Change at NSA causes concern

Shift in acquisitions power could hurt Maryland firms

Pentagon to control finances

Agency has pumped millions into economy

Anne Arundel

November 25, 2003|By Ariel Sabar | Ariel Sabar,SUN STAFF

Over the past year, the National Security Agency has given big contracts to Maryland technology companies, enticed major contractors to open offices with hundreds of new jobs just outside its Fort Meade headquarters and helped start the country's first homeland security business incubator.

But excitement among the state's business boosters over the growing role of the global eavesdropping agency in Maryland's high-tech economy is up against a sobering reality: the NSA no longer controls the purse strings for hundreds of millions of dollars in technology contracts.

As part of the defense authorization bill that President Bush signed into law yesterday, Congress stripped the NSA of power to buy everything from desktop computers to software that sifts through intercepted phone conversations. Lawmakers moved that authority to the Pentagon, which they say has the fiscal discipline that the NSA has been unable to achieve.

Critics have said that the move will mire contracts in the Pentagon bureaucracy and hurt the NSA's ability to quickly buy equipment to keep pace with changes in foreign communications and encryption technology. Some also see it as a possible setback to economic development in Maryland.

They say that the legislation could slow the flow of multimillion-dollar contracts to the private sector. And some see a more subtle concern: that the shift of acquisitions power out of Maryland and to the Pentagon will deprive Maryland firms with ties to the NSA of an inside track to contracts.

Northern Virginia far outpaces suburban Maryland in the competition for federal procurement dollars, experts say, in large part because of the dense cluster of defense firms around the Pentagon, in Arlington, Va.

"What I would be concerned about is the decision-making being remote from the agency, because of political agendas ... trying steer the contracts to one place vs. another," said Bill Badger, president and chief executive officer of the Anne Arundel Economic Development Corporation, which has tried to foster the image of the county as a high-tech haven.

Steve Walker, the president of Walker Ventures, a Glenwood firm that has provided start-up funding to technology companies doing business with the NSA, said the legislation is likely to put a brake on NSA spending.

"It's clearly going to slow down the process," said Walker, a former NSA computer scientist. "The longer it lasts, the more negative effect there will be on the economic activities in the state."

Fiscal reform

For Congress, however, the bigger issue is what lawmakers see as faulty fiscal controls at a spy agency with an estimated $6 billion budget. The legislation, which cleared Congress this month, comes after three years of mounting criticism of the way the NSA takes stock of its technology needs and gives out contracts.

Lawmakers fault the agency's procedures and management structure, and say that the NSA has been given enough chances to fix the problem on its own.

"We want to make sure that taxpayers get the intelligence systems that are needed at the best possible cost," says John Ullyot, a spokesman for Sen. John W. Warner, a Virginia Republican who heads the Senate Armed Services Committee, which led the push for the legislation. "Speed is important, but getting the right systems at the right cost is just as important, and they are not mutually exclusive."

The NSA has been moving to address its congressional critics. It dissolved some offices this year and streamlined chains of command so that more contracting programs report directly to the top acquisitions executive. "The NSA acquisition reform process has taken great strides over the past few years, but there is still work ahead," the agency said last week in a statement.

Boosting local economy

The NSA's expanding role in the Maryland economy has made the dispute over the legislation more than just a bureaucratic squabble.

For most of its 50-year history, it designed much of its computer technology in-house because it feared spies and because few outsiders had the know-how.

But with the high-tech boom of the late 1990s, the agency's director, Air Force Lt. Gen. Michael V. Hayden, began to look to private industry for new ideas.

Since the Sept. 11 attacks, the agency's largess -- hundreds of millions of dollars in contracts -- has drawn company after company to the National Business Park, at Route 32 and the Baltimore-Washington Parkway, just outside the agency's razor wire fences.

The park's landlord moved five tenants out to make room for satellite offices for giants such as Boeing, Northrop Grumman, Lockheed Martin, Titan Corp. and Computer Sciences Corp.

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