A slide in the presentation included a pie chart showing that 70 percent of the budget for the U.S. intelligence community -- as insiders call the sprawling collection of 16 U.S. federal agencies managed by the Director of National Intelligence -- was currently spent on contract awards.

However, that number was contested by two people with knowledge of the classified intelligence budget, neither of whom would agree to be identified discussing it.

"It is wrong," one of them said.

DNI spokesman Stephen Shaw told United Press International that the 70 percent figure provided "only a very rough order of magnitude." It was an estimate, he said, "designed to be illustrative of general trends in contracting" by U.S. intelligence agencies.

He said that the figure indicated the universe of potential spending on private sector contracts. "Basically is it everything except U.S. government personnel costs," he said.

That definition would make 70 percent the size of what federal market analysts call the "addressable market" -- the part of the budget potentially available for private sector contracts, rather than that actually spent on them. But it is still shockingly high, according to Steven Aftergood of the Federation of American Scientists, who monitors U.S. intelligence agencies.

"It's a very high number," he told UPI, especially given that it was an average across the 16 agencies and that for some of them, like the National Reconnaissance Office, which buys the nation's spy satellites, it is likely to be much higher.

"It indicates that contractors are not only significant in (the) intelligence activities (of the U.S. government), but that they are dominant." he said. "It is shocking."

Other recent presentations by senior procurement officials give weight to the notion that there has been a huge growth in intelligence community spending in the private sector.

Deborah Walker, head of outreach for the senior acquisition executive of the National Security Agency, gave a talk last month at the same contractor conference at which Everett spoke.

Walker said the number of contractors who had registered as interested in doing business with the agency rose eight-fold between October 2001 and October 2002, from 144 to 1,165.

Between October 2002 and October 2006 the number rose more than four-fold again, from 1,165 to 5,425.

Of course, not all of these companies actually get to do business with the NSA, which as the agency responsible for U.S. eavesdropping and electronic surveillance operations worldwide is one of the largest government buyers of high technology.

But Walker also reported that the number of contractor facilities cleared by the NSA -- meaning that classified work can go on there -- has grown 30-fold from 41 in 2002 to 1,265 in 2006.

While any business can apply to go on the register of those interested in working with the NSA, intelligence professionals tell UPI that other agencies generally do not go to the trouble and expense of getting a clearance for a contractor facility unless classified government work will actually be taking place there.

Moreover, most analysts looking at the marketplace for government contractors see intelligence agencies as one of the few areas where spending will continue to grow robustly.

INPUT, a research group that analyzes government contract markets, said last week in its annual forecast of federal information-technology spending that the addressable market from U.S. intelligence agencies purchasing in the field will increase from $9.4 billion in 2007 to $14 billion by 2012 -- a compound annual growth rate of 8.4 percent.

Their forecast covered the three intelligence agencies with the biggest spending on information technology: the CIA, the NSA and the National Geospatial-Intelligence Agency, which produces maps and analyzes satellite imagery.

John Slye, INPUT's top federal analyst, told UPI he based his estimates on unclassified procurement documents, "other published data points (and) conversations with people in the big systems integrators," as major contractors are often called.

"There's a very limited degree of visibility," he said. The data that was available "is well dispersed and not easy to put together."

Slye said that information-sharing and knowledge management were big drivers of IT spending "across the whole federal government" as well as in the intelligence sector.

"Companies are incredibly eager to break into doing business with the Intelligence Community," he said. "It is historically one of the hardest set of organizations to crack, but with the slower (federal IT) market overall, companies are pushing hard to get a foothold in this area."

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US Defense Intelligence Agency
The Military Industrial Complex at SpaceWar.com
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