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impressive, its operating margin on these contracts had doubled. As it turned out, it did not
achieve these profits by increasing its core internal staff. In 2008, it had 22,000 employees on its
internal staff, and in 2013, it had roughly the same number on its internal staff. What it expanded
was the number of outside contractors it employed. It added in these five years, by one Wall
Street analyst’s calculation, some 8,000 new external workers. They were employed as system
administrators, infrastructure analysts, computer security specialists and other “geek squad” jobs
at the NSA and other government agencies. Their main qualification was their prior secrecy
clearances (which saved Booz Allen the expense of vetting them and also the loss income while
waiting many months for a clearance.) Snowden therefore was highly-desirable from an
economic point of view for Booz Allen. Even though he had no prior experience as an
infrastructure analyst, and he had been detected being untruthful about his degree in computer
sciences, he not only had a SCI secrecy clearance, but he was willing to take a cut in pay. In
keeping with the Booz Allen business plan, such a recruit would provide another cog in its profit
machine.

Not only had the NSA outsourced much of its computer operations to private companies but
the Clinton Administration in 1996 had privatized background checks for government employees
requiring security clearances. The idea backed by Vice President Al Gore was to reduce the size
of the Federal government by outsourcing investigating the backgrounds of millions of
government applicants for jobs. The task had been previously been performed by FBI but it was
assumed that a profit-making business could do it faster and more efficiently. The private
company named United States Investigative Services (USIS) was purchased in 2007 for $1.5
billion by Providence Equity Partners, a rapidly-expanding investment firm founded only four
years earlier by graduates of Brown University and the Harvard Business School. So like Booz
Allen, USIS was backed by a hedge-fund determined to make money by systematically cutting the
cost of a previously government service. But such outsourcing had drawbacks. For one thing,
unlike the FBI, USIS lacked the investigative clout to gain entry to other the CIA and other
government agencies. For example, when it did the background check on Snowden in 2011, it
could not get access to his CIA file. As will be recalled, there was a "derog” in his file that might
have set off alarm bells. But because of its lack of access to the CIA, USIS did not learn about the
derogatory reports in Snowden’s CIA file. Nor did it learn that he had been threatened by an
internal investigation of his alleged computer tampering in 2009. The FBI, with its long standing
liaisons with the CIA, might have learned this about Snowden if it had done his background
check.

To be sure, the profit calculus might have worked better if it had been coupled with adequate
oversight. But without such oversight, it proved to be a barrier to extended investigations of
applicants. As it turned out, USIS closed cases and cleared applicants without completing an
adequate investigation. According to a US government suit filed in 2014, USIS had prematurely
closed over 665,000 investigations in order to get more quickly paid for them. Since the more
cases it completes each month, the more money it receives from the government, the law suit

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