “advanced telecommunications analysis.”
Another key Booz Allen figure at the NSA is Marty Hill, who came to the company after a 35-year career in signals intelligence and electronic warfare, and previously served as an expert on “information operations capabilities and policy” for Donald Rumsfeld’s Pentagon. He leads of team of 1,200 professionals engaged in all aspects of SIGINT, including technical analysis, systems development and operations.
Vice President Pamela Lentz is a former cryptology officer with the Navy and once worked as a program manager for TRW, one of the nation’s oldest intelligence contractors. (It is now owned by Northrop Grumman) She is Booz Allen’s “client service officer” for the firm’s Defense Intelligence Agency and military intelligence markets, which includes intelligence units within the Navy, Air Force, Army, the unified combatant commands and the undersecretary of defense for intelligence. Among other tasks, Lentz manages a 120-person Booz Allen team that supports the National Reconnaissance Office, the Pentagon agency that manages the nation’s military spy satellites. She also runs a task force that supports human intelligence collection efforts at the DIA.
Vice President Laurene Gallo, a former intelligence analyst at the NSA, leads a Booz Allen “intelligence research and analysis” team that support several agencies, including the CIA, the Office of the DNI and the National Counterterrrorism Center. Vice President Richard Wilhelm, whose job at Booz Allen is to work with the CIA and the ODNI, came to the company after a long career in US intelligence that included stints directing the Joint Intelligence Center for Iraq during Operation Desert Storm and as the NSA’s first director of information warfare.
Vice President William Wansley, a former Army intelligence officer, leads a team of experts in “strategic and business planning” that supports the CIA’s National Clandestine Service, the part of the CIA that conducts covert operations and recruits foreign spies, as well as the Office of the DNI. Another vice president, Robert W. Noonan, a retired Army lieutenant general who once served as the Army’s deputy chief of staff for intelligence and the commanding general of the US Army’s Intelligence and Security Command, is in charge of expanding Booz Allen’s military intelligence business within all the armed services, the combatant commands, the DIA, and the Office of the Secretary of Defense.
Recent Contracts/Events
In spite of its tremendous power as a contractor, Booz Allen has received very little criticism or even scrutiny from Congress. In January 2007, the Senate, when it held hearings on Admiral McConnell’s nomination as director of National Intelligence, had a rare opportunity to inquire about the company. Prior to the hearing, several senators said they would question McConnell about Booz Allen’s role as a contractor; but the hearing was a desultory affair, and senators posed few questions to the new DNI about the high level of contracting in the intelligence community or the specific role of Booz Allen.
In February 2007, a Booz Allen contract with the Department of Homeland Security came under close scrutiny in the House. In February 2007, Rep. Henry Waxman, D-CA., the chairman of the House Committee on Government Oversight and Reform, charged that Booz Allen had a significant conflict of interest over its contract to oversee an $8 billion contract with the DHS Secure Border Initiative known as SBI-Net. Under the contract, Boeing and other companies will build a “virtual fence” of cameras, radar, and sensors that will transmit imagery and data to border patrol agents working along the U.S. borders with Canada and Mexico.
The conflict arose, said Waxman, because Booz Allen had a long-standing relationship with Boeing, the prime contractor for SBI-Net, and could therefore not provide objective oversight of the program. At the hearing, Waxman pointed out to DHS officials that they had hired 98 people to oversee the SBI-Net contract. “But the problem is that 65 of these people don’t work for the government. They work for the contractor,” he said. “You’re relying on them to do the function that a government ordinarily would do.” DHS officials responded that Booz Allen had been hired for advice, not for oversight.
Waxman’s criticism could be made of a myriad of contracts Booz Allen holds with intelligence agencies. At the NSA, for example, it has advised the agency about several contracts that involve companies with which Booz Allen has close business ties. That is also true at the NRO, NGA and CIA. So far, however, no reports of conflicts of interest have emerged from Congress, which in any case exercises little oversight over intelligence contracts.
In another damaging report issued in 2007, Congress’ General Accounting Office found that the Department of Homeland Security was spending nearly $16 billion a year on goods and services from the private sector, making DHS the third-largest employer of contractors in the federal government. Among the beneficiaries of DHS’s spending mentioned in the report was Booz Allen Hamilton, which in 2006 was awarded a $43 million no-bid contract to provide services to the DHS intelligence unit. On reading the $16 billion DHS figures in the GAO report in fall 2007, Sen. Joseph Lieberman, I-Conn., angrily commented: “plainly put, we need to know who is in charge at DHS – its managers and workers, or the contractors.”
The Washington Post later found that Booz Allen’s no-bid intelligence contract with DHS had ballooned from $2 million in 2003 to more than $30 million in 2006 – 15 times its original value. When DHS lawyers first examined the Booz Allen deal, the Post said, they found it was “grossly beyond the scope” of the original contract, and had violated government procurement rules. DHS lawyers ordered an open competition, but it was delayed for a year. During that time, the Post said, “the payments to Booz Allen more than doubled again under a second no-bid arrangement, to $73 million.”
Here is a short list of recent Booz Allen unclassified contracts (2008):
• A $6.3 million contract to provide research on 3-D facial recognition biometric software for the Information Assurance Technical Analysis Center at Offut Air Force Base in Nebraska, awarded in 2008.
• A $48 million contract with the U.S. Air Force to conduct research on “survivability and lethality implications” of an Air Force vehicle program, awarded in 2008.
• In a partnership with CACI International, EDS, Lockheed Martin, SAIC and SRA, the right to bid on $12.2 billion worth of contracts for telecom and IT services for the Defense Information Systems Agency (DISA), awarded in 2007.
• Participation in a consortium of seven companies that will bid on up to $20 billion worth of work in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance – a mouthful of a term usually referred to as C4ISR – for the Army’s Communications Electronics Command, which is based in Fort Monmouth, New Jersey, awarded in 2006.
• A five-year, $250 million contract to provide “systems engineering technical assistance” to the Science and Technology Directorate of the Department of Homeland Security, signed in 2005.
SOURCES
Primary sourcing for this profile came from Tim Shorrock, ''Spies for Hire: The Secret World of Intelligence Outsourcing'' (Simon & Schuster/2008) and from company press releases.
