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Contractors cash in on war

Charles Smith always enjoyed visiting United States troops abroad. Though a civilian, he had worked for the army for decades, helping to run logistical operations from the Rock Island arsenal near Davenport, Iowa.

He helped keep troops supplied, and on trips to Iraq made a point of sitting down with soldiers in mess halls. “I would always ask them: what are we doing for you?”

Smith eventually got oversight of a multibillion-dollar contract the military had struck with private firm KBR, then part of the Halliburton empire, to supply US soldiers in Iraq. But by 2004 he noticed problems: KBR could not account for a staggering $1-billion of spending.

So Smith took a stand: he wrote to KBR officials, telling them that some future payments would be blocked. According to Smith, one KBR official reacted by saying: “This is going to get turned around.” A few days later Smith was abruptly transferred. The payments he suspended were resumed. “The emphasis had shifted. It was not about the troops – it was all about taking care of KBR,” he said.

Eventually, Smith left the army. When he told his story to the New York Times, the paper ran an editorial that said: “In the annals of Iraq war profiteering, put Charles Smith down as one of the casualties.”

What Smith blundered into is one of the most disturbing developments of the post-9/11 world: the growth of a national security industrial complex that melds government and big business. In the military it has led to the explosive growth of the contracting business, with firms such as Xe, formerly Blackwater, or DynCorp increasingly doing the jobs of professional soldiers. In the world of intelligence, private contractors are hired to do the jobs of America’s spies.

A shadowy world of domestic security has grown up, milking billions from the government and establishing a presence in every state. Generals, government officials and intelligence chiefs flock to private industry and embark on new careers selling services back to government. “The creation of this whole industry is a disaster. But no one’s talking about it,” said John Mueller of Ohio State University.

Contractors form huge parts of the lines of supply for US troops. But they also fly planes, provide security and take on big infrastructure projects. Next year, as US combat troops are withdrawn from Iraq, an estimated 5 000 private contractors will provide security for the US state department. Worldwide, the ratio of contractors to US soldiers in uniform is about 1:1. During Vietnam it was 1:8. And it has speeded up since 9/11.

Incidents of malpractice and fraud by contracting firms are legion. An Associated Press investigation last year looked at incidents involving more than 200 contractors worldwide. These ranged from drinking and sexual misconduct to a gunfight outside a nightclub in Haiti.

Oversight of contracting is weak or opaque — and is often contracted out, too. One recent investigation found $4.5-billion of contracts awarded to firms with problematic histories, or which had violated laws.

An industry has also sprung up of recruitment firms that service the intelligence community. A search on website IntelligenceCareers.com found highly paid jobs in Iraq and Japan as well as all over the US, many requiring “top secret” security clearance. Of the private firms with such clearance more than a quarter came into being after 9/11.

Contractors from more than 100 firms are estimated to comprise a third of the CIA. In recession-bound America it is a boom sector: last year’s US intelligence budget was $80-billion, more than twice the 2001 levels.

Those cashing in on the international “war on terror” pale beside the security boom in the US itself. Across the US new organisations sprang up in the wake of 9/11 as the money started to flow. Nine days after the tragedy Congress committed $40-billion to fortify America’s domestic anti-terror defences. In 2002 a further $36.5-billion was injected; in 2003 it was $44-billion.

More than 260 new government organisations have been created since 2001. The biggest is the department of homeland security, which has a 230 000-strong workforce that is awaiting new headquarters in Washington, the largest new federal building since the Pentagon.

Since 2003 this department has distributed more than $30-billion for security and counterterrorism. A Washington Post survey last year called “Top Secret America” revealed there were 1 271 government organisations and 1931 private firms related to counterterrorism, intelligence or homeland security in about 10 000 locations countrywide.

In the Washington, DC area, they have built enough new office space to add up to three Pentagons. A startling 854 000 Americans now hold top secret security clearances, 250 000 of them in the private sector.

About 70 “fusion centres” have been set up across the US to collect data on “suspicious activity”. The centres, believes David Rittgers of the Cato Institute, have had no security impact: “We could abolish them tomorrow. Any intelligent analysis would show we don’t need these things.”

Airport scanners are another big business that has sprung up since 9/11. Tech firm L-3 has won nearly $900-million in business from the Transportation Security Administration. L-3’s full-body scanners, which cost about $200 000 each, are being rolled out across the US, boosted by the failed terror attack in 2009 by a would-be plane bomber who put a device in his underwear.

Yet the government accountability office has found that it is “unclear” whether scanners could have detected the bomb. “They have vastly overbuilt the airport security complex,” said Chris Calabrese, a lawyer with the American Civil Liberties Union.

Then there are the lobbying firms, many based in downtown Washington’s K Street, clustered around the fountain of national security funding like bees around a hive.

“Wherever there’s government money in that amount there’s going to be a swarm of lobbyists,” said Michael Beckel, a researcher at the Centre for Responsive Politics. Spending on lobbying by the scanning industry has doubled in the past five years. The border between lobbying firms and the government departments they seduce is called simply the “revolving door”. A startling eight out of 10 lobbyists for the scanner industry come from government or congress.

Among firms specialising in intelligence work the picture is the same. Booz Allen once hired James Woolsey, a former head of the CIA. Northrop Grumman hired former national security agency director William Studeman. CACI hired Barbara McNamara, an agency deputy director. It is the same in the military, where defence firms snap up retiring generals as advisers and lobbyists. Between 2004 and 2008, 80% of retiring three- and four-star officers went to work in the private sector.

Much of the original justification for contracting and bringing the private sector into national security was that it was cheaper. Yet a 2008 survey of the DHS found that contractors made up 29% of staff but 49% of the budget. —

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