With annual revenues exceeding $5.7 billion Booz Allen Hamilton Holding Corporation is one of America’s largest government contractors. The company now finds itself in the middle of an emerging debate on the role that large corporations play in the U.S. national intelligence structure.
Booz Allen Hamilton (Booz Allen) contracts staff to U.S. government intelligence agencies such as the National Security Agency (NSA), the National Reconnaissance Office, and many unnamed others. At the end of March 2013, the company had around 24,500 employees.
Until recently, one of those Booz Allen employees was Edward Snowden, the NSA whistleblower that leaked the existence of the now infamous PRISM program. Mr. Snowden, before becoming a whistleblower, was an employee of Booz Allen and was contracted by the NSA as an embedded staff member.
Many in Congress are now being asked what kind of role, if any, should large corporations like Booz Allen have in America’s global intelligence apparatus.
Others are asking whether the U.S. government intelligence agencies are simply addicted to companies like Booz Allen.
The reality is there may be no practical way for the U.S. government to lose its addiction to companies like Booz Allen, even if it wanted to.
To understand the addiction, one must understand the dynamics between the structure of employment in the U.S. intelligence field and how the complex world of federal government contracting interacts with it.
According to Booz Allen company reports, slightly over 26% of their employees held what is known as Top Secret / Sensitive Compartmented Information(TS/SCI) clearances. The TS/SCI clearance is one of the highest levels that can be given to any government employee or government contractor.
The best way to think of a TS/SCI clearance is that it provides individuals with some of the highest levels of access to intelligence but without exposing them to the entire national intelligence framework.
To put it in raw numbers – slightly over 6,500 Booz Allen employees hold TS/SCI clearances. To illustrate the magnitude of that number, Booz Allen (as a private corporation) has more employees on staff that hold TS/SCI clearance than the U.S. Department of Education has in total employees.
The standards and background checks by which a TS/SCI clearance is granted are generally the same for both outside contractors and government employees. Many of the similarities stop there however – that is where the complexities of government contracting begin.
When U.S. government intelligence agencies have a need for people they can hire employees on their own payroll (known as insourcing) or they contract those employees from private-sector companies such as Booz Allen (outsourcing). While this process might seem pretty straightforward in the commercial sector, it’s not so simple in the government sector.
Firms like Booz Allen charge the government what is casually known in the world of U.S. government contracting as the ‘loaded-rate’. This rate is essentially the total price that the government must pay to Booze Allen to retain the services of its employees on either short or long-term contracts.
The loaded-rate includes costs such as fringe benefits, general costs, administrative support, and fees (profits) for the company- all of which are made transparent to the government. To be clear, the U.S. federal government knows upfront how much profit (fee) companies like Booz Allen make from the contracts it awards them.
These lucrative contracts allow these large corporations to often pay salaries to TS/SCI holders that exceed what the government can pay on its own federal employee wage schedules.
And so, the free market reigns and the most sought after staff in intelligence work (those with TS/SCI clearances) end up working at the organizations that pay the most – large government contractors like Booz Allen.
If you’re the NSA and need to hire TS/SCI people right away, you have no choice but to suckle the underbelly of government contractors that have essentially cornered this component of the U.S. human capital market.
Over the last several years, raging debates have been occurring on the issue insourcing vs. outsourcing. Companies such as Lockheed Martin, SAIC, Northrop Grumman and Booz Allen shareholders have a lot to lose if the government were to fully insource in the areas of national intelligence.
In fact, in March 2012, The Center for American Progress released a white-paper arguing for the insourcing of many federal government jobs.
The white-paper specifically focused on significant costs associated with outsourcing government jobs to large corporations such as: increased conflicts of interest, greater indirect costs than first estimated, and loss of in-house government expertise – particularly in intelligence and security areas.
The lasting impact of Mr. Snowden’s NSA leaks might not just be illuminating the existence of programs like PRISM, but shining light on the structural relationship between government and the large corporations that work for it.
Over the coming months, senior leadership in The White House and U.S. Congress will almost certainly discuss whether this addiction should be overcome, and if so, what the treatment plan might be.
This article originally appeared on Forbes.com