Breaking the Code

eginning in November, hundreds of National Security Agency technology specialists will walk out the doors of the super-secret Puzzle Palace in Fort Meade, Md., ending their careers as federal workers. But nearly all will return the next day to do the same jobs they did before, as contractors under the largest outsourcing ever conducted by an intelligence agency. The agency announced in July that a team of contractors, led by Computer Sciences Corp. of El Segundo, Calif., and Logicon, a Northrop Grumman subsidiary in Herndon, Va., would take over the management and support of the agency's nonmission-critical computers, networks and telephone systems. One of the largest IT outsourcing pacts in government-it's worth at least $2 billion and as much as $5 billion-NSA's Project Groundbreaker contract reflects a growing recognition by agencies that private companies can provide better IT support at lower prices than federal workers can. Davis, who took over NSA's recruiting and hiring operations last year, says the retooling already is paying dividends. The agency was able to hire only 60 percent of the more than 600 workers it sought in fiscal 2000, but for fiscal 2001, the agency will exceed its goal of hiring 600 new employees, Davis says.
Gen. Michael Hayden is leading the National Security Agency's effort to unscramble a management and technology puzzle born of decades of secrecy.b

Under the deal, CSC must hire the 750 NSA employees who provide IT support for the agency and must offer them comparable salaries and benefits to perform similar tasks under the new contract. CSC also will be responsible for regular upgrades of the agency's support systems. "Outsourcing allows us to narrow the front and do only the things we can do and allows [contractors] to do things they are quite capable of doing on our behalf," says Air Force Lt. Gen. Michael Hayden, NSA's director.

Traditionally, the signals intelligence organization has used in-house personnel for all its work-from designing computer systems to sweeping the floors. But Hayden says times have changed and the agency no longer can afford to have valuable technical employees maintaining e-mail systems and staffing help desks. Nor, he says, can the agency keep pace with the latest information technology. Both responsibilities will now fall to contractors. The agency's remaining technical personnel will be focused on NSA's core mission, breaking and making codes.

Project Groundbreaker is one of several management reforms sweeping the agency as Hayden, who has headed NSA since 1999, leads a team of outsiders and agency veterans who are bringing the world's premier electronic spying operation into the 21st century. After a decade of downsizing and deep budget cuts, Hayden is seeking wholesale changes in how the agency is managed, how it hires employees and where it spends its money. Hayden says nobody tells him, "Boy, NSA is just failing." But he says there is great concern that NSA will not be able to continue to collect the same high-quality electronic intelligence that it has in the past. The rapid proliferation of communication systems and the increase in global encryption are making collecting and deciphering signals intelligence more difficult.

"Essentially, the problem for this agency is we downsized a third [over the past 12 years] while the larger world has undergone the most significant revolution in human communications since Gutenberg," Hayden says. "We have got to get the technology of the global telecommunications revolution inside this agency." To do that, he says, the agency must change its culture.

Code of Silence

Founded in 1952, the National Security Agency is the military's code-breaking and code-making agency. NSA works closely with the Central Intelligence Agency and is a key member of the federal intelligence community. The agency is responsible for the security of all government computer systems. But it is best known for operating listening posts throughout the world and collecting electronic imagery from satellites to generate intelligence on foreign targets. For example, the agency reportedly has tapped into telephone calls terrorist Osama Bin Laden made to his mother. NSA analysts also were on the damaged Navy spy plane forced to land in China earlier this year. Information collected by NSA has been a staple of the President's daily intelligence briefing since Harry Truman was in the White House.

For many of its five decades, NSA has been shrouded in secrecy. The size of its budget and the number of employees working at headquarters and operating listening posts around the world are classified. James Bamford, the author of two well-regarded books on NSA, including the recent Body of Secrets (Doubleday, 2001), pegs the agency's annual operating budget at about $4 billion. The agency's workforce numbers about 38,000 (20,000 civilians and 18,000 military workers)-larger than the FBI and CIA combined, Bamford says. Employees long have joked that NSA stands for "no such agency" or "never say anything."

"I wasn't even allowed to tell my parents where I worked," recalls Gail Phipps, who worked at the agency as a mathematician in the 1960s and now is an executive vice president at CACI, an NSA subcontractor in Arlington, Va., that will support Project Groundbreaker. In the 1970s, NSA got its first taste of public scrutiny when Senate hearings revealed that the agency was spying on Americans. Safeguards were established to severely limit domestic eavesdropping. But by the 1980s, Ronald Reagan, a defense hawk, was in the White House and money poured into the agency to build new, faster computers and hire thousands of computer scientists, mathematicians, linguists and other technical personnel to combat the Soviet threat. Matthew Aid, a former Defense intelligence analyst working on a history of NSA, refers to the decade at the agency as the "Go-Go 1980s" and says there was "very little external or internal oversight of agency operations." John Pike, director of, an intelligence think tank in Alexandria, Va., says the agency learned to avoid close scrutiny by giving Congress and the White House the information they wanted. "Fifteen years ago, if NSA could reassure the President that the Soviets were not going to attack, they could knock off for the afternoon," says Pike.

When the Berlin Wall fell in 1989, budget and personnel levels at NSA began to drop as well. Like other Defense agencies, NSA was hit hard by hiring freezes and budget cuts throughout the 1990s. More significantly, the agency no longer faced a Soviet enemy, once the focus of more than half its collection and analytic efforts. Instead, NSA increasingly was called upon to gather information from a variety of hot spots around the globe. For example, the agency provided key information to take out Iraqi command and control centers early in the Gulf War and offered targeting intelligence for the air strikes in Kosovo in 1999.

Despite the cutbacks and new missions, most intelligence analysts say, NSA still is able to collect nearly all the information requested by Defense agencies and still ranks among the most valued sources of military intelligence. But analysts warn that NSA has moved too slowly in upgrading its costly and inefficient management practices and that years of budget cuts have eroded the agency's once-lopsided technological edge over U.S. adversaries.

'100 Days of Change'

Hayden never worked at NSA before becoming its chief, so there were more than a few surprises in store for him when he took the helm of the multibillion-dollar organization. Among the biggest shocks was learning just how few of NSA's thousands of employees reported directly to him. "I say this only half jokingly: Nobody worked for me, other than [in] this little office out here," says Hayden, gesturing toward a small room off his office reserved for his administrative assistant.

When Hayden took over, the agency was split into five autonomous divisions. Three management committees attempted to run the agency. Scathing internal and external management reviews, ordered by Hayden when he became director, described an agency that lacked central management and a clear vision. "NSA has been in a leadership crisis for the better part of a decade," Hayden's internal review found. The paucity of leadership hurt the agency's credibility with its customers and prevented it from moving into the Information Age, the report said.

Almost immediately after reviewing the reports, Hayden called for "100 Days of Change" and scrapped the agency's management structure. In less than 50 days, Hayden had installed a corporate board of directors reporting directly to him. Instead of five operating organizations, NSA now is divided into two components based on its mission: signals intelligence operations and information assurance. The agency is managed by an eight-member team, which Hayden calls the "breakfast club" because it meets every morning in his office. Members include Hayden, the deputy director, the heads of NSA's two operating divisions, the chief of staff (who oversees support functions such as human resources), the general counsel, the chief financial officer and the acquisition executive.

Hayden says the old management structure was effective in carrying out day-to-day operations because it allowed divisions to operate independently and manage their own resources. But making changes was nearly impossible under the old structure because more than 70 managers had to sign off on them. Hayden says the new organization gives NSA speed and decisiveness, attributes that are critical now that technology systems can become obsolete in 18 months. "We culturally were disinclined to decide quickly or decisively," Hayden says. "No decision was ever final, all decisions could be revisited. Now, we decide more quickly and the decisions tend to be less revisited because, essentially, you are eroding the culture that says everybody gets a vote."

It's no accident that the breakfast club has four members who have been at NSA less than three years or that Hayden created two new positions, the chief financial officer and the acquisition executive. "We are bringing in more leadership from the outside," says Hayden, who stressed that outside managers are critical to reforming a bureaucracy that has long resisted change. Additionally, Hayden has sought to rejuvenate the agency's 600-member Senior Executive Service staff by encouraging 100 SES members to take early or normal retirement and hiring 28 new senior executives from outside NSA.

Acquisition Reform

Among the first outside executives Hayden brought in was Harry Gatanas, a retired Army general with decades of Defense contracting experience. Gatanas was appointed the agency's first acquisition executive last summer. Before him, the work of overseeing purchasing was spread across the agency's divisions. Gatanas remembers calling defense industry colleagues he has known for years to tell them about his new position. Among those Gatanas called was a senior executive at Boeing Space Systems in Seal Beach, Calif., who welcomed the news and then promptly asked him how he could win work at the billion-dollar intelligence agency. "This is Boeing, and the guy says 'How do I do business with NSA?' " says Gatanas, still a bit exasperated about the conversation and similar ones with other defense contractors, large and small. "If I hear that from a guy of his stature and then a women-owned business tells me the same thing, then you know you have gotten a broken acquisition process."

Not surprisingly, Gatanas has set about overhauling the agency acquisition process by linking users of equipment with the agency's buyers, expanding the agency's base of contractors and bringing in outsiders to adapt modern procurement practices to an agency still trapped in Cold War spending habits. "The disciplines of buying things to schedule, buying to cost, having adequate systems engineering and ensuring that you are buying only what you need were not practiced at this agency," says Gatanas. For example, in the past, a signals intelligence operator who needed an antenna would simply relay the request to an agency buyer. The buyer would conduct a brief market survey and then order the antenna from whichever of a handful of the agency's traditional contractors had the best price. Now, Gatanas says, the same intelligence operator must answer questions about whether NSA can afford the maintenance, engineering support and spare parts for the antenna before it's purchased. In turn, buyers must decide whether it's more cost effective to buy one antenna or many, as well as whether the contractor should provide maintenance and be required to make upgrades. Buyers also are being asked to look beyond the agency's very narrow supplier base.

Gatanas says NSA has worked with a nucleus of about 20 to 30 contractors who have won noncompetitive contracts at the agency for decades. About 40 percent of the agency's contracts were awarded without competition in fiscal 2000. Gatanas has ordered that reduced to no more than 20 percent in fiscal 2001. Relying on a narrow supplier base and sole sourcing prevents the agency from using its buying power, often leads to higher costs and keeps the agency from adopting industry's best business practices and technological innovations, he says.

Another acquisition reform priority at NSA is improving communications about bidding opportunities. In August, NSA opened an acquisition research center near its Fort Meade headquarters, where contractors with security clearances can use computers to view NSA requirements and requests for proposals. Eventually, the agency will create an online network so contractors can track new requirements and ongoing procurements in real time.

Gatanas says NSA is considering outsourcing facilities and infrastructure support operations. Other work could be studied as well. "Really, nothing is sacred. If it's not a core competency, then we'll look at the potential of outsourcing it," he adds.

Help Wanted

Not only is the agency opening its doors to new contractors, but also for the first time in nearly a decade, NSA is recruiting and hiring hundreds of workers annually. This move is a marked change from the 1990s when NSA did almost no hiring, while cutting its workforce by about 30 percent. As a result, NSA now has an aging workforce-average age 43-a third of which already is eligible for early or regular retirement.

"Our whole focus has been downsizing as opposed to refreshing the organization," says Harvey Davis, director of NSA recruiting and hiring. The failure to recruit has left NSA struggling to keep up with commercial technology. About three-quarters of the 600 employees the agency plans to hire this year will be technology workers, says Davis. "When you compare the budget that the agency has to move forward in technology to the trillions of dollars that are spent on the outside, it's a compelling imperative that you have to get people who have expertise from the outside into the agency to allow us to compete at all levels," he says.

The agency's clandestine operations had created a culture where employees often were hired out of college and then spent 35 years, often their entire careers, working at the Puzzle Palace.

Davis says NSA can't expect highly marketable IT workers to spend their careers at NSA, nor should it want them to. The agency must be more willing to allow workers to move back and forth between industry and government, perhaps splitting their careers between NSA and contractors, so the latest technology flows into the agency, he says.

Unfortunately, the agency is seeking new technical workers in one of the toughest job markets for IT workers in decades. Most newly minted IT graduates have a half dozen job offers before they leave college and veteran workers can command salaries well above the government average. Accordingly, Davis says, NSA has retooled its hiring and recruitment process.

Among the changes are:

  • Making conditional job offers to the most sought-after workers on the same day they are interviewed, pending security clearance. "The sooner we lock them up the better chance we have of getting them a job," Davis says.
  • Offering $10,000 signing bonuses to IT workers and adopting the federal government's special pay schedule for technical workers, which is more competitive with industry salaries.
  • Streamlining the security process for new applicants. By shortening background checks, increasing the number of people administering lie detector tests and improving scheduling, NSA has reduced from six to three months the time it takes to hire a new employee.
  • Improving customer service. NSA's human resource personnel regularly call and e-mail applicants to let them know where they are in the hiring process. "We want applicants to feel that they have someone they know by name leading them through the process and they are not just a name in a big bureaucracy," Davis says.
  • Holding job fairs. NSA hosted its first-ever job fair for technical personnel in February. More than 2,000 people attended, and NSA made about 250 job offers.

Technical Challenges

Hayden's management reforms have won high marks from military intelligence organizations and some extra funding from Congress. But most analysts say the reforms will be for naught if NSA cannot buy and master new technologies. "It's not clear that NSA will ever recover the margin of advantage it enjoyed over the last several decades," says Steven Aftergood, an intelligence policy analyst with the Federation of American Scientists in Washington. Fiber-optic cables and the growing use of encryption are likely to make NSA's job "vastly more difficult" in the future, he adds.

Former defense intelligence analyst Aid says NSA still does a good job of collecting information. In fact, the agency can collect the equivalent of the entire collection of the Library of Congress in three hours. But the agency has not spent enough money on the computers and personnel to turn that raw information into useful intelligence, Aid says. NSA will need to recruit and hire substantial numbers of technical workers and spend hundreds of millions of dollars on systems that sort information and make sense of it once it is collected if it is to survive in the Information Age, Aid adds.

Hayden concedes that NSA has not yet come to grips with the communications revolution, but he believes the agency is moving in the right direction. "If you are asking, 'Are we so far behind the curve that we can't get there?' The answer is no," he says. "People understand this is still a work in progress."