The recent integration of two military contractors into a $10 billion behemoth is the latest in a wave of mergers and acquisitions that have transformed America’s privatized, high-tech intelligence system into what looks like an old-fashioned monopoly.
In August, Leidos Holdings, a major contractor for the Pentagon and the National Security Agency, completed a long-planned merger with the Information Systems & Global Solutions division of Lockheed Martin, the global military giant. The 8,000 operatives employed by the new company do everything from analyzing signals for the NSA to tracking down suspected enemy fighters for US Special Forces in the Middle East and Africa.
The sheer size of the new entity makes Leidos one of the most powerful companies in the intelligence-contracting industry, which is worth about $50 billion today. According to a comprehensive study I’ve just completed on public and private employment in intelligence, Leidos is now the largest of five corporations that together employ nearly 80 percent of the private-sector employees contracted to work for US spy and surveillance agencies.
Yes, that’s 80 percent. For the first time since spy agencies began outsourcing their core analytic and operational work in the late 1990s, the bulk of the contracted work goes to a handful of companies: Leidos, Booz Allen Hamilton, CSRA, SAIC, and CACI International. This concentration of “pure plays”—a Wall Street term for companies that makes one product for a single market—marks a fundamental shift in an industry that was once a highly diverse mix of large military contractors, small and medium technology companies, and tiny “Beltway Bandits” surrounding Washington, D.C.
As I argue below, these developments are incredibly risky for a country more dependent than ever on intelligence to fight global wars and prevent domestic attacks. “The problem with just five companies providing the lion’s share of contractors is that the client, the U.S. government, won’t have much alternative when a company screws up,” says David Isenberg, the author of Shadow Force: Private Security Contractors in Iraq.
Moreover, the fact that much of this privatized work is top secret—and is generally underreported in the press—undermines the accountability and transparency of our spy agencies. That should deeply concern the American public.
“There’s so much less transparency in intelligence than in defense,” says William Hartung, director of the Arms and Security Project at the Center for International Policy and the author of Prophets of War, a study of the political and social impact of Lockheed Martin. “At least in Pentagon contracting, people can dig out conflicts of interest and cost overruns—the pieces of information you can use to get your hands on the problem.”