Trump's rift with intelligence community is spooking US spy agency contractors

In this undated handout photo from Eon Productions, actor Daniel Craig poses as James Bond. Craig was unveiled as legendary British secret agent James Bond 007 in the 21st Bond film Casino Royale.
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The changing political landscape in Washington and friction between President-elect Donald Trump and the U.S. intelligence community could have major implications not only for the spy agencies but for the shadow private contractors such as Booz Allen Hamilton that support them.

In tweets, Trump has dismissed national intelligence findings of Russian hacking and influence in the presidential election and then Wednesday tweeted about those who "try to belittle our victory." Previously, he also knocked the Central Intelligence Agency for failed prewar intelligence on Iraq and there's been recent talk he's about to trim down the agency.

"I get the sense that they are going to seriously look at repurposing elements of the agency so that it is much more focused on operations and not existing within the Beltway and passing memos around," said Ed Turzanski, an international policy and national security expert at the Foreign Policy Research Institute, a think tank in Philadelphia.

Also vulnerable potentially are private contractors that work with the CIA and the National Security Agency.

The Trump transition team didn't respond to a request for comment.

Then again, the political change in Washington may make contractor disruptions inevitable.

"Until Trump's budgets and direction is clear for federal workers, we would likely see a slowdown in our view," cautioned Stifel analyst William Loomis in a Booz Allen research note written shortly after the election. Also he cited the "significant turnover" of political appointees as "possibly creating a near-term temporary slowdown."

Former intelligence contractor Edward Snowden during an interview at an undisclosed location in Moscow.
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Booz Allen, which gets 97 percent of it revenue from U.S. government agencies, provides everything from cyber and IT services to work designed to enhance the nation's intelligence capabilities. There have been at least two cases of security lapses since 2013 involving Booz Allen employees, including Edward Snowden, who was hired by the consulting firm and leaked NSA documents.

"We think we are well positioned to adapt to any new priorities of the incoming Trump administration," Booz Allen said in a statement for this story. "Because we have deep understanding of the missions of our government clients and have unique advantage of offering technical skills through a management consultant's lens, we can move quickly to support a changing focus within the government."

Still, Booz Allen's 10-K filing last year cautioned that business could be impacted due to "changes in the political climate" and added that there's risk its relationship with the government could be harmed "due to perceived or actual deficiencies in the performance or quality of our work."

Overall, the U.S. budget for the national intelligence program was $53 billion in fiscal 2016 and another $17.7 billion for the military intelligence program.

The exact amount of money spent on intelligence contractors is not released but spending is believed to have risen sharply since 9/11 with terrorism analysis, language and data support and cyber. The CIA and NSA didn't respond to an emailed request for comment.

"We see maneuvering on the chess board every now and then between which things we fund on contract," said Cortney Weinbaum, a national security policy associate in the Washington office of Rand Corp., the think tank. "We just don't know where those movements will happen over the next four years."

Adding to the uncertainty, the president-elect has made a point to tweet about perceived waste in government contracts or programs. And in the case of intelligence contractors, there's been waste linked to private firms that supply services to the intelligence community, according to documents from the intelligence community's inspector general and obtained under a Freedom of Information Act lawsuit last year by Vice News.

"Operationally you'd be told by people in the intelligence community that you're not going to get rid of the subcontractors," said Turzanski, who worked in the U.S. intelligence community during the Reagan administration. "You really do need them."

That said, Turzanski expects it's likely the incoming administration will want to conduct a "very thorough review" of how these subcontractors operate. He believes the scrutiny is driven by "concerns over operational security and the integrity of what we produce."

Meantime, talk about a restructuring and cuts in the CIA — first reported by The Wall Street Journal on Jan. 4 — could be far reaching but might turn out to be a positive for outside contractors such as Booz Allen.

"The more people you push to the field, the more expensive it is," said Weinbaum, a former physicist for the Defense Intelligence Agency. "You'd actually end up having to do more hiring — whether it's from contractors or within government — to support more people in the field."

Also, Weinbaum sees the intelligence community's reliance on private contractors as a good thing. "The private sector brings expertise and fresh ideas and fresh blood into government," she said.

Turzanski agreed: "In the brave new world of cyber espionage and cybersecurity, a lot of the expertise resides outside the United States government. Instead of trying to recreate that capability, you go out and hire what you think is the best; that means you're going to go to subcontractors."

Finally, the flare up in ties between the intelligence community and the incoming administration is seen as a national security risk due to already low morale at the spy agencies. Indeed, the former director of the NSA, Keith Alexander, recently spoke about the problem of employees leaving.

"When they're being told by their leaders that what they do for a living is maybe questionable, it hurts morale at those agencies," said Weinbaum. "You have more people who could be disgruntled employees — and that's the last thing you want in an intelligence agency. Plus you just have a loss of talent; they can get much higher-paying jobs somewhere else with their skills and they know it."