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Director of National Intelligence James Clapper testifies on Capitol Hill March 12 before the Senate Intelligence Committee hearing on worldwide threats.  (Susan Walsh/AP)

The Obama administration promised four years ago that it would significantly shrink the number of private contractors working for U.S. intelligence agencies. But a key member of Congress said this week she remains unconvinced the administration has done enough to shift critical intelligence-related jobs back to government employees.

The most recent public data from the intelligence community depict a one-year decline of 1 percent in the number of contractors holding security clearances, leaving private-sector workers still holding about 22 percent of all those clearances.

In the wake of new controversy about such work, stemming from the recent leak of secrets about U.S. surveillance tactics by a federal contract employee in Hawaii, officials this week cited the decline as a sign of the administration’s commitment to reduce the outsourcing of intelligence work, reversing a hasty expansion of the contractor population after the Sept. 11, 2001 terrorist attacks.

But members of the Senate Intelligence Committee say that problems with outsourcing intelligence functions to private contractors have not been solved. The panel reported in March that after some early progress, some intelligence agencies have been hiring additional contractors. This has resulted in a contracting workforce that “continues to grow,” the committee said in a March 22 report on its activities.

The battle over the administration’s commitment to thin contractor ranks is expected to intensify because of the unprecedented security breach claimed this month by Edward Snowden, who worked less than three months for national security consulting giant Booz Allen Hamilton. The company said it fired the 29-year-old Snowden on Monday for violations of its ethics policy.

At the White House this week, spokesman Jay Carney responded to questions about the number of contractors and their access to classified material by saying these topics merit debate. But he did not say if President Obama will reassess the role of contractors. “I think that is an interesting question and perhaps worthy of debate as part of this conversation that we should be having,” Carney said Tuesday.

Director of National Intelligence James R. Clapper’s office, reacting to questions by the Center for Public Integrity, said this week that the number of so-called core contractors, who assist in the collection and analysis of intelligence, has declined by 36 percent since 2007, when the collection of such personnel data began.

But that statistic, which appears in an unreleased report, refers to a subset of the overall number of those contractors holding clearances, and partly to reductions that preceded Clapper’s arrival in August 2010, government sources said. The pace of reductions has since slowed and “in certain cases, the addition of new contractors outweighed those [positions] dropped and converted” to civilian jobs, one congressional source said, speaking on condition he not be named.

Senate Intelligence Committee Chairman Dianne Feinstein, D-Calif., who vowed in 2010 to keep pushing “until contractors are not used for any inherently governmental purpose” in the intelligence community, said this week in a statement to the Center for Public Integrity that she plans to step up her efforts now. “I am working on legislation to reduce the numbers of contractors and their access to highly classified information,” she said Tuesday.

Congress passed legislation in 2011 allowing intelligence officials to exceed authorized personnel ceilings if they hire federal employees to replace contract workers on a one-for-one basis. But it has not used legislation to force specific cuts in the contractor workforce.

At a Sept. 13, 2011 joint hearing of the House and Senate Intelligence Committees, Feinstein disclosed what she described as a 2009 agreement by the Obama administration to shrink contractor numbers by 5 percent a year, largely by transferring to federal employees any “inherently governmental” work being done by contractors.

The impetus for the informal promise, which had not been publicized before then, was public outrage over the involvement of private contractors in some of the prisoner abuses at Abu Ghraib prison in in Iraq in 2003 and 2004. A congressional aide said this week that the agreement originally involved the Central Intelligence Agency. But the 17 agencies that make up the nation’s intelligence community also agreed to reduce the number of contractors performing a range of critical tasks, the aide said.

That 2009 agreement capped a year when Feinstein’s committee seized on the contracting issue and revealed in a report accompanying the annual intelligence authorization bill that in 2008, contractors comprised 29 percent of all intelligence community personnel but collected a whopping 49 percent of the personnel budget.

The committee acknowledged agencies had made a 3 percent reduction in the total number of intelligence contractors in 2009, but insisted in its report on a 5 percent reduction in 2010.

On July 20, 2010, Feinstein raised the outsourcing issue during Clapper’s confirmation hearing to be director of national intelligence. She and her committee colleagues said they were disturbed by disclosures in the Washington Post that more than 300 firms carried out key functions of the intelligence community.

The number of contractors had been “coming down slightly” during the tenure of his predecessors, she told Clapper.

He agreed with her that time had come “for that pendulum to swing back as it has historically” to reduce the size of the contractor workforce as the wars in Iraq and Afghanistan were ending. Clapper, an Air Force lieutenant general who retired in 1995 and then worked briefly as a Booze Allen Hamilton executive for military intelligence programs, explained past growth by saying that with the “gusher” of funding after 9/11 to support the wars and global counterterrorism operations, “it is very difficult to hire government employees one year at a time.”

“So the obvious outlet for that has been the growth of contractors,” Clapper said. But he added that he needed to see what impact past contractor cuts have had, telling Feinstein: “I’m just reluctant to commit to a fixed percentage” of annual reductions.

By the time Clapper appeared at a joint hearing of the House and Senate intelligence committees on Sept. 13, 2011 — an event intended to assess the intelligence community a decade after 9/11 — Feinstein told him and then-CIA Director David Petraeus they were not doing enough on the contractor front.

Clapper’s office had released figures for fiscal year 2010 showing that the number of so-called core contractors who give direct support to critical intelligence tasks had declined by only 1 percent.

“We had an agreement in 2009 to reduce I.C. contractor numbers by 5 percent a year, but it’s clear that progress has not been maintained and sufficient cuts are not being made,” Feinstein said.

When asked this week to comment about the agreement, Michael Birmingham, a spokesman for Clapper, declined to discuss what he referred to as private discussions between the director of national intelligence and the Senate and House Intelligence Committees.

But Birmingham gave a preview of the case Clapper is likely to make to Congress about the size of the contractor workforce. “Since Director Clapper has been the DNI, the number of core contract personnel has been reduced by 15 percent,” he said. Details appear in a classified report given to Congress.

A congressional source said a reduction in the rate of shrinkage “is to be expected, as the cuts get harder the more you make.” But Feinstein still believes that “further cuts are appropriate, that contractors should not be performing inherently governmental functions, and that contractors should not have access to large amounts of highly classified information, as Mr. Snowden appears to have had,” the aide added.

Feinstein’s interest in limiting access to classified material is not surprising. “Clearly there’s going to be intense scrutiny of the security clearance [process] as a result of the Snowden case,” said Steven Aftergood, director of the Federation of American Scientists Project on Government Secrecy. Among key questions federal investigators and lawmakers will be asking, he said, are: “Was the scope of his access broader than justified? Was he vetted? Or was he fully vetted?”

“People are asking, why does a kid who couldn’t make it through a community college can make $200,000 grand a year and be exposed to some of our most significant secrets,” Senate Appropriations Committee chairwoman Barbara Mikulski (D-Md.) said at a hearing Tuesday. “So we’ll have a lot of hearings … on this.”

The latest annual report on security clearances showed the annual shifts vary by category. In fiscal year 2012, 15,482 fewer contractors held confidential, secret or top-secret clearances than in fiscal year 2011. But 4,428 more held top-secret clearances to handle the most sensitive information, like that leaked by Snowden.

The total number of people with security clearances rose 1.1 percent in the one-year period, with 4.9 million government employees and contractors having confidential, secret or top-secret clearances as of last Oct. 1, the report said. Of that total, 1.4 million held top-secret clearances, with more than a third of that group comprised of contractors.

The report also listed a significant jump in the number of contractors deemed eligible during the year for a top-secret clearance — and a nearly corresponding drop in the number of government employees who were given similar status.

The 133,493 contractors newly deemed eligible for access to top-secret information represented a 30.5 percent increase over the number of contractors in the same category the year before. The number of contractors eligible for confidential and secret clearances rose by nearly 12 percent. For government employees, however, the number eligible for top-secret clearance dropped by nearly 22 percent, while those eligible for confidential and secret clearances declined by 9 percent, the report showed.

Birmingham, the spokesman for Clapper, discounted any notion that these trends portend substantial contractor growth in the last year, explaining that the figures only refer to government workers and contractors considered eligible for access to sensitive materials, but not yet awarded their clearances. Some outside experts said this data could reflect the high turnover seen often within the contractor workforce.

Both Clapper’s office and the White House took pains this week to praise the vast majority of intelligence contractors as patriotic Americans who take an oath to protect the nation’s national security secrets.

“Contractors are an integral part of our workforce and are critical to our national security efforts,” Clapper said in a message sent Monday to the Intelligence Community workforce. “No matter what color badge you wear, you prove every day how much you care about our nation.”

In response to questions Tuesday, White House spokesman Carney said, “I would note that contractors have long been involved in both our defense and intelligence efforts, and that when it comes to security clearances, they are subject to the same system of checks and security clearance procedures as government employees.”

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