Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

• The determination of Federal program priorities or budget requests.

• The direction and control of Federal employees.

• The direction and control of intelligence and counter-intelligence operations.

• The selection or non-selection of individuals for Federal Government employment, including the interviewing of individuals for employment.

• The approval of position descriptions and performance standards for Federal employees. 22

Because these functions focus largely on designing and directing policy, it is mostly in this realm that the potential exists for private players to reorgan ize the interrelations between state and private in the service of their own policy agendas—and to forge new institutional forms of power and influence. Moreover, the very idea of inherently governmental functions, as well as the notion that certain activities should remain the responsibility of government alone, is controversial. Some voices from industry, academe, and think tanks argue that the notion of these functions—not consistently defined across the government—should be scaled back or replaced with “core capabilities” or “competencies.” This view is but one expression of the movement away from stable bureaucracy and toward flexibility. It is also the predictable culmination of more than a half century’s worth of thinking that much of the government’s work can be done more efficiently and cost effectively outside the government superstructure of bureaucracies and employees. Beginning as early as 1955 with the Eisenhower administration, the U.S. government has issued guidelines to federal agencies regarding its policy vis-à-vis private contractors. These guidelines have been revised periodically as industry has ratcheted up the pressure for service contracts. 23

The Clinton administration gave contracting a major push with its Federal Activities Inventory Reform (FAIR) Act of 1998. FAIR supplied the legislative mandate for Bush II’s “competitive sourcing” and compels agencies to inventory their civil service work and assess which functions are “commercial” and thus subject to outsourcing to the private sector, and which are “inherently governmental” and therefore not eligible. The Bush administration subsequently attacked inherently governmental functions head-on with its 2003 directive.

A close look at inherently governmental functions reveals that contractors are today firmly implanted in them. For instance, contractors:

• Manage—and more—federal taxpayer monies doled out under the stimulus plans and bailouts. The government enlisted money manager BlackRock to help advise it and manage the rescue of Bear Stearns and the American International Group (AIG). BlackRock also won a bid to help the Federal Reserve, an institution which itself combines state and private power, to evaluate hard-to-price assets of Freddie Mac and Morgan Stanley. 24As the Wall Street Journal noted, “Black-Rock’s multiple hats put it in the enviable position of having influence on setting the prices of both the assets it is buying and selling.” 25With regard to the fall 2008 $700 billion bailout, also known as the Troubled Asset Relief Program (TARP), the Department of Treasury hired several contractors to set up a process to disburse the funds. 26

• Choose other contractors: The Pentagon has employed contractors to counsel it on selecting other contractors. The General Services Administration (GSA) enlisted CACI, the Arlington, Virginia–based company, some of whose employees were among those allegedly involved in the Abu Ghraib prisoner abuse scandal in Iraq, to help the government suspend and debar (other) contractors. (CACI itself later became the subject of possible suspension/debarment from federal contracts.) 27

• Oversee other contractors: The Department of Homeland Security is among the federal agencies that have hired contractors to select and supervise other contractors. Some of these contractors set policy and business goals and plan reorganizations. The Departments of Defense and Homeland Security enlist “lead systems integrators” (contractors or teams of contractors) to carry out large, complex programs, develop systems, and hire subcontractors to work under their supervision. Defense contractors also “improve thought leadership and change management services.” And, in the National Clandestine Service (NCS), an integral part of the Central Intelligence Agency (CIA), contractors are sometimes in charge of other contractors. 28

• Control crucial databases: In a megacontract awarded by the Department of Homeland Security in 2004, Accenture LLP was granted up to $10 billion to supervise and enlarge a mammoth U.S. government project to track citizens of foreign countries as they enter and exit the United States. As Asa Hutchinson, undersecretary for Border and Transportation Security at the Department of Homeland Security under Bush II, remarked, “I don’t think you could overstate the impact of this responsibility, in terms of the security of our nation.” 29

• Draft official documents: Contractors have prepared congressional testimony for the Secretary of Energy. Web sites of contractors working for the Department of Defense have also posted announcements of job openings for analysts to perform functions such as preparing the Defense budget. One contractor boasted of having written the Army’s Field Manual on “Contractors on the Battlefield.” 30

• Run intelligence operations: In more than half of 117 contracts let by three big agencies of the DHS (the Coast Guard, the Transportation Security Administration, and the Office of Procurement Operations) and examined by the GAO, the GAO found that contractors did inherently governmental work. One company, for instance, was awarded $42.4 million to develop budget and policies for the DHS, as well as to support its information analysis, infrastructure protection, and procurement operations. At the National Security Agency (NSA), the number of contractor facilities approved for classified work jumped from 41 in 2002 to 1,265 in 2006. A full 95 percent of the workers at the very secret National Reconnaissance Office (one of the sixteen intelligence agencies), which runs U.S. spy satellites and analyzes the information they produce, are full-time contractors. 31

• Execute military and occupying operations: The Department of Defense is evermore dependent on contractors to supply a host of “mission-critical services,” including “information technology systems, interpreters, intelligence analysts, as well as weapons system maintenance and base operation support,” according to the GAO. U.S. efforts in Iraq illustrate this. As of July 2007, some 160,000 soldiers plus several thousand U.S. civilian employees were greatly reliant on the 180,000 U.S.-funded contractors, of which some 21,000 were Americans (about 43,000 foreign contractors and 118,000 Iraqis made up the rest). As of early 2008 the figure was more than 190,000 contractors. This is in sharp contrast to the 1991 Persian Gulf War: The 540,000 military personnel deployed in that effort greatly outnumbered the 9,200 contractors on the scene. 32

The government is utterly dependent on private contractors to carry out many inherently governmental functions. As the Acquisition Advisory Panel, a government-mandated, typically contractor-friendly task force made up of representatives from industry, government, and academe, acknowledged in its final 2007 report: “many federal agencies rely extensively on contractors in the performance of their basic missions. In some cases, contractors are solely or predominantly responsible for the performance of mission-critical functions that were traditionally performed by civil servants.” This trend, the report concluded, “poses a threat to the government’s long-term ability to perform its mission” and could “undermine the integrity of the government’s decision making.” Contractors are so integrated into the federal workforce that proponents of “insourcing”—transferring work back to the government—acknowledge they face an uphill battle. 33