The Booz Allen connection


Edward Snowden worked for the security contractor Booz Allen Hamilton. For those who are unfamiliar with the name, this is a high-powered private agency that the government subcontracts much of its intelligence work to, often at much higher costs than it would have taken for the government to have its own in-house people doing the same work. It is the intelligence equivalent of military contractors that the state department hires as mercenaries (again at much higher cost) in its various wars and whose atrocious behavior in places like Iraq have done so much to poison the Iraqi people’s attitudes towards the US.

The point of having private contractors do the work that the US government could do at lower cost is partly to provide a taxpayer-funded financial subsidy to private businesses, partly to be able to enable the government to wash its hands of any responsibility if anything goes wrong, and partly to keep down the official count of casualties and the numbers and cost of direct personnel.

Booz Allen Hamilton gets especially favorable treatment from the government. In many ways, it is to the intelligence establishment what Goldman Sachs is to the Treasury Department. In both cases, people revolve in and out between the firm and the government, and its high-level personnel shuffles are quite revealing about the incestuous relationships that exist.

The current of director of national intelligence (DNI), James Clapper, who issued a stinging attack on the intelligence leaks this weekend, is a former Booz Allen executive. The firm’s current vice-chairman, Mike McConnell, was DNI under the George W Bush administration. He worked for the Virginia-based company before taking the job, and returned to the firm after leaving it. The company website says McConnell is responsible for its “rapidly expanding cyber business”.

James Woolsey, a former CIA director was also a Booz Allen vice-president, and Melissa Hathaway, another former company executive also once worked as the top aide on cybersecurity to McConnell when he was DNI. The company headquarters in the leafy Washington suburb of McLean in northern Virginia, close to CIA headquarters and home to former and current intelligence officers.

Booz Allen is a for-profit that has a cushy gig. Its main client is the government that does not seem to mind paying high prices for things it could do in-house much more cheaply.

In its most recently concluded fiscal year, it collected $5.76 billion in revenues and reported a healthy operating profit of $446 million. After paying $149 million in income taxes, it was left with net income of $219 million.

Essentially, Booz Allen is a conduit for taxpayer money to contractors, shareholders, and employees, many of whom, like Snowden, are highly paid. The Guardian pegged his salary at $200,000. According to the company’s proxy filing, CEO Ralph Shrader earned a $1,162,500 salary last year, plus nearly $2 million in stock awards and other compensation.

In the case of Snowden, $200,000 is not bad for a 29-year old junior level employee, leaving aside the bonus of living in Hawaii. If he had been doing the same job as a government employee, he would have been lucky to get even half that. Walking away from such a cushy job, leaving behind his family and friends, and risking long-term imprisonment (or even worse) makes the government’s task of discrediting Snowden even harder.

Not that they, and their defenders of an out-of-control national security state, are not going to try.

Comments

  1. slc1 says

    Before bestowing sainthood on Snowden, if he can manage to stay out of jail, he can write a book which will be a guaranteed best seller. Although many commentators in the lame stream media are pontificating that Hong Kong will allow extradition, I don’t think it’s a slam dunk, given that the Government of China is probably tickled pink about the revelations. What a propaganda bonanza this is for them. At the least, the Chinese Government might wink at Snowden leaving Hong Kong to travel to a country with no extradition treaty with the US (Brazil?).

  2. machintelligence says

    I don’t suppose there is much chance of Booz Allen Hamilton losing the contract over this security breech.

  3. slc1 says

    In the case of Snowden, $200,000 is not bad for a 29-year old junior level employee, leaving aside the bonus of living in Hawaii. If he had been doing the same job as a government employee, he would have been lucky to get even half that

    What this episode should lead to is an investigation of the government’s privatization program because Prof. Singham is right on the money. Snowden’s story relative to his remuneration is a scandal that costs the taxpayers billions. Of course, nothing will be done as the power of private contractors doing business with the government is far greater then the poor slobs who toil in government offices around the country. After all, it was the administration of Ronnie the rat that really got the privatization program off to a flying start with its A76 studies. What politician would want to go before the electorate and be accused of increasing the number of government employees, who are considered drones and scum by a public brainwashed by the the Ronnie the rat’s admirers..

  4. says

    I don’t suppose there is much chance of Booz Allen Hamilton losing the contract over this security breech.

    Zero. Mike McConnell – former director of NSA and DNI – is one of their high-paid lobbyists/partners.

  5. Mano Singham says

    One thing is clear in contemporary US: the rich and powerful never get punished whatever they do.

  6. doublereed says

    Government contractors often mitigate the conflicts of interest that the government has with themselves. By hiring independent contractors, they are not able to do a lot of corrupt government BS that can occur otherwise. Also, hiring/firing practices are a bit different for contractors/government, which can lead to different qualities of workforce.

    That’s not to say there aren’t lots of conflicts of interest with government contractors. There are. But getting rid of the government contractors would not solve these conflicts of interest at all, and in fact would usually create more.

    As for Booz Allen Hamilton losing the contract, I find it a rather strange question. Obviously this is a lone actor, so why do you want a bunch of other dudes to lose their job over it? Besides, that only discourages whistleblowers even more, because Booz Allen needs to make further sure that their employees will play ball rather than do what is ethical. That makes absolutely no sense. Us progressives and liberals should encourage whistleblower behavior for employees.

    Essentially, Booz Allen is a conduit for taxpayer money to contractors, shareholders, and employees, many of whom, like Snowden, are highly paid.

    This is a really silly sentence. Yes, if you are paid to do something by the government, taxpayer money is paying you do things. A “conduit”? This isn’t insider trading. This is being hired to do something and doing what you’re hired to do.

  7. unbound says

    If you think the pay for the resources is high, you should see what Booz Allen (and all the other private contractors) charge for the resources.

    A $208,000 paid employee (including benefits, etc) comes out to $100 / hour. I guarantee that the employee is billed out at $200 to $250 / hour. The same goes for the lower level analysts. The experienced analyst with a total compensation package of $52,000 isn’t billed out at $25 / hour, but is billed out at $80 to $100 / hour.

    The primary problem is that the government would only pay the first person something like $100,000 max, and probably closer to $25,000 for the 2nd resource (which, in more expensive areas like Hawaii, LA, NY, DC, etc isn’t doing well at all). Where do you think the talented people are going to head to?

    Clearly, the government thinks those people are more valuable than what they pay…to the point of being willing to pay 3 to 5 times what it would cost to hire them on their own at reasonable salaries. But that would be government waste somehow or another…

  8. says

    If you think the pay for the resources is high, you should see what Booz Allen (and all the other private contractors) charge for the resources.

    Yes – the government’s reliance on outsourcing and contracting is the single greatest looting of the treasury in the history of treasuries. And nobody seems to care. Presumably because those who’d care are getting their little slice of it and those who are paying for it can’t do anything about it except pay their taxes and watch it go into the pockets of the fat cats.

  9. slc1 says

    Somehow, we got along fine 60 years ago before crooked contractors started looting the government. As I recall, the A76 regulations say the privatizing a federal government activity is for the purpose of performing it as well at a lower cost to the taxpayers. Was Snowdon being paid more then twice what a government employee doing the same work would be paid an example of saving money (Snowdon was a government employee of the NSA before going to work at Booz Allen and was probably a GS13 or lower)? Not hardly. I suspect that doublereed is an employee of a private government contractor spouting bullshit to protect his job.

  10. slc1 says

    If appears that Ranum and I are in agreement here, a rather unusual occurrence. Having had experience on both sides of the fence, I can say that I did not find that employees of government contractors were superior to government employees in terms of intelligence or ability.

  11. kraut says

    What is really scary: Snowden said afaik that at certain levels contractor employees have access to passwords to bank accounts etc.
    As a private contractor, which has now been proven lacks supervision over his employees – who would catch on if one of his employees would raid bank accounts with knowledge gained through his work? Or would sell sensitive information to bidders?

  12. slc1 says

    Just to clarify what was said here, consider a contract employee earning $50/hour. I don’t know what Booz Allen’s indirect is but offsite for a large company, an indirect of 200% overhead and 25% G&A would not be out of line. That means that the Government is paying .25 *2*50 + 2*50 + 50 = 187.50/hour for his/her time If its a cost plus contract with an 8% fee, the total billing is $187.50 + .08*($50+.25*$50) = $192.50 for his/her time (can’t charge fee on overhead).

    This, of course, totally ignores the cost to the government of awarding the contract in terms of time spent by the technical evaluation panel, the contracting officer’s technical representative, and employees of the agency’s office of contracts and procurement.

    Anybody in his/her right mind who thinks that this process saves the government money is either not in his/her right mind or is a fuckken liar.

  13. says

    at certain levels contractor employees have access to passwords to bank accounts etc.

    “certain” equals “any”
    That’s from the PATRIOT money-laundering provisions. And you can be absolutely sure it’s just used to look for terrorist funding, not to see if any dissidents can be financially compromised or if anyone is depositing large amounts of drug money or anything that’s not terrorism related. Obviously, these are people you can trust. President Obama says so, and President Obama is also someone you can trust. Trust, trust, trust.

  14. doublereed says

    60 years ago we had contractors and we have always had contractors.

    Reagan beefed up contractors a lot more and is responsible for a lot of ridiculous corruption in the government that has been perpetuating for the last 30 years. He caused conflicts of interest to get out of control and allowed government contractors to have more power than they previously had in government. But that was 30 years ago, not 60.

    I have no idea how good Snowden was (NSA guys tend to be pretty badass). For Booz-Allen to pay him $200,000 that either means he was damn awesome or damn corrupt (paying a lot for a person can still be worth it). Considering he’s the whistleblower in this case, you’d think us Liberals would give him the benefit of the doubt. Why are you attacking HIM for being corrupt, when he has proven himself to be ethical???

    “Spouting bullshit to protect his job”? Really? Government never has conflicts of interest inside itself? What are you going on about? What bullshit are you talking about? Saying Government Contractors are inherently evil is just as stupid as Libertarians talking about Government is inherently evil.

  15. slc1 says

    To paraphrase Churchill, Obama is terrible; the only problem is that all the others are even worse.

  16. slc1 says

    We didn’t have support contractors then like we do now. And for the information of doublereed, I worked on both sides of the government/contractor connection. When I entered government service, there were no support contractors at my agency.

    Snowden lacked a college degree. How the hell did he rate a $200,000/year job with a contractor like Booz/Allen? The muck da mucks at that company have some explaining to do, as do the COTRs at the NSA who approved his presence on their contracts and the contracting officers who approved his rate. Contrary to doublereed’s claims, this has nothing to do with his whistle-blowing. I am willing to bet that there are hundreds if not thousands of folks like him pulling down exorbitant salaries at these contractors.

  17. Mano Singham says

    That statement is meaningless without a comparison group. Are you suggesting that Obama is the best America can find? Who are ‘all the others’?

  18. Seeker says

    Snowden lacked a college degree. That threw me, too. He also had just a GED; he dropped out of high school. What’s the answer? (Disclaimer: the following is just my personal speculation:) He came out of the CIA. Who are his parents? Dig deeper, and I suspect you’ll find Snowden was hired by the CIA because of his connections. After that, Booz was thrilled to hire him because of his CIA connections.

    As to salary; was he *earning* $200k, or was BAH being *paid* $200k for him? Was Booz being paid $200k because it would cost $350k for a gov’t employee to do the same job, what with the vacation and sick leave and training budget and retirement fund and all the other benefits?

    I repeat: these are just thoughts I had; I am not an expert in any of this and am merely speculating.

  19. slc1 says

    Re Seeker

    That’s a good point relative to the CIA. That agency is notorious for incest, with several generations working for the agency.

    As for his salary, I have assumed that he $200,000 he is reported to have been paid was unloaded. That’s a good point as, if it is a loaded rate, his actual take home rate might be closer to $50,000/year, still pretty good for a high school dropout with no college degree. By the way, I was under the impression that he was employed at the NSA before joining Booz Allen.

  20. slc1 says

    He’s certainly better then any of the Rethuglicans who ran, including Huntsman. Obviously, there are undoubtedly thousands if not millions of Americans who might be better, they just don’t run for office. As to whether he is better then Hillary Clinton, his opponent in the 2008 Democratic primaries, it’s not at all clear that she is better, given her association with the Family and her hawkish views on foreign policy.

  21. Seeker says

    @slc; I will be the first to say I don’t have all the facts. However, my impression was (based on all the news about the connections between CIA and Booz Allen) that Snowden was first employed at the CIA and then became a Booz Allen contractor for NSA. If I am wrong, then I am wrong and I freely admit it.

    I share your outrage that a high school dropout is making even $50k/year when there are so many well-educated folks without those connections who can’t make anywhere near that amount.

  22. slc1 says

    Did they ever? The US Government is of the rich, by the rich, and for the rich, to paraphrase Lincoln.

  23. doublereed says

    Who cares if he had a degree or not? That kind of thing could easily be made up for with job experience and serious badass-itude. I know very competent people who have degrees and very competent people without degrees. People have different paths in life. It’s not a big deal.

    You guys are sounding more like you’re just looking for reasons to not like things.

    Contrary to doublereed’s claims, this has nothing to do with his whistle-blowing. I am willing to bet that there are hundreds if not thousands of folks like him pulling down exorbitant salaries at these contractors.

    No, I’m just asking why you’re saying it’s all so corrupt and awful, when there are legitimate reasons why this could be the case. And considering he is a whistleblower, shouldn’t we give him the benefit of the doubt?

  24. slc1 says

    Re seeker

    According to Wikipedia, Snowden’s parents did not work for the CIA but did have US government connections. His father was an officer in the Coast Guard, his mother worked for the US District Court in Maryland. Apparently, he worked as a security guard for an NSA facility in Maryland (don’t know whether he was a government employee or a contract employee; suspect the latter) and then joined the CIA. Of course, he may have had another relative working for the CIA who greased the wheels.

    By the way, don’t blame Snowden for his exorbitant salary, blame the system the paid it to him and the clowns who run it.

    http://en.wikipedia.org/wiki/Edward_Snowden

  25. Guess Who? says

    @doublereed: just like most of the rest of real life, contractor jobs require demonstrated degrees to attain certain levels. Additionally, a 29-year-old with no high school and no college diploma would look like a poor choice when there are dozens upon dozens of 29-year-olds with college degrees (and many with postgrad degrees). i know when I interview people for a job that requires focus and commitment, seeing that someone had the focus and commitment to make it through high school is a plus.

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