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S. Hrg. 112–391 

INTELLIGENCE COMMUNITY CONTRACTORS: ARE 

WE STRIKING THE RIGHT BALANCE 

HEARING 

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE, AND THE 

DISTRICT OF COLUMBIA SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

SEPTEMBER 20, 2011 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

DANIEL K. AKAKA, Hawaii, Chairman 

CARL LEVIN, Michigan 

MARY L. LANDRIEU, Louisiana 

MARK BEGICH, Alaska 

RON JOHNSON, Wisconsin 

TOM COBURN, Oklahoma 

JERRY MORAN, Kansas 

LISA M. POWELL, Majority Staff Director 

ERIC TAMARKIN, Counsel 

RACHEL R. WEAVER, Minority Staff Director 

JENA N. MCNEILL, Professional Staff Member 

AARON H. WOOLF, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statement: Page 

Senator Akaka .................................................................................................. 1, 29 

Prepared statement: 

Senator Akaka .................................................................................................. 39 

WITNESSES 

TUESDAY, SEPTEMBER 20, 2011 

Hon. Daniel I. Gordon, Administrator, Federal Procurement Policy, Office 

of Management and Budget ................................................................................ 3 

Hon. Charles E. Allen, Senior Intelligence Advisor, Intelligence and National 

Security Alliance .................................................................................................. 9 

Mark W. Lowenthal, Ph.D., President and CEO, The Intelligence and Security 

Academy, LLC ...................................................................................................... 11 

Scott H. Amey, General Counsel, Project on Government Oversight .................. 13 

Joshua Foust, Fellow, American Security Project ................................................. 15 

CLASSIFIED SECRET SESSION

Edward L. Haugland, Assistant Inspector General for Inspections, Officer 

of Inspector General, Office of the Director of National Intelligence, accompanied by George D. Bremer, Jr. ........................................................................ 30 

Paula J. Roberts, Associate Director of National Intelligence for Human Capital and Intelligence Community Chief Human Capital Officer, Office of 

the Director of National Intelligence, accompanied by Alex Manganaris 

and Sharon Flowers ............................................................................................. 31 

ALPHABETICAL LIST OF WITNESSES

Allen, Hon. Charles E.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 47 

Amey, Scott H.: 

Testimony .......................................................................................................... 13 

Prepared statement .......................................................................................... 59 

Foust, Joshua: 

Testimony .......................................................................................................... 15 

Prepared statement .......................................................................................... 65 

Gordon, Hon Daniel I.: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 41 

Haugland, Edward L.: 

Testimony .......................................................................................................... 30 

Lowenthal, Mark W., Ph.D.: 

Testimony .......................................................................................................... 11 

Prepared statement .......................................................................................... 52 

Roberts, Paula J.: 

Testimony .......................................................................................................... 31 

Questions and responses for the Record 72 

APPENDIX 

Background .............................................................................................................. 74 

Policy letter referenced by Mr. Gordon .................................................................. 83 

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(1) 

INTELLIGENCE COMMUNITY CONTRACTORS: 

ARE WE STRIKING THE RIGHT BALANCE? 

TUESDAY SEPTEMBER 20, 2011 

U.S. SENATE,

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

MANAGEMENT, THE FEDERAL WORKFORCE,

AND THE DISTRICT OF COLUMBIA,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:32 a.m., in Room 

SD–342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 

Chairman of the Subcommittee, presiding. 

Present: Senators Akaka, Levin, Landrieu, Begich, Johnson, 

Coburn and Moran. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. I call this meeting and hearing of the Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia to order. 

I want to welcome our guests and our witnesses. Aloha and 

thank you so much for being here. 

Today, the Subcommittee will examine the Intelligence Community’s (IC) reliance on contractors and whether the IC has rebalanced its workforce in the decade since the September 11, 2001 attacks. 

After the attacks, intelligence agencies had to rapidly surge their 

workforces and turned to private contractors to fill gaps. While I 

understand the initial need to rely on the contractors, I am concerned that 10 years later the IC remains too heavily dependent on 

contractors. According to an investigation by the Washington Post, close to 30 percent of the current IC workforce are contractors. 

Although contractors undoubtedly have contributed greatly to 

keeping this country safe over the last decade, our overreliance on 

contractors raises a number of concerns. Federal workforce challenges contribute to the heavy reliance on contractors. The IC has 

gaps in language, technical and certain other skills. IC contracting 

firms often pay more, increasing the challenge of recruiting and retaining Federal employees instead of contracting for the work. 

Despite these challenges, the Office of the Director of National 

Intelligence (DNI), which oversees the 16 elements of the IC, last 

published an IC Strategic Human Capital Plan in 2006. The IC 

must invest in the strategic planning and training needed to adH605-41331-79W7 with DISTILLER

2 

dress its long-term workforce needs, and Congress must make sure 

the IC has the tools required to recruit and retain the best. 

Additionally, I am concerned that contractors are improperly performing inherently governmental functions that are reserved for 

Federal employees. The IC must exercise sufficient oversight to 

make sure those tasks are completed by a Federal worker. 

The acquisition workforce is critical for proper contractor oversight and management, but there are significant shortfalls governmentwide, including within the IC. We must ensure that the IC acquisition workforce has the staff and training needed to promote 

the efficient, effective, and appropriate use of contractors. 

Given the current budget pressures, I am also concerned about 

the high cost of IC contractors. Several estimates show that contract employees cost significantly more than Federal employees in 

the IC. A recent study by the Project on Government Oversight 

(POGO) on governmentwide contracting found that Federal employees were less expensive than contractors in 33 out of 35 occupational categories. In the decade since September 11, 2001, intelligence contracting firms have reaped huge profits paid for by the 

American taxpayer. 

Finally, the movement between government and contracting 

firms raises a risk that decisions made within the IC could be influenced by conflicts of interest. Former Central Intelligence Agency (CIA) Director Michael Hayden instituted a cooling off period at 

the CIA, but there is no IC-wide approach. I would like to hear 

from our witnesses on how conflicts can be prevented. 

As part of its effort to rebalance the workforce, the Administration announced plans to insource core governmental functions that 

should be reserved for Federal employees. I hope to learn today 

whether these efforts have been effective and what additional steps 

are needed. 

I look forward to the testimony and to a productive discussion 

with our witnesses. 

I want to welcome our witness for the first panel, Daniel I. Gordon, who is the Administrator of the Office of Federal Procurement 

Policy (OFPP) at the Office of Management and Budget (OMB). 

As you know, it is the custom of the Subcommittee to swear in 

all witnesses, and I would ask you to stand and raise your right 

hand. 

Do you solemnly swear that the testimony you are about to give 

the Subcommittee is the truth, the whole truth, nothing but the 

truth, so help you, God? 

Mr. GORDON. I do, sir. 

Senator AKAKA. Thank you very much. 

Let it be noted for the record that the witness answered in the 

affirmative. 

Before we start, I want you to know that your full written statement will be made a part of the record, and I would also like to 

remind you to please limit your oral remarks to 5 minutes. 

Administrator Gordon, please proceed with your statement. 

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3 

1The prepared statement of Mr. Gordon appears in the appendix on page 41. 

2The policy letter referenced by Mr. Gordon appears in the appendix on page 83. 

TESTIMONY OF HON. DANIEL I. GORDON,1 ADMINISTRATOR, 

FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET 

Mr. GORDON. Thank you, Chairman Akaka. Good morning. 

Senator AKAKA. Good morning. 

Mr. GORDON. I very much appreciate the opportunity to appear 

before you this morning to discuss the rebalancing of the mix of 

work performed by Federal employees and contractors. 

As you know, last week, our office issued the final version of the 

policy letter2 on the Performance of Inherently Governmental and 

Critical Functions. That policy letter, and its issuance, is an important milestone. It clarifies for the Federal agencies and for the public how we are going to balance the capabilities and capacity of 

Federal employees and the contractors who support us in our work. 

This has been a long process, a very public and transparent process, in which we received many comments, and the final issuance 

of this policy letter fulfills the commitment by the President in 

March 2009, in his Memorandum on Government contracting that 

we need to clarify the line that has become blurred over the years 

between work that can be contracted out and work, as you say, Mr. 

Chairman, that needs to be reserved for performance by Federal 

employees. 

I cannot say that the new guidance dramatically changes the current policy landscape, and in fact, the final version of our policy letter largely tracks the draft, but there are several improvements 

and changes that I would like to briefly highlight this morning because we think that those improvements should help the agencies 

understand the proper role for Federal employees and for contractors in today’s world, which I should say is notably more complex 

than when we last issued a policy letter almost 20 years. 

I appreciate that this morning you are particularly interested in 

the application of these policies to the Intelligence Community. As 

I explained in my written statement, our work in the Office of Federal Procurement Policy is governmentwide procurement policy, 

and consistent with that the policy letter takes a governmentwide 

approach. That said, I will point out in my statement, now and in 

response to questions, particular issues related to the Intelligence 

Community. And, of course, we talked with agencies in the Intelligence Community throughout the development of the policy letter. 

We do think that the policy letter will serve the Intelligence 

Community well as they work to strike the right balance between 

the use of Federal employees and contractors. 

That said, three points in brief: 

First, the policy letter establishes a single standard definition of 

what inherently governmental functions are. It adopts the statutory definition from the Federal Activities Inventory Reform Act 

(FAIR Act). We appreciate having that single definition will require 

changes to the Federal Acquisition Regulation (FAR) and other documents, and we plan to proceed to do that expeditiously. 

The policy letter goes beyond the definition though. It provides 

criteria and tests and examples for agencies, not exhaustive lists 

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because we appreciate that when we identify something as an inherently governmental activity it does not mean that things not on 

the list can be performed by contractors. That is why we provide 

the criteria and the tests. 

We preserve in the policy letter what has been long established, 

and that is that the direction and control of intelligence and counterintelligence operations continues to be viewed as an inherently 

governmental function. 

The final version does address some other areas of particular importance overseas, such as the use of contractors in security operations connected with combat, or potential combat. 

Second, and perhaps most important, in the area of definitions, 

the policy letter calls on agencies to identify their critical functions 

and to assess whether they are unduly dependent on contractors in 

those critical functions. We emphasize that agencies need to maintain control by Federal employees, of their mission and operations, 

of particular relevance in the intelligence area. 

And third, the policy letter lays out management responsibility 

that agencies have to follow to ensure that the rebalancing is happening and that they are not unduly dependent on contractors. 

That is important in the area of closely associated functions; that 

is, functions closely associated with inherently governmental ones, 

an important area in the Intelligence Community. 

It is also important in the area of insourcing. We are very concerned that insourcing not be taken, done, in a way that unduly 

harms small businesses, and we provide guidance in that area. 

I should say, Mr. Chairman, that we have worked with agencies, 

including in the Intelligence Community, in my almost 2 years in 

this position, and I think it is fair to say that the agencies, particularly in the Intelligence Community, are already following the core 

elements of the policy letter. We do not expect to see a widespread 

shift away from contractors because of the issuance of the policy 

letter. We do think that the policy letter will help agencies do a 

better job in identifying if, and when, rebalancing is needed and to 

take action if action is needed. 

As I said, we will be working to implement areas of the policy 

letter in the Federal Acquisition Regulation, and other documents 

as we assess what training is needed and we help the agencies establish training, to be sure that the message gets out that we need 

to be careful that we respect the line between work that can be 

contracted out and work that needs to be reserved for performance 

by Federal employees. 

I very much appreciate your interest and the Subcommittee’s interest, Mr. Chairman, in this important topic. We look forward to 

working with the Subcommittee and with other Members of Congress as we move forward. 

This concludes my brief opening remarks. I would be honored to 

answer any questions the Chairman may have. 

Senator AKAKA. Thank you very much. 

Administrator Gordon, as you know, part of the President’s plan 

for economic growth and deficit reduction seeks to end the overpayment of Federal contract executives. Of course, that is the latest 

word. 

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In justifying this proposal, he indicates that it is inappropriate 

for taxpayers to fund Federal contractor salaries that are—and he 

uses the word—multiples of what Federal employees are paid. The 

proposal is expected to save $300 million annually. 

Would you elaborate on this proposal and why the Administration supports it? 

Mr. GORDON. With pleasure, Mr. Chairman. 

As you know, in most cases, when the Federal Government buys 

the way Americans buy in general; that is to say we pay fixed 

prices. 

However, in the government contractor arena, in a minority of 

our purchases, we have a different arrangement and one that is 

somewhat riskier for the government. In that minority of cases, we 

reimburse contractors for their costs and then on top of reimbursement we pay them a fee for their profit. In those cases, there is 

concern about how much we are paying those contractors because, 

obviously, if we reimburse someone their costs, just like if I were 

to tell a plumber in my home, I will reimburse whatever your costs 

are, they have no incentive to limit their costs. 

And as a result, we have a number of statutory and regulatory 

limits on how much we will reimburse. The general rule of thumb, 

if you will, is reimbursement should not go beyond what is reasonable. That is a general limit. 

In the area of reimbursement for executives’ compensation, we 

are usually talking about indirect costs pools. And without getting 

into too many details, the bottom line is that Congress, a number 

of years ago, established a cap on how much the government 

should reimburse contractors for their executive compensation for 

their five most highly paid executives. 

Those caps used to be on the order of $200,000 or $300,000 a 

year in terms of the compensation that we would be willing to compensate, that we would be willing to pay the contractors for. Over 

the years, the statutory formula that Congress crafted in the 1990s 

has worked in a way that I do not think anybody anticipated so 

that the cap has gone up dramatically by hundreds of thousands 

of dollars and is now well over $600,000 a year. 

It is that payment that strikes us as excessive. I do not think 

anybody anticipated that the cap would go up so fast. And what we 

are saying is in a time when we are limiting Federal employees’ 

salaries, and in fact, freezing Federal employees’ salaries, it seems 

unreasonable to continue to dramatically increase the amount that 

we compensate through the reimbursement process to contractors. 

If the contractors want to pay their executives millions of dollars, 

they are free to do that. We are saying we will only reimburse up 

to this cap. 

Senator AKAKA. Thank you, Administrator Gordon. 

OFPP invited public comment on its draft policy guidance in 

March 2010. A number of respondents, including 30,000 who 

signed a form letter, argued that the list of examples of inherently 

governmental functions was too narrow and should include more 

functions, particularly involving intelligence. The final guidance 

contains only one intelligence example, which is unchanged from 

the draft. 

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How did OFPP determine which functions to include and why did 

you not expand examples related to intelligence? 

Mr. GORDON. Thank you, Mr. Chairman. 

As you say, we received a good number of comment letters. Many 

of them were form letters, but we received 110 comment letters 

that were not form letters. They addressed various issues from different aspects because, of course, this was a very public process. 

In the area of intelligence, we actually received fairly few comments. It is true that a few called for an expansion of the list of 

inherently governmental functions. One area that they noted in 

particular was interrogations, and we considered adding something 

to the list of inherently governmental functions. Let me explain 

why we decided not to add interrogation as an inherently governmental function. 

The fact is that Congress enacted legislation that generally bars, 

in particular the Department of Defense (DOD), from using contractors in certain interrogation functions. So to a certain extent, 

the problem did not need to be addressed. But in addition, in that 

prohibition Congress allowed the Secretary of Defense to waive the 

restriction. 

In our view, the very fact that the Secretary is allowed by statute 

to waive the restriction suggests that Congress did not view the 

function as inherently governmental per se because, of course, you 

do not want to have a member of the Cabinet allowing inherently 

governmental functions to be contracted out. As a result, we 

thought it was wiser to leave the statutory scheme in place and not 

change the list. 

I will tell you, as I mentioned in my opening statement, we 

worked very carefully and closely with both the intelligence agencies and with the Department of Defense more generally, and I 

think it is fair to say that they were very comfortable with the 

guidance that we developed. I think that the management guidance 

and the guidance in the area with respect to critical functions is 

going to be particularly helpful in the Intelligence Community. 

Senator AKAKA. Thank you. 

Administrator Gordon, I am pleased that the Administration 

issued the final policy guidance last week. How will you go about 

educating both Federal employees and contractors about its contents? And I am particularly interested about your outreach and 

education efforts for the IC workforce. 

Mr. GORDON. In everything that we do in the Office of Federal 

Procurement Policy, Mr. Chairman, we work very closely with the 

agencies across the Executive Branch, both in the Intelligence 

Community and outside. 

We have explicitly stated in the policy letter that every agency, 

except for the very small ones, needs to identify one or more senior 

officials who are going to be accountable for the implementation of 

the policy letter, to us in the Office of Management and Budget. 

We direct the agencies that they need to develop and maintain 

internal procedures to be sure that the policy letter is implemented. 

We require them to review the guidance that they have at least 

once every 2 years to be sure that they are acting appropriately. 

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We tell the agencies that they need to ensure that their employees understand their responsibilities under the policy letter. 

We require training no less than every 2 years to improve agency 

employee’s awareness of their responsibilities. 

And, we require management controls. 

I should say that we will be working with the Defense Acquisition University and the Federal Acquisition Institute to be sure 

that appropriate materials for training are developed governmentwide. 

I would add, Mr. Chairman, that I think that the Intelligence 

Community has been really ahead of the curve in these past several years in being focused on the need to address rebalancing and 

concern about excessive reliance on contractors so that in many 

ways I think the Intelligence Community has been a role model in 

terms of its sensitivity to the need to address overreliance on contractors. 

There is a limit to what I can say here in this open session, but 

I know that you will have the opportunity later this morning to 

hear from the leadership in the Intelligence Community, and you 

will hear much more by way of specifics than I can disclose here, 

about the progress that they are making. 

Senator AKAKA. Thank you very much. 

Administrator Gordon, as you know, the final policy guidance defines critical functions as those functions necessary to an agency 

being able to effectively perform and maintain control of its mission 

and operations. What process should the IC use to determine 

whether specific functions are critical as defined in the policy letter? 

Mr. GORDON. Mr. Chairman, again, I think in this area the Intelligence Community has actually shown leadership that other agencies can learn from. In particular, the Intelligence Community has 

focused on the need to have an inventory of contractors, what the 

contractors do, and the many other agencies across the Department 

of Defense and in the civilian agencies actually are struggling to 

put together an inventory of their service contractors that is as 

comprehensive and as thoughtful as what has been created within 

the Intelligence Community. 

The term, ‘‘critical function’’, may be a relatively new term for 

the Intelligence Community, but I think that what they have been 

looking at, when they look at core contract personnel, very much 

overlaps the idea of critical functions and the idea of functions that 

are closely associated with inherently governmental ones. 

So I think that the agencies in the Intelligence Community and 

elsewhere need to focus on what are their critical functions, and in 

those critical functions they need to do an assessment, as I think 

the Intelligence Community has been doing now for several years, 

about whether Federal employees are present in sufficient numbers, with sufficient capabilities, to maintain control of the agencies’ mission and operations. 

Senator AKAKA. I see. Well, I want to thank you very much, Administrator Gordon, and commend you for what you have been 

doing and the progress that has been made. But we needed to highlight some of these things so that we can see what actually is happening. 

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So do you have further comments? 

Mr. GORDON. If I could, Mr. Chairman, I would say that I think 

that your commitment to this issue and the Subcommittee’s interest in the issue are particularly timely today. 

I think that your commitment will be tested in the months to 

come because there are those who, I think in a myopic way, focus 

on reducing the size of the Federal Government and what they 

really mean is reducing the size of the Federal workforce. 

The fact is in the Intelligence Community, as in other agencies, 

the Federal Government has important tasks that need to be done. 

And if arbitrary reductions in the size of the Federal workforce are 

put in place, we could have a situation, as we have unfortunately 

seen in the past, where agencies turn in an unjustified and 

unthoughtful way to contractors to do work that, on reflection, the 

agencies recognize should be done by Federal employees, so that 

your vigilance in thinking about and preserving the appropriate 

balance between work done by Federal employees and by contractors, I think, will be tested in the months to come. And I very much 

appreciate your commitment to ensuring that the right balance is 

struck. 

Thank you, Mr. Chairman. 

Senator AKAKA. Thank you very much, Administrator Gordon. 

You are correct when you say that it is timely. And with the situation our country is in economically, we need to do this throughout 

the system really, not only with the IC, and see what we can do 

in helping our country. 

Mr. GORDON. Thank you, Mr. Chairman. 

Senator AKAKA. So I want to thank you so much for your testimony and your responses. It will be helpful because I know you understand that we are doing this to try to work together to improve 

the systems that we have in place. And, of course, intelligence is 

one of the areas that is so important to our Nation, and we need 

to have it work well, as well as sustain it the best that we can, and 

we need to work together to do this. 

So I thank you so much for your work. 

Mr. GORDON. Thank you sir. 

Senator AKAKA. Thank you. 

So let me ask the second panel to please come forward. 

I want to welcome Charles E. Allen who is the Senior Intelligence Advisor, Intelligence and National Security Alliance, Dr. 

Mark M. Lowenthal who is President and CEO of the Intelligence 

and Security Academy, Scott H. Amey, General Counsel of the 

Project on Government Oversight, and Joshua Foust, a Fellow at 

the American Security Project. 

As you know, it is the custom of this Subcommittee to swear in 

all witnesses. So I would ask you to stand and raise your right 

hands. 

Do you swear that the testimony you are about to give the Subcommittee is the truth and nothing but the truth, so help you, God? 

Mr. ALLEN. I do. 

Dr. LOWENTHAL. I do. 

Mr. AMEY. I do. 

Mr. FOUST. I do. 

Senator AKAKA. Thank you. 

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1The prepared statement of Mr. Allen appears in the appendix on page 47. 

Let it be noted for the record that the witnesses answered in the 

affirmative. 

Before we start, I want to again remind you that your full written statements will be included in the record, and we ask you to 

please limit your oral remarks to 5 minutes. 

So, Mr. Allen, will you please proceed with your statement. 

TESTIMONY OF HON. CHARLES E. ALLEN,1 SENIOR INTELLIGENCE ADVISOR, INTELLIGENCE AND NATIONAL SECURITY ALLIANCE. 

Mr. ALLEN. Thank you, Mr. Chairman. It is a pleasure to be here 

and to have the opportunity to speak on this very vital subject. 

As you indicated, I am representing the Intelligence and National Security Alliance (INSA). INSA is a small nonprofit organization that serves as a forum where individuals from the public, 

private, and academic sectors associated with intelligence and national security communities can come together to discuss issues of 

common concern and offer suggestions to policymakers. 

Most recently, INSA has published papers on cyber intelligence, 

homeland security intelligence, organizational conflict of interest 

and recommendations for smart reductions for the Intelligence 

Community in the current challenging fiscal environment. We will 

soon publish a paper on improving the security clearance process 

for contractors. 

INSA tries to represent the best interests and concerns of both 

public and private sectors, and I believe we can provide you a 

unique perspective on the topic of Intelligence Community contractors. 

I have been associated with the Intelligence Community for over 

50 years. I joined the CIA in 1958 and served there 47 years. I was 

the Under Secretary for Homeland Security for Intelligence and 

Analysis from 2005 to 2008. 

In many of these assignments, particularly when we were trying 

to develop new organizations and capabilities to confront new 

threats, we would inevitably be faced with a dilemma, that we 

needed an individual with a certain skill or talent that was not 

readily available within the organization, for example, unique foreign language skills or unconventional information technology 

skills. Often, the best solution in those circumstances was enter 

into a contract with a trusted private company which could provide 

such a skill set in short term. 

In earlier days, the numbers were small. In recent years, because 

of the complex asymmetric threat of terrorism, these numbers have 

grown substantially, and finding the right balance of government 

workers supported by qualified contractors with unique skill sets 

has become increasingly complex. 

It was a good thing and very timely that the Office of Federal 

Procurement Policy finalized the policy letter on ‘‘Performance of 

Inherently Governmental and Critical Functions’’ last week. While 

the Intelligence Community has been carefully following interim 

guidance issued in March 2010, publication of this definitive policy 

sends a clear message regarding the importance of the topic. 

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The policy letter does a good job of outlining what constitutes ‘‘inherently governmental’’ and what constitutes ‘‘critical functions’’, 

and provides the guidance the Intelligence Community needs to ensure that functions that are intimately related to the public interest are performed only by Federal employees. 

Requiring Intelligence Community agencies to carefully prioritize 

critical functions and judiciously maintain management, oversight, 

and control of those functions ensures that the agencies operate effectively and maintains control of their missions and operations, 

but it gives them the flexibility to find the right Federal employee/ 

contractor balance when very unique skills may be required to perform the critical function. 

I do believe that Intelligence Community agencies have dramatically improved management of the contractor workforce as part of 

the strategic workforce planning efforts that the Director of National Intelligence requires. 

When I was the Under Secretary for Intelligence and Analysis at 

the Department of Homeland Security (DHS), I did not ask if the 

intelligence products or inputs were developed by a contractor or 

by government employees, but I knew I had put in proper safeguards to ensure that priorities and final analytic judgments—inherently governmental functions in my estimation—were the ultimate responsibility of Federal employees. That said, from my perspective, contractors were part of the team and they were held to 

the same standard as other government employees on my staff. 

The Intelligence Community has a lot of experience in lessons 

learned, managing the contractor workforce, particularly over the 

last 10 years when the need for manpower and expertise increased 

exponentially, then the Intelligence Community had little choice 

initially, than to seek immediate support from qualified, trusted 

companies in the private sector. 

In your letter of invitation, you asked me to comment on how the 

Intelligence Community addresses organizational conflict of interest (OCI). The potential for OCI is always there and there must be 

management procedures to safeguard against any such conflict. 

We did a study at INSA earlier this year and could not come 

across a single instance of an IC contractor intentionally playing 

the role of a bad actor in any Intelligence Community activity. 

The study also found that each Intelligence Community agency 

had its own policy with regard to OCI and that these policies were 

not always consistent. We recommended that the Director of National Intelligence should provide policy guidance to create some 

level of consistency on the issue of OCI. 

With regard to hiring, training and retention challenges in balancing the Intelligence Community, they differ little from the challenges facing the Federal Government writ large. The IC has a 

large portion of its workforce nearing retirement, and replacing 

such expertise will be a challenge because of a gap in the mid-career population created by the hiring freezes in the 1990s, pre-September 11. Conversely, well over 50 percent of the workforce has 

been hired since September 11, 2001. These demographics would 

suggest that the Intelligence Community continue to rely on contractors for certain skills, at least until these challenging demographics moderate themselves over time. 

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1The prepared statement of Dr. Lowenthal appears in the appendix on page 52. 

I will stop there and look forward to your questions, Mr. Chairman. 

Senator AKAKA. Thank you very much, Mr. Allen. 

Mr. Lowenthal, will you please proceed with your testimony? 

TESTIMONY OF MARK M. LOWENTHAL,1 PH.D., PRESIDENT 

AND CEO, THE INTELLIGENCE AND SECURITY ACADEMY, LLC 

Dr. LOWENTHAL. Thank you, Mr. Chairman. Thank you for the 

opportunity to appear today. 

I spent 25 years in Federal service. During my last tour in 2002 

to 2005, I was the Assistant Director of Central Intelligence for 

Analysis and Production, which was the third highest ranking position in the Intelligence Community. And I would note that half of 

my staff were made up of contractors, and their services were vital 

to me and vital to the mission that Director George Tenet had 

given to me. Since then, I have been a contractor. I was also a contractor from 1997 to 2002. So I have seen this from both sides. I 

was also the Staff Director of the House Intelligence Committee. So 

I have also seen this from the congressional perspective. 

The question that is posed in the title of the hearing is one of 

balance. Let me suggest another way of looking at this. Instead of 

balance and ratios, I think we should be asking ourselves what is 

the most efficient, most cost effective way of getting the necessary 

jobs done. And it is not necessarily a balance and ratio answer. 

Your letter asked me to comment on four questions, and I will 

do that briefly. Regarding the OFPP letter, I think that the letter 

has done a very good job, as Mr. Allen just said, in defining inherently governmental functions. I think their lists in the letter and 

in Appendix A make sense and are fairly easy to follow and should 

be implemented. And the Intelligence Community is pretty much 

doing that as far as I can tell. 

I have some issues with Appendix B, which is functions closely 

associated with the performance of inherently governmental functions because several items on that list strike me as being areas 

where you could have a contractor do good work. 

I come to this conclusion based on my own experience as the Assistant Director because two of our major initiatives that we undertook—the National Intelligence Priorities Framework (NIPF) and 

the Analytic Resources Catalog (ARC), both of which we built to 

manage the Intelligence Community under President George Bush 

and which President Barack Obama continues to use to manage 

the community—were built with major inputs from contractors, 

and their work was the highest quality. It was highly objective, and 

it was absolutely necessary. And we could not have put in place 

these major programs without contractor support. 

Second was the question of how we assess the value of contractors. I think we have to recognize why contractors get hired. It is 

the budget you get. If the budget says you can hire so many fulltime employees and so much money for contracting, there is your 

answer. Agencies will spend the money they get in the lanes in 

which they get it, but they do not have a lot of say about the allocations once Congress produces a budget and the President signs it. 

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We seem to be going through a series of fashions regarding contractors. In the 1990s, it was generally assumed that contractors 

were cheaper than Federal employees because you could terminate 

a contract at will and you were not committed to their health care 

and to their pension costs, and therefore, contractors were cheaper. 

Now everybody knows that contractors load their rates because 

they are paying for health care and pensions costs. So it was probably a null set, but we tended to hire more contractors. 

At the same time, the intelligence budget in the 1990s was flat, 

and so the shortfall in personnel was made up for by hiring contractors. Then, after we were attacked in 2001 and it was necessary to ramp up our skill set quickly, we turned back to contractors again because that is where the relevant talent was. So we 

sort of have this up and down, back and forth fashion. 

The third issue is the question of how we manage and oversee 

Intelligence Community contractors. The vital issue here, the major 

difference in intelligence contractors and the Department of Defense contractors is the issue of getting security clearances. You 

have to have a clearance to be a contractor in those areas. 

The letter inviting me to testify, in your opening statement, 

made reference to the Washington Post series on the use of contractors. I would tell you, sir, that most of my professional colleagues 

found that series to be hyperbolic in tone and highly subjective and 

not terribly informative. 

Yes, there are a lot of contractors with clearances, but the reason 

you get clearance is because the government tells you in order to 

work on this contract you need cleared employees. It is not our 

idea. I assure you it would be easier to run my firm if I did not 

have to have clearance requirements. 

This leads to two interesting side effects. One you have already 

noted is rating Federal employees to hire as contractors. You made 

reference to General Hayden’s one year cooling off period. I think 

his rule is a very sensible rule, and I think that would be a good 

rule to put across the Intelligence Community. 

Second, it creates competition among contractors to acquire other 

firms not so much for the work they have but to pick up a lot of 

people who are cleared. 

And so, the requirement for cleared employees has an interesting 

side effect. 

Finally, there is the issue of the balance of the workforce. The 

demographics of our analytic workforce are very disturbing in my 

view, as somebody who used to manage the workforce. The budget 

was flat in the 1990s, and as Director Tenet pointed out several 

times, we lost the equivalent of 23,000 positions across the Intelligence Community, either people who were never hired or people 

who were not backfilled when they left. And so, the net result is 

a huge loss in manpower. 

Then, after we were attacked in 2001, we started hiring a lot of 

new people. So if you look across the 16 agencies, 50 percent of the 

analytic workforce has less than 5 years of experience. So we probably have the least experienced analytic workforce that we have 

had since 1947 when we first created the community. 

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1The prepared statement of Mr. Amey appears in the appendix on page 59. 

And so, the way that we have made up for this is to hire contractors because the contractors, the people who left the community, 

were the people who had the residual expertise. 

And this demographic is going to play out for several years to 

come, and so the demographics on the analytic side are a little bit 

scary, if you will. 

I have in my prepared statement some other ideas I think the 

Subcommittee should look at. In the interest of time, I will skip 

over those. 

I will just close with what I said at the beginning. I do not think 

it is so much a question of balance and ratio. I think it is a question of what is the best way to get the job done, and I think there 

are lots of alternatives. And it has to be, I think, a case-by-case 

kind of issue. 

Thank you, Mr. Chairman. 

Senator AKAKA. Thank you very much, Dr. Lowenthal. 

Mr. Amey, will you please proceed with your testimony? 

TESTIMONY OF SCOTT H. AMEY,1 GENERAL COUNSEL, 

PROJECT ON GOVERNMENT OVERSIGHT. 

Mr. AMEY. Good morning. I want to thank Chairman Akaka and 

the Subcommittee for asking the Project on Government Oversight 

to testify today. 

In light of today’s hearing, the Members of this Subcommittee 

should be asking what intelligence services are we buying and 

whether we have the appropriate balance of Federal and contractor 

employees supporting the IC. 

I am typically able to provide a general assessment of an agency’s contracting portfolio because the public has access to basic information via the Web. However, in the case of the IC, the doors 

to such data are closed. For example, missions, contract awards, 

dollar amounts, and the number of contractor personnel are classified and therefore not publicly available. 

Data had been made available in the mid-2000s with an inventory of IC core contractor personnel which documented that the 

IC’s budget was roughly $42 billion, approximately 70 percent of 

the IC budget was spent on contracts and that the government 

workforce was approximately $100,000, and contractors comprised 

approximately 28 percent of the total IC workforce. 

Based on the public release of the overall intelligence appropriations request earlier this year for $55 billion, it does not look like 

much has changed. POGO is concerned that despite some additional disclosures prompted by previous calls by Congress and the 

Intelligence Community Directive 612, little has changed over the 

years. 

For example, a 2009 report by the Senate Select Committee on 

Intelligence stated that it was trying to enhance personnel management authority, improve IC personnel planning, account for the 

number and use of the growing number of contractors and replace 

contractors with Federal employees. The increased cost due to reliance on contractors was also cited in that report. 

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However, last week, Senator Feinstein raised IC concerns at a 

joint hearing of the Senate and House Select Committees on Intelligence. The Senator raised concerns about the continued high use 

of contractors, the use of IC contractors for inherently governmental functions that should be performed by government employees and the high cost of using contractors. 

Those are separated by approximately 2 years but sound very 

similar. 

Earlier this month, DOD released a report about its fiscal year 

2010 insourcing actions. Intelligence work involved about 1 percent 

of the jobs insourced by DOD. Not surprising, the rational for 

insourcing those 170 intelligence jobs was cost 64 percent of the 

time, inherently governmental functions 16 percent of the time and 

closely associated functions about 9 percent of the time. 

The cost of hiring contractors has been raised before by the government, and in POGO’s most recent report called ‘‘Bad Business: 

Billions of Taxpayer Dollars Wasted on Hiring Contractors,’’ many 

of the job classifications POGO analyzed are typically characterized 

as commercial services that can be found in the Yellow Pages. 

However, with respect to the subject of today’s hearing, it is 

worth pointing out that in 2008 the government outsourced approximately 28 percent of its intelligence workforce and paid contractors 1.6 times what it cost to have that work performed by government employees. The ratio was $207,000 annually for a contractor employee versus $125,000 for a Federal employee. 

POGO’s analysis supported those findings. POGO analyzed the 

costs associated with outsourcing language specialists, which are 

frequently used to perform intelligence functions, and found that 

contractors may be billing the government on average $211,000 per 

year, more than 1.9 times the $110,000 per year the government 

compensates a Federal employee. 

Outsourcing work to Federal contractors is premised on the theory that it provides flexibility to the government to meet its needs. 

That may be true in certain circumstances, but outsourcing work, 

especially in certain sensitive program areas, may actually cost the 

government because you have to remember government employees, 

unlike contractors, can perform both inherently governmental functions as well as noninherently governmental functions. 

The government might be more flexible to adapt to changing policies, missions, and intelligence operations if we did not have to 

worry about its contractors staying in inherently governmental 

work. We do not want contractors and contracting officers bickering 

in the field over what is or is not an inherently governmental function, and taxpayers should not have to pay for the additional expense to supplement the contractor workforce every time work 

treads close to the inherently governmental function line. 

POGO recommends that IC agencies and Congress conduct assessments of IC service contracts in order to gain a better understanding of the type of services procured, the total dollars awarded, 

and to compare the cost of using Federal employees as compared 

to contractors. To the extent possible, these assessments should be 

made publicly available. 

I would also urge all IC agencies to review the Office of Federal 

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1The prepared statement of Mr. Foust appears in the appendix on page 65. 

ployees to ensure that contractors are not performing inherently 

governmental functions. 

Finally, I would urge the Senate to consider not imposing IC fulltime equivalent (FTE) ceilings. Such restrictions prevent the government from operating at optimal efficiency and flexibility, and in 

the long run might result in increased costs for agencies and taxpayers. 

Thank you for inviting me to testify today. I look forward to answering any questions and working with the Subcommittee to further explore how intelligence contracting can be improved. 

Senator AKAKA. Thank you very much, Mr. Amey, for your testimony. 

Mr. Foust, will you please continue with your testimony? 

TESTIMONY OF JOSHUA FOUST,1 FELLOW, AMERICAN 

SECURITY PROJECT 

Mr. FOUST. Chairman Akaka, thank you very much for inviting 

me here this morning. 

So there is very broad public agreement that the government 

must take measures to respond to the explosive growth of contracting in the IC. Now the government tends to contract out services when it does not have employees with the skill set to perform 

a given function, like building a drone, understanding a certain 

piece of information that has come in, or so on. 

But this public consensus that contracting needs to be curtailed 

is based on some, I think, faulty assumptions. One of them is that 

the industry of contracting has grown beyond anyone’s ability to 

control it, that it results in widespread fraud, waste, and abuse, 

and that the fundamental nature of contracting itself presents analysts, agents, and officers of the Intelligence Community with irreconcilable conflicts of interest. 

I think these are actually the wrong issues to be focusing on because they do not address the real problems that plague the IC’s 

reliance on contractors. The biggest problem facing the IC contracting industry is not that some contractors might abuse the system but rather that the government has designed a system that 

can encourage abuse. 

Missing in the public examination of the IC contracting industry 

is the role that the government itself plays. Ultimately, the government is responsible for the conduct of the companies that it hires 

to perform functions. While any violations of rules that are already 

in place merit investigation and prosecution, contractor behavior 

commonly labeled as misconduct is really perfectly legal and within 

the bounds of the contract agreements that companies sign with 

their government clients. 

The current state of contracting within the IC is incoherent. 

There is broad confusion about the nature of what are appropriate 

government roles and contractor roles, along with inconsistent accountability and poor resourcing for accountability mechanisms. 

Contracts are often worded vaguely or incompletely, and with everchanging requirements, deliverables, and performance metrics, all 

of which are supposed to catalogue and record how a company fulH605-41331-79W7 with DISTILLER

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fills a contract. They create an environment rife for exploitation by 

companies seeking to extract revenue from the process. 

Every contract that the government issues for a company to perform work is defined by a Statement of Work (SOW). This is a document that defines the parameters of the work the contractor will 

perform, including a description of the project, expected duties the 

contractor must fulfill, and the outputs and metrics by which performance will be measured. These are often poorly written, kept intentionally vague and wind up not actually addressing the stated 

intent of the contracts. 

As one example, every statement of work I’ve had to either administer, edit, review, or write has stated as a basic metric of performance the number of employees the contractor should hire. That 

is the basic means by which the government measures the contractor’s performance is based first and foremost on the number of people hired to work on the contract. This has two serious consequences that affect the contracting environment. It removes the 

distinction between the employees that would make work products 

better, and it confuses the number of employees with contract performance. 

This bizarre system of hiring intelligence contractors is born 

from several interdependent processes that I go into more detail in 

my written testimony. 

But there is a very real distinction between the qualifications 

and credentials that are put in place to hire contractors to perform 

work. Often, a high level clearance is mistaken as qualification to 

perform a given type of work, which leads to questionable product 

outcomes and questionable program outcomes. 

Furthermore, poorly worded SOWs can place contractors in positions that introduce potential conflicts of interest. This can include 

hiring contractors to work in a government facility security office 

which puts them in charge of reading on competitor contracts, 

which is also a situation I have encountered while working in the 

Intelligence Community. 

The SOW system is also unclear on what constitutes deliverable 

and contractor outcomes. This makes it difficult for the government 

to control costs, measure outputs, and measure if the contractors 

are performing the terms of their contracts in a reasonable way. 

It also misidentifies what outcomes really are. Simply sitting in 

a chair and turning out reports might be an outcome the government desires, but absent measuring the context of those reports 

and the value that the contractors provide the government, it is difficult to say for certain that the contracted tasks actually help the 

government function. 

The broader question of what constitutes an inherently governmental function is slightly beyond my perspective and authori

tativeness. I do not have direct experience that would give me an 

authoritative stance on functions that should never be performed 

by a civilian contractor, but I have encountered situations in which 

contractors are put in charge of life and death decisions, either in 

targeting analysis shops, running drones programs, and similar situations. This makes me deeply uncomfortable, and I would be more 

comfortable seeing employees that have taken an oath on the ConH605-41331-79W7 with DISTILLER

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stitution making life and death decisions in the Intelligence Community. 

However, many of the problems that exist within the IC contracting industry begin with the government lacking the knowledge 

and means to design and manage its contracts. Rather than focusing on the numbers and balance of the contracted workforce, it 

would be better to examine the broader systemic issues that require the use of contractors in the first place. By fixing the need 

for contractors and by making the process of contracting both more 

transparent and more accountable, many, if not most, issues of balancing contractor and government employees will resolve themselves. 

Thank you, Senator, and I look forward to your questions. 

Senator AKAKA. Thank you very much, Mr. Foust, for your testimony. 

Dr. Lowenthal, Mr. Foust’s testimony indicated that he believes 

there is broad confusion about which roles should and should not 

be filled by contractors within the IC. During your time at CIA, 

was there a clear understanding of what roles should be reserved 

for Federal employees? 

Dr. LOWENTHAL. Mr. Chairman, as I said, when I was the Assistant Director, half of my staff were made up of contractors predominantly from one federally funded research development center 

(FFRDC) and from two private sector firms, and I do not think 

anybody in my office had any confusion about what they could and 

could not do, or I do not think any of my government employees 

had any confusion about what they could ask contractors to do. 

They could not monitor other contracts. They could not be involved in solicitations. They could not be involved in acquisitions. 

Beyond those sorts of common-sense rules though, I used them 

as an integral part of my staff. I had them manage planning 

projects for me. As I said, I had them help create the priorities 

framework that is used by the President. I had them run investigations for me. I had them help set up meetings and represent me 

at meetings, all of which seemed to be within bounds. 

So I think it is generally understood, at least within the Intelligence Community as I saw it, what contractors could and could 

not do. And I never saw any confusion on the part of my contractors, and I never had a situation where I felt a contractor had gotten out of his or her lane either. 

They pretty much understood why they were there and what 

they had been hired to do in support of my office, and so I just did 

not see it as a problem, sir. 

Senator AKAKA. Mr. Allen. 

Mr. ALLEN. Yes, Mr. Chairman, we are talking here about what 

we call core contractors, not those that build satellites or do high 

end, exquisite, exotic engineering, and scientific work for the Intelligence Community, or the ones that do the support services because we do contract for heating and air conditioning and for mowing the lawn. But we are talking here about those who are working 

in a more integrated fashion, as Dr. Lowenthal just described, with 

the government employees. 

From my perspective, when I was the Assistant Director of Central Intelligence for Collection where I had a social and environH605-41331-79W7 with DISTILLER

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mental impact assessment (SEIA) of contractor support, and when 

I was the Under Secretary at Homeland Security it was very clear 

that the government was in charge and the government made the 

final decisions. 

The government makes decisions relating to achievable intelligence. Life and death decisions are not made by contractors. That, 

I can assure you. I know that from personal experience, having 

worked at the Central Intelligence Agency most of my life. 

I believe that we are getting much better. I believe that the guidance that has come from the Director of National Intelligence, looking hard at the core contractors, this middle band that we are talking about. I think we are looking at what is inherently governmental and what is not. 

And where we need the expertise—unique expertise, surge expertise, short-term expertise of core contractors, I think it is spelled 

out more clearly. Admiral Dennis Blair, when he was Director of 

National Intelligence, signed Intelligence Community Directive 612 

which spells out very clearly the responsibilities of core contractors. 

Senator AKAKA. Mr. Foust. 

Mr. FOUST. Thank you, Senator. 

So I should probably clarify that my experience in the Intelligence Community has not been as a part of the Central Intelligence Agency. I have worked for the Defense Intelligence Agency, 

other military intelligence agencies and organizations. So it is possible that there is a difference of experience between civilian and 

military intelligence agencies. 

However, I can say that within the military Intelligence Community there are contractors who are in charge of selecting targets for 

assassination in Iraq and Afghanistan. There are also contractors 

who are put in charge of functions that we would ordinarily consider sensitive. So I do not have any knowledge as to whether or 

not this happens in a civilian agency, but within the military community it has happened in the recent past. 

At the same time, I think when we are looking at this question 

of whether or not the government has a good handle on it, this 

comes back to what I write in my written testimony about how 

good program design and good management will naturally resolve 

the question of whether or not contractors are being used properly. 

I have worked on projects where there was a good government 

manager, and that government manager kept contractors in their 

lane. There was no confusion about roles, duties, and people did 

not step out of their line. 

I have also worked at projects where that has not been the case. 

And if government management is either not properly trained or 

if the contracting officer representative (COR) who is in charge of 

administering the contract and interacting with the contractor program manager is not properly trained, resourced, or given the mandate to their job, there can be serious problems of either contractor 

overstep or contractor misconduct. 

And I want to make clear that when I call these things misconduct or overstep I do not mean to imply that there is any maliciousness on the intent of the contractor. Like everyone else on this 

panel, I have never encountered a contractor or a contractor manager or executive who behaves mendaciously or I think has anyH605-41331-79W7 with DISTILLER

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one’s worst interests at heart. Rather, the system itself encourages 

conduct that we would consider to be unacceptable. I think this is 

unintentional and a consequence of design rather than malice. 

Senator AKAKA. Thank you Mr. Foust. 

Mr. Allen, there are governmentwide problems with having 

enough acquisition professionals with the right training—— 

Mr. ALLEN. Yes. 

Senator AKAKA [continuing]. To clearly define contracting requirements and performance metrics from the outset and to effectively oversee them. This can lead to, of course, cost overruns and 

poor outcomes. The need to rapidly expand intelligence activities 

after the September 11, 2001 terrorist attacks, of course, worsened 

this problem within the IC. 

What should be done to enhance government contract management to improve outcomes? 

Mr. ALLEN. I think, Mr. Chairman, you put your finger on a 

problem. 

I think in the cold war we had wonderfully experienced acquisition experts, contracting officers who were deeply experienced, contracting officers, technical representatives that helped manage and 

control that. We had the drawdown. We grew exponentially after 

September 11, 2001. We really have yet to develop, I think, the 

richness of experienced contracting officer’s technical representatives (COTRs). 

In acquisition, my view is that there needs to be a lot more emphasis on this. I see it at the National Reconnaissance Office where 

General Bruce Carlson, I think, is improving the whole acquisition 

process. He has had six highly successful launches with great, exquisite payloads and space that are operating absolutely and completely effectively. 

My view is that it is going to take time. We have management 

schools that can build this. We are building it now. The Director 

of National Intelligence, General James Clapper, understands that 

this is a deficiency, but we are working to get it better. 

My view is that we are not quite there yet. We need to continue 

to improve that area. 

Senator AKAKA. Thank you very much. 

Mr. Foust, your written testimony discussed flawed IC contracting practices such as shortfalls in contract statements of work 

and performance metrics. Would you elaborate on what the IC 

must do to address these problems, including whether the ODNI 

should be responsible for setting better contracting standards 

across all IC elements? 

Mr. FOUST Yes, Senator. So there is a need to keep statements 

of work for contracts, to a certain degree, flexible so that contractors can respond to what their government clients want them to do 

in the future. 

The shortfalls that I highlight in my written testimony come 

down to situations where that flexibility, I think, ended up being 

taken a couple of steps too far. The most obvious one that we have 

already mentioned earlier today has been the use of contractors in 

interrogation, in particular, contractors running interrogation at 

Abu Ghraib. They were originally hired on an information technology (IT) support contract for the U.S. Army and wound up doing 

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detainee interrogations in Iraq. I think that is a very obvious example of taking vaguely worded statements of work and just abusing the process. 

A more common use involves what could be more charitably 

called mission creep, at least within the analytic community. So 

that involves hiring a contractor to perform work on a given topic 

and then along the way the government realizing that they want 

to have expertise or analysis performed on another topic and using 

a phrase like ‘‘other functions as assigned’’ to then require the contractor to hire new people to perform another job function that was 

not contained in either the original request for proposals or the 

statement of work as written. 

As far as fixing this, from the government’s perspective, I think 

there is a lot of room to tighten up contract language. One of the 

processes that I discuss in my written testimony comes down to 

measuring what actual project outcomes are, what you intend this 

project to do. 

This is not a problem that I think would be limited simply to 

contractors. I think it gets at a broader systemic issue of poor 

project design and a lack of strategic thinking in terms of what 

specific agencies and then branches within agencies want to perform. 

There are some job functions like simply maintaining awareness, 

or understanding message traffic or information coming out of an 

area, that you cannot really put metrics on. There is no way to 

measure whether what you are doing is really going to meet some 

objective or not because you may not know what that objective is. 

But I think that is when it starts to clarify the question of 

whether it is appropriate to be having contractors performing indefinable tasks with uncertain outcomes. I think that is a situation 

that implies a certain permanence to the function, in which case 

it would make sense to be assigning permanent Federal employees 

to be performing it rather than temporary contractors. 

Beyond that, I mean there have been a couple of mentions here 

that there is a lot of case-by-case examples that need to be taken, 

and I think maintaining that flexibility is important because every 

intelligence function is not the same. And instituting communitywide guidelines for how to tighten up statements of work could be 

really difficult without getting into an expansive bible of regulations about how to make it work. 

Senator AKAKA. Thank you. Mr Amey. 

Mr. AMEY. If I may, I think your last two questions to the panel 

are related. You are going to make mistakes in the process if you 

do not have the adequate number of acquisition personnel that are 

able to oversee the large amount of contracts. This is not just in 

the IC community. This is in the government overall. We have seen 

a dramatic increase in contract spending. Especially service contract spending now makes up the bulk of the contract dollars that 

we award each year. And therefore, if we are operating under a 

quantity rather than a quality policy directive, then at that point 

we are prone to make mistakes. And so, that is where enhancing 

the acquisition workforce, getting them better trained will also help 

in better requirements definition, better programs, better market 

research. Unfortunately, I think we have been just in a position 

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where we have to award contracts as quickly as possible, that we 

have made mistakes which will lead to waste, fraud, or abuse. 

Dr. LOWENTHAL. Mr. Chairman, may I? 

Senator AKAKA. Dr. Lowenthal. 

Dr. LOWENTHAL. If I just can comment on something Mr. Foust 

said, certainly, when you are hiring contractors to support your 

analysis, which is something I know fairly well, you need a certain 

amount of flexibility because you really do not know what you are 

going to be analyzing next beyond a couple of easy guesses. I managed the President’s intelligence priorities for 3 years, and one of 

the hardest things about that is trying to forecast 6 months out, 

where do I need my next set of analysts. 

To give you an easy example, if I was still managing the system 

in December 2010, I would not have assigned an awful lot of analysts to Tunisia. I think I might have assigned an analyst to watch 

Tunisia while watching Algeria and Libya. In January, I would 

have had a whole bunch of analysts watching Tunisia. 

Certainly, when you are managing the analytical system or the 

collection system that Mr. Allen used to manage, you need a certain amount of inherent flexibility. The world is nonlinear because 

of the crises that we all deal with. But in the Intelligence Community, you are supposed to anticipate those. So if you have a workforce that is stuck in certain lanes in analysis and collection, you 

are not going to have the flexibility to respond to the needs of policymakers in the time that you need them. 

Senator AKAKA. Thank you. 

Dr. Lowenthal, your written testimony discuss how the IC Federal workforce is fairly young and inexperienced relative to the contractors that they oversee. How does that dynamic impact the ability of the Federal IC workforce to appropriately oversee the contractor workforce? 

Dr. LOWENTHAL. I think we actually have three different populations operating simultaneously. 

The workforce, the young workforce that I mentioned and that 

you just referenced, tend to be younger analysts who are not doing 

contract supervision. They are working as analysts. The problem is 

that across the community—CIA, the Defense Intelligence Agency 

(DIA), the National Security Agency (NSA), DHS—there are too 

many of them, not that we want to get rid of them, but we hired 

so many of them after the shortfalls in personnel in the 1990s that 

the demographic is skewed. 

So we have former IC employees coming in as contractors, but 

they tend to be supervised by middle level people who are more experienced than the young analysts. 

I do not think there is a problem in supervising the contractors. 

That tends not to be done by the young analysts. The problem with 

the young analysts is simply the fact that they just do not have a 

lot of experience and they are there in much larger numbers than 

anything we have seen in the preceding 50 years. 

But I think in terms of managing the contractors, that is happening at a level above those new analysts, and so I do not perceive 

that as a problem, sir. 

Mr. ALLEN. Mr. Chairman, I would just like to comment on that 

as well. 

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Senator AKAKA. Mr. Allen. 

Mr. ALLEN. I agree totally with Dr. Lowenthal on the issue. 

When I came to the Department of Homeland Security, I had a 

contractor population analytically of about 60 percent, government 

about 40 percent. 

We started changing that ratio. I talked to Congressman Thompson and Congressman King on this issue, and I said we are going 

to correct this. We changed it over 3 years. Today, my successor 

now has it at about 60 percent government, 40 percent contractor, 

and she is well on her way to becoming 70–30. 

So it was a matter of we brought in a lot of experience, former 

agency, CIA and other officers who mentored those young analysts, 

but the decisions were always in the hands of the Federal Government. They were always my decisions or my deputy’s decisions, on 

any product that we produced. 

Senator AKAKA. Thank you very much. 

Mr. Amey, your statement recommends that Congress remove 

ceilings limiting on how many Federal employees an agency can 

hire. In this budget environment, some might view this as a green 

light to grow the size and cost of government. Would you discuss 

how removing these ceilings could actually lead to reduced costs 

and more efficient government? 

Mr. AMEY. Certainly, Mr. Chairman. I think, as Dr. Lowenthal 

had mentioned, this is not about ratios. It really is about efficiencies and providing an effective government. 

So with that point, if we have a workforce that is in the IC and 

we have an office that is 10 percent government employees but we 

have to supplement them with 40 percent contractor employees, we 

have a total workforce of 50 percent. We need to reconsider that 

number and see if there are cost efficiencies, that we do not need 

potentially 40 percent IC contractor employees supplementing that 

office. 

We are spending the money somewhere. It is not like we removed it from the Human Resources (H.R.) budget of an agency. 

All we have done is supplement it with a contractor award—a contract award—and we have just supplemented it with a new contractor employee workforce. 

So that is what I think we need to make sure that we go back 

and really look at the efficiencies and the effectiveness of agencies, 

to make sure that we have the right balance and there are going 

to be savings there, if we take a look at that, whether that work 

is insourced and we hire more Federal employees or if that work 

is outsourced. 

If we find that contractors provide the work more cheaply, then 

maybe we do not need Federal employees to perform those functions unless they are inherently government or closely associated 

or critical. And that is where you are just going to have to operate 

under a weigh test on whether government employees should, not 

whether it is legal for a contractor employee to perform a function, 

but should a government employee perform that function, and that 

is a different scenario. 

And I think that is what we need to really do, and that is what 

the Department of Defense has done with their insourcing study. 

We have 43 jobs that they found that were inherently governH605-41331-79W7 with DISTILLER

23 

mental or closely associated. So at that point, they have taken a 

look at those jobs. 

And when you asked the question to Mr. Gordon earlier on the 

first panel, on how do you plan to see this kind of washed down 

through the system, I think the OFPP policy letter is a great step 

forward. 

But I like to see something from ODNI that comes out and takes 

it a step further: Here are missions, here are functions, that we 

think should be performed by government employees. And take a 

look at those and also ask for a cost efficiency study to be done and 

performed to make sure that we are saving as much money as possible. 

Senator AKAKA. Mr. Amey, as you know, the Intelligence Community keeps much of its facts and figures regarding the use of 

contractors secret. To a large degree, this is necessary to protect 

the national security, but it also makes it extremely difficult for the 

public and groups like POGO to hold intelligence agencies accountable. 

How could we better balance the need to protect national security secrets with transparency and accountability? 

Mr. AMEY. Well, obviously, this Administration has taken a big 

step forward in revealing what the budget request was earlier this 

year, and I think that is where we can start, with total figures. I 

do not necessarily need to know what the breakdown of every operating personnel is for the IC community, whether as a Federal employee or as a contractor employee, but if we just start with kind 

of the low-hanging fruit dollar amounts. 

If you have read Dr. Ronald Sanders conference call, it is very 

difficult. He gets grilled. This was a few years ago, but he was getting grilled by reporters on what the size of the workforce was. It 

was very circular because he was giving a total number for the 

number of Federal employees but the percentage was not a percentage of the total. 

I mean I had difficulty in following it, and I think so did every 

reporter that was on that conference call. 

There are places where I think we can add transparency. We just 

have to make sure that it is done with kid gloves to make sure we 

do not reveal something that really does place the Nation in harm 

or national security at risk. 

Mr. ALLEN. Mr. Chairman, I would just like to add that, as you 

know, you are going to be hearing later in a classified session. I 

believe that the Senate Select Committee on Intelligence has been 

especially active in this area of looking at contracts, looking at the 

number of contractors and the ratios and the balance involved. 

As you know, in the past, the DNI has published the numbers 

of core contractor personnel. There is an enormous transparency in 

a classified environment. So there is nothing held back. 

And Director Clapper, who is a good friend, has spoken very 

bluntly about this, that he is going to get it right and he is going 

to work on what is inherently government and adhere to that. 

Senator AKAKA. I would like to ask this next question to the entire panel. 

In your written statements, several of you raised the issue of 

how competition for employees with security clearances impacts IC 

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24 

contracting. Of course, security clearances are important to protecting classified information within the IC. 

This Subcommittee has focused extensively on improving the 

speed and quality of the security clearance process, but I believe 

there is room for improvement. What changes to the security clearance process could improve IC contracting and the quality of contractors hired? Mr. Allen. 

Mr. ALLEN. Mr. Chairman, I am currently head of a task force 

sponsored by the Intelligence and National Security Alliance which 

is looking at the security clearance process and suitability, and the 

emphasis is on contractors because we know that the system today 

is arcane in many ways. It is not efficient. We know there is waste. 

And in moving clearances among contractors, the transportability, if a contractor has Top Secret Sensitive Compartmented Information (SCI) clearance at DIA, is working on a contract and his 

unique skills are needed at CIA, there should be just simply electronic transfer of his clearances. Today, we have a fairly painful 

process. 

And we could cite almost any agency of the 16 agencies and the 

antiquated way in which we operate. 

This study will be out in the December timeframe. We will make 

it available to you and to your Subcommittee staff to review. It is 

a white paper directed at the Director of National Intelligence focused on just small, incremental steps that could be made to improve this. 

And we will save, I think, a substantial amount of money. We 

will more effectively use contractors than we do today. Sometimes 

they have to wait weeks or months in order to get those clearances 

transported from one agency to the other even though the individual involved have—they are fully cleared, been vetted by all the 

security organizations. 

I look forward to finishing this study and presenting it to you, 

sir. 

Senator AKAKA. Thank you. Dr. Lowenthal. 

Dr. LOWENTHAL. Mr. Chairman, I would just echo what Mr. Allen 

said. We have an arcane process that does not even reflect the 

technology that is available to us. 

I was hiring a government employee on my staff. He was a DIA 

officer, and it took me 10 months to transfer his clearances to CIA. 

I was astounded. It was a breathtaking moment. We deal with an 

arcane process that really does not catch up with the rules. 

But one of the ironies of this is that Mr. Allen and I have probably done, between us, hundreds of interviews with people as references for people who are getting clearances. All those people who 

interviewed us were contractors. So we hired contractors to conduct 

the security clearance process, which is an interesting irony. 

But we could clearly make the process quicker. We know that 

there is a problem when you hire a government employee as we 

lose some of them because of how long it takes to hire them. 

Mike McConnell, when he was the DNI, tried to get the security 

community, the people who are in charge of this, to move from risk 

avoidance to risk management. I think that was a good idea that 

the Director had. It would be a very difficult cultural shift because 

if you are a security officer your main goal in life is to make sure 

H605-41331-79W7 with DISTILLER

25 

that nothing bad happens on your watch and you are not going to 

be liable to say well, let’s cut corners here, let’s make the process 

faster. 

So one of the issues you have to deal with is what are the incentives for the people who actually manage this system, who are totally separate from the contractor workforce or the people setting 

out contractors. It is a whole different community of people. 

But I think there is room for improvement that would make the 

system better and less expensive. 

Senator AKAKA. Thank you so much. 

Mr. AMEY. I will leave this question for the other panelists. I do 

not have any information that would be as insightful as what they 

have already had to offer. 

Senator AKAKA. Thank you. Mr. Foust. 

Mr. FOUST. Thank you, Senator. 

So I think this question about the clearance process comes back 

to the point I made in my written testimony about the difference 

between qualifications and credentials. Contractors tend to be used 

for two primary functions—either to bring expertise into the IC 

that it does not already have or to simply fill seats on a requirement that they need. I think Tunisia is a good example where the 

two coincide, but that does not always happen. 

Right now, the security clearance process tends to exclude the 

most highly qualified area experts because having substantial family, social, or other personal contacts in areas of interest, say the 

Middle East, North Korea, or other areas that pose substantial security risks, can actually get in the way of their getting a clearance 

to then participate in the intelligence process. This is a substantial 

barrier for both Federal and contracted employees. 

I think from the contractor’s perspective the real advantage that 

contractors bring to the intelligence process is their flexibility, their 

ability to be rapidly hired and rapidly fired. 

The problem this introduces in a cleared environment is that firing a contractor immediately cancels or suspends their clearance if 

they cannot be immediately transferred onto another contract. 

I am not sure exactly how the specifics of this could be worked 

out, but decoupling one’s clearability or one’s cleared status from 

having to be attached to an active contract currently drawing 

money from the Federal Government would go a long way toward 

increasing the flexibility that cleared contractors can provide to the 

community. There is probably a lot more research to be done on 

that, but that is one idea that could be brought in front of more 

knowledgeable people than I. 

Senator AKAKA. Thank you very much. 

And finally, I have another question for the entire panel. 

As you know, contractors often recruit IC employees because they 

have the needed clearance and expertise. We have heard stories of 

government employees quitting one day and returning to the same 

job as a contractor the next day, often for more pay. 

As you are aware, former CIA Director Hayden instituted a cooling off period so that CIA employees who left before retirement 

could not return immediately as a CIA contractor. 

Do you think this policy has been effective and should it be implemented across the IC? Mr. Allen. 

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26 

Mr. ALLEN. Yes, Mr. Chairman, I think it has been very effective. 

General Hayden saw what was happening at the Agency where 

people were coming in, working for 2 or 3 years, getting a lot of 

expertise working in operations, or in science and technology, or 

analysis, and then seeing opportunities to make more money by immediately going out and keeping their clearances, coming back as 

an contractor employee. He instituted that change. That was a wise 

decision. I think it has not affected the efficiency of the Central Intelligence Agency. 

My view is if you are retiring and getting your annuity, that is 

fine to go work for a contractor. I have no problem with that. 

But we need a more stable workforce, and occasionally, we had 

contractors quite actively recruiting some of our best personnel. 

And what General Hayden did at CIA should be emulated by the 

rest of the community. 

Senator AKAKA. Dr. Lowenthal. 

Dr. LOWENTHAL. I mentioned this in my summary remarks, Mr. 

Chairman. I agree with Charlie. I think what Mike did in the 

Agency was a very good idea. 

I spent a lot of my time, when I was the Assistant Director, counseling younger people who said I have just been offered this 

amount of money to go work in another firm. And they get a bonus 

for having a clearance. It is like a signing bonus in baseball. It is 

not just that they are being offered a higher salary, but they will 

get a bonus because they are coming in cleared. 

So I think what General Hayden instituted at the agency was a 

very sensible, nonpunitive policy. I think it probably helped safeguard his workforce. And like Mr. Allen, I would see that as a rule 

that could be easily implemented across the community to the benefit of the government. 

Senator AKAKA. Thank you. Mr. Amey. 

Mr. AMEY. I would agree. There is a lot of emphasis on hiring 

government employees, but you do not have as much emphasis on 

retention of government employees, and so whatever we can do to 

improve the retention policy. 

A cooling off period, I have seen it manipulated with defense 

agencies where the cooling off period actually states that you cannot receive compensation. So somebody will go there and not accept 

compensation for a year, but then come out and get a bonus 366 

days later. 

So it always can be manipulated, but anything that we can do 

to try to retain qualified government employees that are highly 

trained. 

And that is where part of the overhead that the government invests. When people talk about the cost to the government for a government employee is so high. Well, we do spend a lot of money on 

training and on educating, and at that point we do not want to see 

all that just kind of spill over and poached by the contracting industry. 

Senator AKAKA. Thank you. Mr. Foust. 

Mr. FOUST. Yes, I would agree with everyone else here, that was 

a very good rule. 

I have seen where that rule is not in place, in the defense community, be abused, where government employees go work for conH605-41331-79W7 with DISTILLER

27 

tractors in the same role and in the same office for more pay, and 

I think a cooling off period would be very useful to implement community-wide. 

Senator AKAKA. Thank you very much. I thank our witnesses 

very much, our first two panels as well. 

The Intelligence Community has played a critical role in keeping 

us safe in the decade since the September 11, 2001 attacks. Our 

oversight is intended to help make sure that the IC is as effective 

as possible. Given the difficult budget environment, we must also 

understand the cost implications of contracting versus insourcing 

different functions in the IC. 

I look forward to working with the Administration and my colleagues in the Senate to ensure that the IC’s total workforce is 

properly balanced to further its important mission. 

We are now going to take a short recess and reconvene the hearing to receive testimony in closed session. While the third panel 

will be closed to the public, we will work with the Administration 

to release an unclassified transcript of as much of the proceedings 

as possible. 

The hearing record will be open for 2 weeks for additional statements or questions from other Members of the Subcommittee. 

So this hearing is now in recess until 11:15 a.m. Thank you. 

[Whereupon, at 11:02 a.m., the Subcommittee proceeded to closed 

session.] 

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(29) 

INTELLIGENCE COMMUNITY CONTRACTORS: 

ARE WE STRIKING THE RIGHT BALANCE? 

(CLASSIFIED SECRET SESSION) 

TUESDAY SEPTEMBER 20, 2011 

U.S. SENATE,

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

MANAGEMENT, THE FEDERAL WORKFORCE,

AND THE DISTRICT OF COLUMBIA,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, in classified SECRET 

session, at 11:38 a.m., in Conference Room 1, Senate Visitors Center, Hon. Daniel K. Akaka, Chairman of the Subcommittee, presiding. 

(This transcript reflects unclassified excerpts of that session). 

Present: Senator Akaka (presiding). 

Also Present: Christian Beckner, Ray Ciarcia, Troy Cribb, Counsel of the full Committee, Lisa Powell, Staff Director, and Eric 

Tamarkin, Counsel, Subcommittee staff; Peggy Evans, Hayden 

Milberg, Jared Rieckewald, and Renee Simpson, Senate Select 

Committee on Intelligence staff; David Beaupre, George Bremer, 

Sharon Flowers, Edward Haugland, Mary Keller, Alexander 

Manganaris, Jeanette McMillian, Eric Pohlmann, and Paula Roberts, Office of the Director of National Intelligence; and Anne 

McDonough-Hughes, Government Accountability Office. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. I call this hearing of the Subcommittee on Oversight of Government Management, the Federal Workforce, and the 

District of Columbia back to order. I want to welcome our witnesses on our third panel. Aloha and thank you for being here. 

The witnesses on our third panel are: Edward Haugland, Assistant Inspector General for Inspections, Office of Director of National 

Intelligence; and Paula J. Roberts, Associate Director of National 

Intelligence for Human Capital and Intelligence Community Chief 

Human Capital Officer, in the Office of the Director of National Intelligence. 

It is the custom of the Subcommittee to swear in all witnesses, 

so would you stand and raise your right hand. 

(Witnesses Haugland and Roberts sworn.) 

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30 

Let it be noted for the record that the witnesses answered in the 

affirmative. If you would please try and limit your oral remarks to 

5 minutes, although your full written statements will be made a 

part of the record. 

Mr. Haugland, please proceed with your statement. Before we 

continue, I just want to remind you we don’t have mikes, so if you 

cannot hear me or I can’t hear you I’ll let you know. Thank you. 

Will you please proceed, Mr. Haugland. 

TESTIMONY OF EDWARD L. HAUGLAND, ASSISTANT INSPECTOR GENERAL FOR INSPECTIONS, OFFICE OF INSPECTOR 

GENERAL, OFFICE OF THE DIRECTOR OF NATIONAL INTELLIGENCE, ACCOMPANIED BY GEORGE D. BREMER, JR. 

Mr. HAUGLAND. Thank you, Mr. Chairman. Thank you for the invitation to the Inspector General of the Office of the Director of National Intelligence to testify on the topic of the use of contractors 

in the Intelligence Community. I’m honored to represent Roslyn 

Mazer, the ODNI Inspector General, and serve as her designee at 

today’s proceedings. As you know, the ODNI Inspector General recently completed an inspection that evaluated the ODNI’s use of 

core contractors. The findings and recommendations from this report, which have been presented to the Subcommittee as the statement for the record, will be the basis for my testimony here today. 

To begin, I will respond to the four items that you asked our testimony to address. 

First, the findings and recommendations of our report. We developed three findings and several recommendations. The findings 

are: First, the ODNI has not fully performed the strategic and 

human capital planning activities required of all Federal agencies. 

As a result, there is not a road map upon which to plan for the 

effective application and management of core contractor workforce. 

The second finding: Since its standup, the ODNI has leveraged 

CIA to provide contracting services through an interagency acquisition agreement. However, the ODNI has not implemented internal 

controls necessary to ensure the acquisition process is meeting its 

needs. 

The third finding is that the ODNI is not managing contracting 

officer’s technical representatives (COTRs), as an essential element 

or component of the ODNI’s acquisition workforce. 

Each finding resulted in several recommendations that, in summary, are designed to: One, ensure the ODNI complies with the 

Government Performance Results Act (GPRA), including development of a strategic plan and strategic human capital plan; ensure 

that internal controls are in place to improve the oversight of core 

contracts; and, further, empower the contracting officer technical 

representatives and improve the ODNI’s management of them. 

The DNI has endorsed our recommendations fully, which are intended to mitigate the findings in our report. 

The Subcommittee also requested that we discuss whether the 

ODNI is properly managing and overseeing its core contractor 

workforce, to include whether the contractors are performing core 

governmental functions, and whether the ODNI is implementing a 

strategy to balance the Federal employee-to-contractor mix. 

H605-41331-79W7 with DISTILLER

31 

In both of these areas, we found the ODNI was not performing 

optimally and we made recommendations designed to remedy those 

shortfalls. 

Finally, the fourth item the Subcommittee asked us to address 

dealt with the ODNI Inspector General suggestions on issues involving the use of contractors that should be investigated across 

the Intelligence Community. 

During the course of our evaluation, we did review a variety of 

other assessments that suggest issues identified in our report are 

not unique to the ODNI. However, as our office has not specifically 

assessed or evaluated other Intelligence Community elements, we 

are not in a position at this time to recommend an investigation 

of systemic issues. Our evaluation was focused solely on assessing 

the risks associated with the administration and management of 

core contractors in the ODNI. 

This concludes my opening remarks, Mr. Chairman. I look forward to answering any questions the Subcommittee may have. 

Senator AKAKA. Thank you very much, Mr. Haugland. 

Ms. Roberts, will you please proceed with your testimony. 

TESTIMONY OF PAULA J. ROBERTS, ASSOCIATE DIRECTOR OF 

NATIONAL INTELLIGENCE FOR HUMAN CAPITAL AND INTELLIGENCE COMMUNITY CHIEF HUMAN CAPITAL OFFICER, OFFICE OF THE DIRECTOR OF NATIONAL INTELLIGENCE, ACCOMPANIED BY ALEX MANGANARIS AND SHARON FLOWERS 

Ms. ROBERTS. Good morning, Mr. Chairman. It is my pleasure to 

update you on the Director of National Intelligence’s ongoing efforts to oversee our core contractor personnel by assessing their 

functions, quantities, and costs. It is worth noting, as part of our 

overall efficiencies work that we are doing across the IC, that the 

Director of National Intelligence has directed the agencies to reduce their reliance on core contractor personnel. 

Before I address our efforts, let me give you some overall context. 

The IC workforce is composed of three distinct elements: Civilian 

personnel, military personnel, and core contractor personnel. Together they comprise the IC’s ‘‘total force.’’ Together they address 

intelligence mission needs and requirements. For the Intelligence 

Community to perform strategic workforce planning of all three 

elements, all of the intelligence needs have to be considered. 

[REDACTED] 

I would like to specifically address core contractor personnel, who 

should be distinguished from other contractors. Commercial contractors provide services, such as landscaping or IT support. They 

are not core contractors. Commodity contractors are not core either—they deliver commodity services, such as building a satellite. 

Likewise, we may contract for a commodity service such as a specific study. 

Core contractor personnel provide direct support to civilian and 

military personnel. In 2005, we had 16 intelligence agencies, with 

no single standard to count or distinguish contractors. When Congress established the ODNI, we were able for the first time to bring 

together the Intelligence Community and establish core definitions 

and standards for contractors. 

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32 

In 2006, the ODNI began to conduct an annual inventory of 

those core contractor personnel that directly support IC missions. 

In 2009, the Director of National Intelligence approved and signed 

Intelligence Community Directive (ICD) 612 to guide the use of 

core contractor personnel. First, it affirms the prohibition on the 

use of core contractor personnel to perform inherently governmental activities. Second, it generally describes the circumstances 

in which core contractor personnel may be employed to support IC 

missions and functions. Third, it makes the inventory an annual 

requirement; and fourth, it provides a standard definition of core 

contractor personnel. 

In the ICD, we give examples of when to use core contractor personnel for immediate surges, discreet, non-reoccurring tasks, 

unique expertise, specified services, cases where we may have insufficient staffing, the transfer of institutional knowledge and cases 

where it is more efficient or effective. 

[REDACTED] 

You asked me to address our views on the Office of Federal Procurement Policy’s recent policy letter, ‘‘Performance of Inherently 

Governmental and Critical Functions.’’ The policy letter provides a 

framework and reinforces much of the work that we have done, and 

we hope to continue making progress with this additional policy. 

Implementation of this policy will be shared responsibility across 

the Intelligence Community’s acquisition, human capital, and financial management communities. We believe many of our core 

contractor personnel practices capture the essence of the policy letter, and we are reviewing the details carefully to consider where 

we may need to make additional refinements to our policies to best 

implement this policy across the Intelligence Community. 

In conclusion, Mr. Chairman, I believe we are striking the proper 

balance with the use of core contractor personnel in the Intelligence Community. Contractor personnel will remain an integral 

part of the IC’s total force. At the same time we will continue to 

strengthen our oversight mechanisms and management controls to 

ensure that core contractor personnel are used appropriately, and 

we will continue our efforts to reduce our reliance on core contractor personnel as appropriate. 

I stand ready to answer your questions, sir. 

Senator AKAKA. Thank you very much for your testimony, Ms. 

Roberts. 

Ms. Roberts, given the ODNI’s charge to oversee the IC and provide policy and budget guidance, what is the ODNI’s strategic vision over the next 5 to 10 years for its use of contractors. 

Ms. ROBERTS. We see core contractors as a part of the total force, 

and it is imperative that we conduct workforce planning looking 

across several years to determine the best use of contractors as 

they complement the civilian workforce. 

We will continue our efforts to do outreach and recruitment to 

try to obtain the skilled workforce we need, and the core contractor 

personnel will be complementary to what we’re able to do with the 

civilian workforce. 

Senator AKAKA. As a follow-up, are ODNI’s current statutory authorities sufficient to implement its strategic vision? 

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33 

Ms. ROBERTS. We believe that we have many of the authorities 

that we need to facilitate strategic workforce planning. We do have 

a legislative request in to get more flexibility in the workforce ceiling, so that we may have the ability to hire the workforce that we 

need and to convert core contractor positions to government civilian 

positions as necessary. 

Senator AKAKA. Ms. Roberts, as you know, OFPP recently released guidance on inherently governmental functions. What process do you use or intend to use to aid or guide IC agencies in determining whether specific functions must be performed by Federal 

employees? 

Ms. ROBERTS. As part of our workforce planning work, we look 

specifically at the skills we need and what’s involved in terms of 

competencies to do the work that we need to have done in the intelligence mission. We are working carefully with the acquisition and 

procurement folks on what we can expect to have contractors do to 

supplement the work that we do. 

We make sure we work together to recruit government employees 

who meet our needs, and we work very carefully with the acquisition and procurement folks. 

Senator AKAKA. Ms. Roberts, in your testimony you discuss how 

contract personnel were used to provide key language skills following the September 11, 2001 attacks. As you know, I believe foreign language skills are critical to our national security. Could you 

elaborate on the steps your office is taking to improve the language 

skills within the IC’s government workforce and reduce reliance on 

contractors for critical language skills? 

Ms. ROBERTS. Yes. We have a strategic plan that we have put together to look specifically at language requirements. When we 

think about language skills, we think about two things: Linguists 

and foreign language skills that analysts need to have. So we work 

with the IC elements on an annual basis to understand what requirements they have, and we are currently investing in training 

and education to improve the proficiency of the people who have 

foreign language skills. 

We likewise have invested quite a bit in outreach to universities 

to attract young people with foreign language skills. In fact, we 

work very closely with the Department of Defense on a scholarship 

program that works directly with universities and colleges. In addition, we have some outreach to K through 12 to get the word out 

on the importance of studying foreign languages. We have a very 

deliberate program that is focused on outreach, education and 

training, and developing skills for the IC workforce in both linguists and in the cases where analysts need to have foreign language skills. 

Senator AKAKA. Mr. Haugland, in its report on the administration and management of ODNI core contractors, the Inspector General recommends that ODNI issue instructions for enhanced control 

when contractors closely support inherently governmental functions. Would you elaborate on the concerns underlying this recommendation and what these instructions should contain? 

Mr. HAUGLAND. Yes, Mr. Chairman. Through our evaluation, we 

did not identify any examples, specific examples where contractors 

were doing inherently governmental functions. However, through 

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34 

the overall evaluation the control processes that were used to clarify distinctions, the training, those aspects or areas that required 

from our perspective improvement. So in our recommendations we 

offer specific steps as relates to training, relates to enhancing internal controls, and also relating to the reward system for the COTRs. 

If I could turn to George Bremer, who actually conducted the 

evaluation, he may assist me in providing some clarity on the specifics, other specifics. 

Mr. BREMER. Yes, Senator. As it specifically relates to those 

closely supporting inherently governmental functions, and the FAR 

requires that when there are contractors performing functions that 

closely support inherently governmental functions there ought to be 

enhanced management controls to ensure the contractors aren’t influencing the government in making policy decisions. 

We don’t specify what the enhanced controls are. We just found 

that we couldn’t find any examples of advanced controls or enhanced controls, with the exception of some people thought that 

award fee criteria might fall into that category. We disagreed. So 

we recommended that there be controls to make sure that government decisions weren’t being swayed by contractors where those 

contractors were the experts in that field. 

Senator AKAKA. Would you please identify yourself. 

Mr. BREMER. I was the project lead for the contractor evaluation. 

I work for Mr. Haugland. 

Senator AKAKA. Your name, sir? 

Mr. BREMER. George Bremer, sir. 

Senator AKAKA. I want to ask, Ms. Roberts, if you have any further comments on that question? 

Ms. ROBERTS. No, thank you. 

Senator AKAKA. Mr. Haugland, your report concludes that ODNI 

has not fully performed the strategic capital planning areas required of all the Federal agencies. How does this finding affect 

ODNI’s ability to manage its core contractors, and what are the 

most important elements that ODNI must include in a strategic 

human capital plan to correct this finding? 

Mr. HAUGLAND. Well, Mr. Chairman, in terms of affecting the 

management of the ODNI’s core contractors, the strategic planning 

basically would spell out the core functions, core mission areas, and 

core criteria. The strategic human capital planning would then expound on that to offer criteria related to the balance between the 

core contractors and the number of government staff. 

So without that, as we stated in the report, it’s not really a road 

map to define what the balance should be or what that allocation 

is and therefore strategic planning for the number of government 

employees or the number of contractors may not be as sufficient or 

optimized as possible in terms of affecting the ability to oversee 

and manage the core contractors. 

There are a number of elements we identify within our report 

that are ongoing. There’s continued work and training with the 

COTRs, there’s a new contracting database and training efforts 

under way to further expand the knowledge and understanding. So 

within the ODNI there are measures that are being taken and we 

don’t want to leave you with the understanding that there were no 

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35 

controls in place, there was no training in place, of the ODNI in 

management of the core contractors. 

However, through our evaluation, as Mr. Bremer indicated, because we did not find any specific written procedures, written internal controls, that was one of our findings. 

Senator AKAKA. Thank you. 

Ms. Roberts, would you make any further comments on this 

question? 

Ms. ROBERTS. I don’t have any comments on that question sir. 

[REDACTED] 

I’m going to invite Alex Manganaris to help address some of the 

experience we’ve had looking at the core contract inventory over 

the last 3 years. But as he comes forward to talk about that, I 

would mention once again the effort that we have in place within 

the IC right now to look at efficiencies based on constraints we 

have with tight budgets. The DNI has specifically been working 

with all of the agencies and asked us to look very carefully at efficiencies, and so each of the IC elements are encouraged to look at 

ways to reduce contractors. 

It’s important for us to do the workforce planning and to ensure 

that everyone is following the proper procedures and policies that 

we’ve laid out. On a recurring basis, we bring together experts from 

across the IC elements to have discussions about these core contractors to ensure that everyone understands how to interpret the 

policies. 

But let me ask Mr. Manganaris to address some of the experience we’ve had with the inventory. 

Senator AKAKA. Would you please identify yourself. 

Mr. MANGANARIS. Alex Manganaris. Good morning, Senator 

Akaka. 

[REDACTED] 

Over the years, though, the general direction has been a declining reliance on contractors. Ms. Roberts talked about the fact that 

the workforce planning process is ongoing and that there are times, 

there are exceptions, when an event happens, an emergency, where 

we have to increase the number of contractors. 

Senator AKAKA. Thank you. 

[REDACTED] 

Ms. ROBERTS. Well, each of the Intelligence Community agencies 

look independently at their workforce and what they are contracting for. We ask them to look each year to see what changes 

they need to make in terms of that balance. Now, one of the things 

that’s very important that I would like to clarify is, when it’s time 

for us to look at potentially bringing a function ‘‘in house,’’ that we 

go through a competitive process in hiring government employees. 

So any contractor, just like anyone else, would have to go through 

the competitive process to become a government employee, it’s not 

a direct conversion. 

But we do have some strategic goals for making conversions, and 

in those cases a lot of times the contractors are the most competitive. Each IC element is a little different. They make the decisions 

on what they can afford to bring in house and we work with them 

to understand what their plans are on an annual basis. 

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36 

The number that we have in the statement reflects what we were 

able to gather out of the recent meetings we’ve had with IC elements. 

Senator AKAKA. Thank you. 

Ms. Roberts, you mentioned personnel ceilings have led to greater reliance on contractors rather than government workers to perform important IC functions. As you know, the House recently 

passed the Intelligence Authorization Act for Fiscal Year 2012, 

which would give ODNI relief from this personnel ceiling. Will you 

further explain how personnel ceilings have contributed to the IC’s 

reliance on contractors and discuss whether the House passed provision would adequately address the problem? 

Ms. ROBERTS. We believe the House passed Intelligence Authorization Act will greatly help give us the flexibility that we feel we 

need in order to go out and hire and recruit key personnel. We 

have certainly looked at the strategic skills that we need and it 

often takes a while to go out and hire, bring in an employee, and 

give them the training and development they need in order to be 

fully functional. 

On an annual basis we do this workforce planning and we understand what our needs are. When we look at cases where we want 

to, for example, bring in some of the functions that were contracted 

out, in order for us to do this conversion work, we need the flexibility to be able to exceed the ceiling so that we can bring them 

in. 

Another example of where the ceiling sometimes will give us a 

constraint is when we have to surge to quickly to respond to something that is happening in the world, and we may need to go out 

and hire some additional key personnel. Sometimes if we’re constrained with the ceilings it hinders our ability to go out and get 

the talent that we need. 

I would just see if anyone has anything else to add. 

Mr. MANGANARIS. Senator Akaka, I would like to mention the 

challenge that NGA had in trying to reduce its number of contractors. During the fiscal year 2011 budget process, NGA requested an 

increase in its civilian workforce which included contractor conversions, and they were denied that request because there’s a lot of 

visibility on the civilian numbers and the contractor numbers, and 

the budget requests are much more general. 

[REDACTED] 

Senator AKAKA. Ms. Roberts, do you have an estimate of what 

percent of current IC contracting is the result of personnel ceilings? 

Ms. ROBERTS. Mr. Manganaris or Ms. Flowers, do either of you 

know the percentage? I don’t know myself. 

Senator AKAKA. Mr. Haugland, the Inspector General’s report 

finds that ODNI is not managing its acquisition personnel, in particular contracting officer’s technical representatives, as an essential component of its workforce. How can ODNI elevate and empower acquisition personnel within ODNI? 

Mr. HAUGLAND. Well, Mr. Chairman, thank you for the question. 

I think our recommendations go right to the heart of your question 

in terms of, one, is ensuring that the contracting officer technical 

representative roles and functions are included in the performance 

report; and two is that there’s an incentive and reward system in 

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37 

place to facilitate the recognition of COTRs for their job, their important role within their—three, to make sure that there is enhanced training to ensure the COTRs fully understand their roles; 

and four, from a management oversight perspective we remain 

there is an inherently—that the government managers who oversee 

the COTRs understand their roles, understand their functions, and 

then provide proper oversight and recognition that it is indeed a 

core function. 

Those different elements that are within the recommendations of 

our report—and if I’ve missed anything I’ll turn to Mr. Bremer— 

I think are key to ensuring that the COTR function is not only enhanced, but recognized, but then used to help drive overall accountability within management of the contractor and acquisition workforce. 

Senator AKAKA. Ms. Roberts, what will ODNI do to make sure 

it has a robust acquisition workforce, including adequately trained 

and empowered employees? 

Ms. ROBERTS. Just recently my office worked very closely with 

the ADNI for Acquisition and we have teamed to put together a 

strategic workforce plan for the acquisition workforce. The strategic 

plan addresses the core skills that we feel we need, the types of 

training that the workforce requires, and the specific milestones for 

implementation of the plan. 

So we have already spent quite a bit of time working with acquisition on these, specifically what skills do the contracting representatives need to have, the procurement officials, the different 

types of people that all come together to manage the contract workforce. 

Ms. Flowers, do you want to add anything? 

Ms. FLOWERS. Sharon Flowers, DNI senior procurement executive. 

I would just add that right now, as the DNI actually evolves into 

a robust organization that actually has an acquisition function—in 

the past, we’ve actually depended on an agreement with the CIA 

to do our contracting for us. So with that, the highlights of the IG 

inspection, with the facts that we have become a very robust member of the community—we’re actually looking at our processes 

again to figure out the best way and determine the most economical and effective and efficient way to do contracting internal to the 

DNI. 

We actually have very robust external oversight of the rest of the 

community, but the internal function of DNI is the part that we 

want to make more robust. 

Ms. ROBERTS. Perhaps I could clarify the reference I made just 

a moment ago on strategic workforce planning for the acquisition 

corps: It was a community-level document, and internal to the 

ODNI, as per the comments we heard from the IG, the ODNI staff 

itself has some work to do. 

Senator AKAKA. Thank you. 

Mr. Haugland, your report raises concerns about ODNI’s reliance 

on CIA to carry out much of its contracting functions. I understand 

that CIA manages the contracts for core contract employees, who 

make up a large percentage of ODNI’s workforce. Would you elaboH605-41331-79W7 with DISTILLER

38 

rate on the line of concerns and corrective actions that should be 

implemented? 

[REDACTED] 

Mr. HAUGLAND. In terms of how we’re looking to strengthen that, 

that goes to our second set of recommendations, on the internal 

controls, is the overall relationship with CIA was done in concert 

with or in compliance with the Economy Act. So, given that, in 

terms of the overall benefit to the government, ensuring that, our 

recommendations asked the ODNI to put in specific controls and go 

to the performance of those contracts, the performance of the contracting, of the contractors themselves, and other internal controls 

related to the designation and delegation of responsibilities from 

the contracting officers to the COTRs. 

So there are several steps in there we’re taking a look at within 

our recommendations to ensure a better understanding of the performance of the output, of the outcome of the contractors despite 

the outsourcing to CIA for the functions. 

Senator AKAKA. Thank you. 

[REDACTED] 

Ms. ROBERTS. I think that the ODNI staff is maturing. It’s only 

been in place for a few years, and I think at the standup of the 

ODNI it was important to go out and get the talent that it needed 

to oversee the IC, and in some cases, in many cases, core contractor 

personnel were brought in to help supplement the staff to do this 

job. 

As we’re getting more experienced now with the functions and 

the work that we need to do, I would expect to see the ODNI migrate more towards civilian personnel to perform many its duties 

and to reduce the number of core contractors. 

Senator AKAKA. Mr. Haugland and Ms. Roberts, I want to thank 

you very much for taking the time to testify today and thank you 

for your service to our country as well. As you know, the ODNI 

serves an essential role in integrating and overseeing the Intelligence Community. Our oversight is intended to help ODNI focus 

on finding an appropriate balance of contractors and Federal workers across the IC and investing in the Federal workforce where 

needed to accomplish that. I look forward to working with you on 

these issues. 

This hearing of three panels has helped us examine this issue so 

we can improve the system to be efficient and to continue to serve 

the country. 

This hearing record will be open for 2 weeks for any additional 

statements or questions from other Members of the Subcommittee. 

Again, I want to say thank you very much. This hearing is adjourned. 

[Whereupon, at 12:02 p.m., the hearing was adjourned.] 

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