Fighting For Intelligence funds

The veil of secrecy is lifting from the intelligence community's budgets, helping analysts track who gets what.

louds of secrecy and obscure accounting practices have long made it difficult for outsiders to track the flow of dollars through the national intelligence programs. Total spending levels, programs, overall priorities and even the location of the CIA's technology office remain secret.

But even the CIA can no longer ignore the fundamental changes that have occurred since the Cold War's end. As a result, information has dribbled out as contractors fight for diminishing funds and the government relaxes Cold War security rules. So it is possible to estimate, if only roughly, the total intelligence spending -- about $29 billion -- and how it flows to technology, operations and personnel, as well as construction.

One thing seems clear: The greater Washington area shares the vast bulk of intelligence spending with California. There, Lockheed Martin Corp., Hughes Aircraft Co., and other firms build ultra-secret spy satellites and their various components -- solar panels, computers, radars and the like.

Washington, on the other hand, is where top policymakers in the White House and the Pentagon consume intelligence information and decide agency budgets. As a result, the intelligence agencies base themselves in Washington, dragging behind them a supporting cast of companies that build satellites, crunch data, review intelligence estimates and build information-distribution networks -- all capabilities that have applications in numerous civilian and private-sector applications.

The local lineup of intelligence installations is impressive. The $3.1 billion CIA is based in Langley, Va., the $3.5 billion National Security Agency is based in Fort Meade, Md., and the $625 million Defense Intelligence Agency is based at Bolling Air Force Base just south of Washington. The $135 million Central Imagery Organization calls Vienna, Va., its home, the National Photographic Interpretation Center is based in Washington, the Navy's intelligence center is in Suitland, Md., and the Army has an intelligence center in Fort Belvoir, Va.

Washington's latest success is the arrival of the $6.8 billion National Reconnaissance Office. Its various elements -- mostly based in California -- will soon move into a new complex off the Dulles Toll Road. The arrival of the agency and its teams of spy-satellite developers will benefit Fairfax County, says John Pike, who monitors intelligence spending for the Washington-based office of the Federation of American Scientists. NRO will draw contractors involved in the design and construction of spy satellites.

If nothing else, Fairfax County is gaining from the NRO's construction of its swank new $400 million headquarters building, exposed in a blaze of congressional publicity last year.

But that's not all. "Fairfax County is the county that the intelligence community built," said Pike. "For every dollar being spent on a [spy-]satellite in California, there's a dollar being spent on the data-management system," much of which is based in the Washington area, he said.

Still, local intelligence spending -- likely to be a few hundred million dollars every year -- is peanuts compared to the federal government's expenditure of $17.9 billion on various technology contracts in the area during 1994, says Steve Fuller, a professor at George Mason University, Fairfax, Va.

Post-Cold War cuts

But there is no doubt that intelligence budgets are headed south. The end of the Cold War has reduced intelligence spending by about 20 percent, said Pike. This reduction has taken technology spending by the NRO and the NSA down to $8.1 billion, said Pike.

Although the agencies have adjusted their research priorities well to cope with the budget squeeze, the inevitable result will be the loss of some intelligence systems that would have been deployed after 2000, said Richard Haver, who served as executive director of the Intelligence Community Affairs office until March. Haver is now leading the investigation of the damage wrought by Aldrich Ames, a CIA employee who spied for the Russian KGB intelligence agency.

Some of the agencies, such as the NSA, have also been forced to cut their technology spending because they can't reduce their Cold War staffing levels fast enough. Still, this wave of cuts has been less steep than the post-Vietnam War cuts, when spending fell by 40 percent, Pike said.

The NSA's R&D priorities were indicated by NSA director Adm. John McConnell, who said the agency has less difficulty eavesdropping on signals than filtering out the most interesting data from the deluge of communications. For example, new communications technology being developed by AT&T could fill the Library of Congress in only three hours, McConnell said.

Among other things, these trends have sparked a flurry of mergers and acquisitions, as well as bitter competition for the remaining intelligence contracts. For example, TRW fought and lost a legal battle for more than a year against the then-unmerged pair of Lockheed Corp. and Martin Marietta for a new generation of wide-area surveillance satellite that combines electronic-intercept and infrared sensor technology.

Reductions in defense spending may soon be matched by reorganization of the intelligence hierarchy. John Deutch, the new head of the CIA, wants to create a new National Imagery Agency that would combine the CIO, the NPIC and the Defense Mapping Agency in Chantilly, Va., to better study and share intelligence collected by the NRO's spy satellites.

There's no word on the fate of this proposal, or of another Deutch proposal that would give him more power to redirect the flow of annual intelligence funds to the NSA, NRO and CIA. At the moment, Deutch "has influence, but no power," over the distribution of intelligence funds, which are authorized and appropriated by Congress, said Pike.

Where the money goes

Which companies get this intelligence money? Bethesda, Md.-based Lockheed Martin gets the lion's share, says Pike. Not only does it build several types of spy satellites, it launches all of them on its various rockets, including the powerful Titan IV rocket, he said.

After Lockheed Martin comes a second tier of companies, such as Hughes; The Boeing Co., Seattle, Wash.; TRW Inc. in Cleveland, Ohio; and E-Systems Inc. in Dallas. Raytheon Co., Lexington, Mass., will become a leading player with its recently announced acquisition of E-Systems.

Another tier of intelligence firms supply components and support services. These include Litton Industries Inc.'s Itek division, which builds space telescopes in Lexington, Mass., Ball Corp. in Muncie, Ind., as well as the idea factories -- PRC Inc., BDM International Inc. in McLean, Va., and SAIC. BTG Inc., Vienna, Va., and BBN, Cambridge, Mass., have been suppliers of computer networking and security-related services.

And then there are the computer suppliers, such as the federal unit of Sun Microsystems Inc. whose workstations power the National Photographic Interpretation Center, the National Security Agency and numerous other intelligence centers.

And many of these companies, which got their start in the intelligence business, have established units locally that in some cases have outgrown headquarters.

For example, SAIC employs more people in the Washington area than in San Diego, while E-Systems' Melpar Division in Falls Church, Va., did roughly $400 million in business in 1994.


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