How So Many Intelligence Programs Got So Out of Control
Many of the largest intelligence acquisition programs are billions of dollars overbudget and running far behind schedule, according to a recent report by the House Intelligence Committee. The multibillion-dollar advanced satellite programs run by the National Reconnaissance Office (which is under the Pentagon's management) are among the worst offenders.
So how did things get so bad? Part of the problem is that for decades, there was no one person who had full control over the intelligence budget. To complicate matters, most administrations have insisted that the budget figures for the intelligence community remain classified, which means that the costs of runaway programs spiraled in secret with little or no public scrutiny.
The budget problems are "a decade in the making," says Stephen Cambone, the undersecretary of defense for intelligence. Back when the first President Bush began to slash defense spending as the Cold War ended, the Pentagon shed the bulk of its in-house expertise on essential areas like acquisition and systems engineering.
"We went to an acquisition process that transferred most of that responsibility from the government to the contractor community," says Cambone. "Then, without doing any of the in-house engineering that needed to be done, the department and the agencies simply transferred to the contractors–without proper prior planning or budgeting–requirements for capabilities that they couldn't possibly deliver."
The risk was compounded by a system that allowed contractors to calculate their own cost estimates, with little or no independent verification.
"Then, just to make it really a mess, we went into an incentive structure, which encouraged the contractors to push all their risk to the out years," Cambone adds. "Nobody did it for a bad reason … but the results have just been bad. And now we're in the process of fixing it."
The new director of national intelligence, John Negroponte,is still testing his authority over the budget, but he did take the difficult step of curtailing one of the most out-of-control programs–a next-general satellite system called Future Imagery Architecture. He has also signaled that he wants to take on other budgeting problems.
"The most significant thing that I believe that I have pressed for is realistic budgeting for these projects," Negroponte says, "so that we have a good appreciation upfront of what the costs are likely to be."
For future major acquisition programs, agencies are now required by law to obtain "independent cost estimates." DNI officials say this should help them make more realistic budgeting decisions in the future and prevent agencies and contractors from low-balling their projections.
"When you have an even playing field, you can compare them and decide what are the greatest needs," says Patrick Kennedy, the deputy DNI for management.
The DNI is also implementing an even playing field among the different intelligence agencies. For years, each agency has organized its own budget independently, making cost comparisons across agencies next to impossible. Early on, the DNI ordered the CIA and other major agencies to use the same groupings–called "expenditure centers"–to organize their budgets. In other words, each agency will have to categorize spending on information technology, for example, the same way.
"This will permit us to compare and contrast across agency lines who is proposing the best bang for the buck," says Kennedy.
The agencies are falling into line.
"You can, if you want, call that an additional administrative burden; you can call that invasive," says CIA Director Gen. Michael Hayden. "Actually, what I think you've got there are two virtues out there doing combat–one that optimizes the agency; the other optimizes the community. I said, 'Do what Pat Kennedy says.' " Hayden admits that it will take some time for the CIA to get used to this: "This agency isn't used to answering to anybody."
There is still a very long way to go. For one thing, as the Senate Intelligence Committee noted, the biggest agencies in the intelligence community (including the CIA, the National Security Agency, and the NRO) still cannot produce auditable financial statements. Part of the problem lies with the Pentagon, where each agency has its own customized financial management software system. The CIA, officials say, is getting closer. But currently, the State Department's Bureau of Intelligence and Research is the only one of the 16 agencies whose statements can be fully audited.
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