Edward Snowden's NSA leak prompts questions over US reliance on contractors

Washington: The US government may have to reconsider how much it relies on outside defense contractors who are given top security clearances after an NSA contractor exposed top-secret phone and internet surveillance programs.

Edward Snowden, a 29-year-old systems technician at Booz Allen Hamilton Holding Corp, admitted on Sunday that he divulged details of the National Security Agency's programs to The Guardian and Washington Post.

Booz shares fell 2.6 percent on Monday, and peers such as SAIC and General Dynamics fell as much as 1.7 percent.

"We do need to take another, closer look at how we control information and how good we are at identifying what people are doing with that information," said Stewart Baker, former general counsel at the NSA and former assistant secretary for policy at the Department of Homeland Security.

Baker said Snowden's leaks show the need for the government to tighten up what can be seen by contractors, as well as government employees.

"Are we challenging him, are we auditing him? Are we taking measures to be sure he doesn't have wide-ranging access to stuff that is not relevant to him?" Baker said of a theoretical contractor with wide-ranging access.

Companies like Booz became a cornerstone of the US government's national security efforts after the September 11 attacks. With a massive ramp-up in security operations came the need for organizations that could move quickly to implement new rules, regulations and screening protocols.

But that did not always go smoothly. A notorious example is the company formerly known as Blackwater, which agreed last summer to pay fines for trying to operate in Sudan despite sanctions. The company had previously been a source of strained U.S.-Iraqi relations over shootings there.

The US government spends more than 300 billion dollars a year on services that are contracted out, according to Scott Amey, general counsel at the Project on Government Oversight, an independent watchdog that investigates corruption and misconduct in government.

"The government workforce has pretty much stayed the same over the last 30 to 40 years but we've supplemented that with a contractor workforce that has grown dramatically," he said.

More than 4.9 million people had government security clearances as of October 1, 2012, including about 1.4 million with "top secret" clearance, according to the Office of the Director of National Intelligence. Nearly 800,000 government employees had "top secret" clearances, versus 480,000 contractors; the remaining "top secret" holders were not broken down.

It is too early to say whether Snowden's disclosures will create momentum on Capitol Hill to review the use of contractors and security clearance policies.

"Whether someone is a contractor does not make them more likely to leak classified information," Saxby Chambliss, the top Republican on the Senate Intelligence Committee said in a statement. "There are very good contractors in the intelligence community right now who serve their country honorably."

As of March 31, Booz employed 24,500 people, of whom 76 percent held security clearances and more than a quarter held top security clearances. According to its last quarterly report, 99 percent of Booz's revenue comes from contracts with US government agencies or other federal contractors.

One senior insurance industry executive said an incident like this could affect a security contractor's future insurability, particularly given the weight insurers put on a company's reputation.

"In the brand and reputation market now, for future loss of revenue, there's now an industry that evaluates and ranks the reputations of entities," said Kevin Kalinich, a national managing director at Aon Risk Solutions.

"If you have a long-term high ranking, the recovery of your revenue is astronomically higher than for companies that have a poor brand and reputation ranking."