The National Security Agency: Issues for Congress

Order Code RL30740

CRS Report for Congress

Received through the CRS Web

The National Security Agency:

Issues for Congress

Updated January 16, 2001

Richard A. Best, Jr.

Specialist in National Defense

Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

The National Security Agency: Issues for Congress

Summary

The National Security Agency (NSA), one of the largest components of the U.S.

Intelligence Community, has reached a major watershed in its history. Responsible

for obtaining intelligence from international communications, NSA’s efforts are being

challenged by the multiplicity of new types of communications links, by the

widespread availability of low-cost encryption systems, and by changes in the

international environment in which dangerous security threats can come from small,

but well organized, terrorist groups as well as hostile nation states.

NSA’s efforts to adjust to the changing geopolitical and technological

environment have been strongly encouraged by Congress and reflect a major shift in

congressional oversight of the Agency. Although Congress has always approved

funding for NSA, for decades routine oversight was limited to a few Members and

staff. In the 1970s, congressional investigations of intelligence agencies resulted in

greater public attention to NSA and criticism of activities that infringed on the civil

liberties of U.S. persons. Subsequently, both the Senate and the House of

Representatives established intelligence oversight committees that have closely

monitored NSA’s operations. The Foreign Intelligence Surveillance Act (FISA) was

enacted in 1978 to regulate collection by foreign intelligence agencies of the

communications of U.S. persons. The end of the Cold War, the expansion of lowcost encryption and the explosion of communications systems led Congress to take

a more public profile in overseeing the large and secretive Agency.

Reacting in large measure to congressional concerns, NSA launched two

separate management reviews, one by outside experts, the other by longtime Agency

officials. Both made strong criticisms of Agency personnel policies, an outmoded

organizational structure, and an unwillingness to utilize civilian practices that more

effective than those available in-house. The current NSA Director, Lt. General

Michael V. Hayden, USAF, has used these analyses to launch a series of major

initiatives designed to improve NSA’s operations, to attract and reward more

qualified people from outside industry, and is developing a major contract for outside

support of its non-sensitive Information Technology (IT) functions.

A major renewal effort is underway, but observers believe many challenges lie

ahead that will require congressional oversight. Many of the reforms in personnel

policies recommended are difficult to implement in a government organization,

especially in an extremely tight market for technical specialists. The technical

complexities of dealing with widespread and sophisticated encryption as well as the

proliferation of communications devices remain to be resolved. NSA is, along with

other intelligence agencies, not well-positioned to analyze developments among the

assortment of terrorist groups and narcotics smugglers around the world that can

seriously affect U.S. interests. NSA has also come under heated criticism in the

European Parliament for allegedly collecting, in cooperation with the British,

commercial intelligence to benefit U.S. corporations.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Roles and Missions: The Growing Influence of Congress . . . . . . . . . . . . . . . . . 2

Changing Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Personnel Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Diversity and Equal Opportunity Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Changing Personnel Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Charting NSA’s Future Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Director Hayden’s Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Elements of Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Appendix A. Congressional Oversight of NSA: A Brief Review . . . . . . . . . . . . 15

Appendix B. Cooperation with Other Countries and the Echelon Controversy . 23

The National Security Agency:

Issues for Congress

Introduction

The National Security Agency (NSA), one of the largest components of the U.S.

Intelligence Community, has reached a major watershed in its history. Responsible

for obtaining intelligence from international communications,1 NSA’s efforts are being

challenged by the multiplicity of new types of communications links, by the

widespread availability of low-cost encryption systems, and by changes in the

international environment in which dangerous security threats can come from small,

but well organized, terrorist groups as well as hostile nation states.

NSA was established in 1952 as a highly compartmented secret codebreaking

effort undertaken by a handful of military officers and civilians, but the Agency has

gradually become an acknowledged government agency responsible for signals

intelligence (sigint). This evolution has been in significant measure a result of

congressional initiatives. Congress provided the statutory framework for NSA and

its activities. Laws have been enacted that carefully prescribe the limits of NSA’s

electronic surveillance of U.S. persons. Congress has been increasingly inclined to

take public notice of problems at NSA and is supporting reforms that are designed to

make NSA more effective in current technological and geopolitical environments.

The challenges facing NSA are formidable; a difficult operational environment

as well as limitations on spending levels for intelligence call into question the future

capabilities of NSA. Public interest in NSA has been heightened in recent months by

some members of the European Parliament who allege that the United States and a

few other countries are cooperatively engaged in systematic electronic eavesdropping

in order to promote the commercial interests of U.S. corporations. This Report will

1

A primary responsibility of NSA is the collection and analysis of signals intelligence a

function that has been described by Director of Central Intelligence George Tenet as “one of

the pillars of US intelligence. Along with our other intelligence collection activities, we rely

on SIGINT to collect information about the capabilities and intentions of foreign powers,

organizations, and persons to support the foreign policy and other national interests fo the

United States. SIGINT is critical to monitoring terrorist activities, arms control compliance,

narcotics trafficking, and the development of chemical and biological weapons and weapons

of mass destruction.” Statement by Director of Central Intelligence George J. Tenet before

the House Permanent Select Committee on Intelligence, April 12, 2000. NSA is also

responsible for protecting information systems security of U.S. Government agencies. This

is an increasingly important NSA mission that includes the preparation of codes and encoding

devices, but the focus of this report will be on the more controversial intelligence collection

and analysis mission.

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attempt to provide an unclassified description of NSA’s evolution, the technical and

operational environment that now exists, and indicate some issues that the executive

branch and Congress will be facing in coming years.

An unmistakable change affecting NSA has been the openness with which its

policies and problems are now discussed both by the Agency’s leadership and by

congressional oversight committees. Until very recently NSA was the most secretive

intelligence agency, more shielded from public scrutiny than the Central Intelligence

Agency (CIA). Only the most elliptical references were made in public to the sigint

mission, and at one time, NSA employees identified themselves only as working for

the Defense Department. In the past few years, however, senior intelligence officials

frequently describe NSA’s problems and reports accompanying intelligence legislation

include extensive commentary on the challenges facing NSA and the approaches

encouraged by Congress. These changes were made possible by the absence of a

superpower competitor capable of exploiting any inadvertent security slip and by the

need to justify intelligence spending at a time when international climate is apparently

more benign. These factors removed inhibitions against NSA “going public” and, at

the same time, created a political environment that would require public understanding

of NSA’s mission if the Agency could continue to obtain the funding necessary to

update its operations.

Roles and Missions: The Growing Influence of Congress

For decades Congress was content to consider the signals intelligence effort and

the organization of NSA primarily as the responsibility of the executive branch. For

a quarter century after the end of the Second World War, NSA and the nation’s other

intelligence agencies undertook their activities with little publicity and with

congressional interest limited to a handful of members of armed services and

appropriations committees. The intelligence investigations of the 1970s, however, led

to well-publicized hearings that placed many secrets, including those of NSA, on the

public record. Of greater enduring significance was the establishment of select

intelligence committees in both the House of Representatives and the Senate. These

committees were granted the authority to conduct oversight over the intelligence

activities of the Federal Government, including NSA. They became, along with the

appropriations committees, the points of contact between the intelligence agencies

and Congress. As a result of the extreme sensitivity of much intelligence information,

the two intelligence committees came to act essentially as surrogates for the Congress

and the public in regard to intelligence agencies. Until the mid-1990s much of interest

of the committees, as reflected in report language and public hearings, centered on the

CIA and especially its operations directorate. Sigint activities were undoubtedly

matters of congressional concern, but they were very rarely the focus of public

attention.2

In recent years, with the end of the Cold War the two intelligence committees

have had much more intensive concern with NSA as reflected in more detailed report

language on NSA’s activities. The extent of oversight is reflected by comments in

2

For additional information on congressional oversight of NSA, see Appendix A.

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the report on the FY2000 Intelligence Authorization bill (H.R. 1555) by the House

intelligence committee:

In the last two Congresses, the committee has been direct in its identification of

process and management problems that require attention. The committee believes

that NSA management has not yet stepped up to the line. There have been some

efforts at reform, but there are still several areas where change is not only needed

but is critical for NSA’s future. 3

Congress has taken a more open interest in NSA at a time when the Agency’s

roles and missions are facing significant reformulation. Congress has provided

guidance for NSA’s future direction and has made budgetary allocations based on its

sense of appropriate goals, personnel policies, and organizational structure. Most

observers believe, moreover, that, given the fluid state of international affairs and

information technologies, that further congressional attention is likely as NSA changes

to adapt to its new environment.

Changing Technologies

The primary targets of electronic surveillance during the Cold War were the

communications of hostile military organizations and governments. Most of such

communications were encrypted; in many cases this message traffic could be read only

sporadically, if at all (although useful information can often be obtained without

actually reading the actual messages). Some communications were carried on land

lines that could be intercepted only if they could be physically tapped, inevitably a

difficult undertaking. It was, nonetheless, the government and military circuits that

provided the most important intelligence of military capabilities, hostile intentions, and

diplomatic maneuvers that could place this nation’s security at risk. Civilian

communications–telegraphs, telephones, facsimile devices, etc.–were usually

unencrypted and often sources of valuable information, albeit of secondary priority.

In the past decade, two important trends have combined to change the nature of

electronic surveillance efforts. The end of the Cold War meant policymakers and

military officials had a wider range of countries that they were concerned with and

placed much greater emphasis on “non-state actors”–terrorist groups and narcotics

smuggling organizations that have come to be seen as genuine national security

threats. These links are not necessarily easy targets given the great expansion in

international telephone service that has grown by approximately 18% annually since

1992. Intelligence agencies are faced with profound “needle- in-a-haystack”

challenges; it being estimated that in 1997 there were some 82 billion minutes of

telephone service worldwide.4

3

U.S. Congress, 106th Congress, 1st session, House of Representatives, Permanent Select

Committee on Intelligence, Intelligence Authorization Act for Fiscal Year 2000, H.Rept. 106130, Part 1, May 7, 1999, p. 12.

4

Linda Blake and Jim Lande, Trends in the U.S. International Telecommunications Industry

(Washington: Federal Communications Commission, 1999), tables 7,9.

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The technologies used in civilian communications circuits have also changed; in

the past decade reliance on microwave transmissions (which can be intercepted with

relative efficiency) has been increasingly displaced by fiber optic cables.5 Fiber optics

can carry far more circuits with greater clarity and through longer distances and

provides the greater bandwidth necessary for transmitting the enormous quantities of

data commonplace in the Internet age. Inevitably, fiber optic transmission present

major challenges to electronic surveillance efforts as their contents cannot be readily

intercepted, at least without direct access to the cables themselves. The widespread

use of fiber optics may also affect requirements for expensive sigint satellites since

transmissions over fiber optic cables cannot be intercepted from space-based

platforms.6

In addition to the widespread use of fiber optic cable, civilian communications

have been marked by increased access to high-quality encryption systems formerly

available only to governments and militaries. Some systems are available at no cost

on the Internet and others can be obtained commercially at minimal expense. This has

led to an extensive debate in the United States about the need for export controls on

sophisticated encryption systems. Although it is universally acknowledged that

commercial encryption systems available throughout the world present major

challenges to intelligence (and law enforcement) agencies, U.S. intelligence officials

have argued that permitting export of high-quality U.S. systems with associated

systems support would greatly extend the capabilities of other governments and

hostile groups to protect their communications. After extensive discussions within the

executive branch and Congress, steps have been taken to loosen, but not remove, U.S.

restrictions on encryption exports.7 NSA officials were active in criticizing

unrestricted encryption exports and observers suggest that these views, which were

shared by many in Congress especially within the intelligence and armed services

committees, may have fueled press criticism of NSA.

Changing threats, coupled with the evolving global technological environment,

have undoubtedly made NSA’s tasks far more difficult. The proliferation of

communications throughout the world and the spread of encryption may make

electronic surveillance almost impossible. Much equipment acquired for Cold War

missions is not effective against new targets. In some cases, NSA must resort to

analyses of traffic patterns–who is communicating with whom, when, and how

often–to provide information that may not be obtainable through breaking of codes

and reading of plaintext.

A major shortcoming was revealed in January 2000 when a software anomaly in

the communications infrastructure curtailed NSA’s operations for some 72 hours. An

5

See Ivan Amato, “Fiber Optics: Communicating at Light Speed,” Washington Post,

November 10, 1999, p. H1; Lee Bruno, “Broadband: To Infinity and Beyond,” Red Herring,

February 2000, p. 170.

6

See Jeremy Singer, “Sophisticated Fiber Optics Also Problematic for NSA,” Defense News,

June 12, 2000.

7

See (name redacted), Encryption Technology: Congressional Issues, CRS Issue Brief

IB96039; Richard A. Best, Jr. and (name redacted), The Encryption Debate: Intelligence

Aspects, CRS Report 98-905, November 4, 1998.

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intensive and expensive effort was required to restore operations. A subsequent

assessment found that the fundamental problem was not technical, but doctrinal and

organizational. 8

Personnel Matters

NSA has employed many highly gifted scientists, engineers, and mathematicians.

However, shifting geopolitical concerns and budget reductions required in the early

1990's led to early retirements and fewer newly hired employees. During the same

period, the Agency was also required to move towards a personnel structure more

closely reflective of national demographics. Simultaneously, a revolution in

communications and information technologies was launched in many small, start-up

firms whose culture and salary and personnel benefit levels were radically different

from those of government agencies. As the extent of these problems became

apparent, Congress has provided guidance in several areas.

Diversity and Equal Opportunity Issues

At least since the enactment of the National Security Agency Act of 1959 NSA’s

personnel policies have been the subject of congressional interest. That Act in essence

established a separate personnel system for NSA. By the mid-1980s the House

Intelligence Committee became concerned with the relatively small numbers of

African-Americans, Hispanics, and women within the NSA workforce. (In 1993,

blacks constituted 9% of the total number of NSA employees whereas the national

labor force percentage was just over 10; the NSA Hispanic percentage was 1.2,

whereas the national average was just over 8; for Asian Americans, the national figure

was 2.9, at NSA it was 0.9.)9 One congressional initiative included provisions in the

FY1987 Intelligence Authorization Act (P.L.99-569) amending the National Security

Agency Act to establish an undergraduate training program to facilitate the

recruitment of minority high school students with skills in mathematics, computer

sciences, engineering and foreign languages. Recruitment efforts were made in

colleges with higher concentrations of Hispanic students and efforts were made to

ensure equal consideration in promotions. By 1996, NSA had made measurable

increases in minority and female representation in the general workforce and in

8

See Walter Pincus, “NSA System Crash Raises Hill Worries,” Washington Post, February

2, 2000, p. 19; Michael V. Hayden, “Background on NSA: History, Oversight, Relevance for

Today,” Defense Intelligence Journal, Summer 2000, p. 31. During this period the British

reportedly helped to supply data that NSA could not obtain directly; see Ben MacIntyre, “UK

Spied for US as Computer Bug Hit,” Times (London), April 27, 2000.

9

Statement of Vice Admiral J.M. McConnell, USN, Director, National Security

Agency/Chief, Central Security Service in U.S. Congress, 103rd Congress, 1st session, House

of Representatives, Permanent Select Committee on Intelligence, Cental Intelligence Agency,

Defense Intelligence Agency and National Security Agency: Minority Hire, Retentions and

Promotions, Hearing, October 28, 1993, p. 27.

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leadership positions.10 These initiatives were not welcomed by all NSA personnel,

with some officials expressing concerns that others would receive preference at their

own expense.11 Since the mid-1990s public congressional hearings and published

committee reports have not given extensive discussion to diversity issues. Although

efforts continue to increase the diversity of NSA’s workforce, other personnel issues

have complicated hiring and promotion policies.

Changing Personnel Requirements

Since the end of the Cold War, the nature of sigint targets has changed; the sheer

quantity of communications has dramatically risen and sophisticated encryption

systems are increasingly available throughout the world. These changes in targets and

technologies have required a substantially different NSA workforce. Long staffed by

civil servants and military personnel who made their whole careers in cryptologic

specialities; NSA officials must now be able to shift rapidly among disparate sigint

efforts and varying targets. Different skill mixes are required at NSA at a time when

technical specialists in communications, computer services, and encryption systems

are in high demand throughout the economy. Observers believe that entry- and midlevel government salaries are not equal to opportunities currently available in an

especially dynamic sector of the economy; furthermore, workers in technical fields

often shift jobs in short periods and it may not be possible to retain them solely on the

basis of the career benefits of federal service.12

As has been the case with other intelligence agencies, staffing levels at NSA have

been reduced during the past decade. Many analysts and others who spent their

careers focusing on Soviet and Warsaw Pact issues no longer directly relevant to U.S.

security concerns have retired or moved into new specialities. Some media observers

suggest, however, that NSA continues to be burdened by an “old guard” of Cold

War-era careerists whose talents are not precisely suitable to emerging missions.

Although such charges are difficult to document (and may only reflect bureaucratic

politics), it is generally acknowledged that NSA will have to adopt an altered

personnel structure. FY2001 Intelligence Authorization legislation (passed by both

houses, but vetoed by the President because of concerns not directly related to NSA)

would provide authority for NSA to offer early retirement and voluntary separation

10

U.S. Congress, 104th Congress, 2d session, House of Representatives, Permanent Select

Committee on Intelligence, Human Resources and Diversity, Hearing, September 20, 1996,

pp. 28-29.

11

U.S. Congress, 103d Congress, 2d session, House of Representatives, Permanent Select

Committee on Intelligence, Hiring, Promotion, Retention and Overall Representation of

Minorities, Women and Disabled Persons within the Intelligence Community, Hearing,

September 20, 1994, pp. 124-125.

12

In November 2000 the Office of Personnel Management announced that it was establishing

higher rates of basic pay for entry- and mid-level information technology (IT) workers

throughout the Federal Government, with net pay increases ranging from 7 to 33%. The IT

categories involved include a significant number of positions at NSA. NSA is also preparing

to implement a new compensation structure that will use variable pay to recognize and reward

achievement. See “NSA Chief Pushes Ahead with Overhaul of Agency’s Culture,

Operations,” Defense Information and Electronics Report, October 20, 2000, p. 5.

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pay to employees with 20 or 25 years of service (depending on age). This provision

was inserted to provide the NSA Director with the opportunity to institute personnel

changes that are considered necessary and reflects the intelligence committees view

that “the situation at NSA is unique, not only in the enormity of the task of

modernization, but also in the direct impact on national security should NSA

modernization fail.”13

One approach that has been adopted is to increase reliance on contracting out

personnel services although security considerations can complicate the use of noncareer personnel. 14 In some cases it has been possible to acquire the services of some

retired NSA officials who are able to receive the relevant clearances with little delay.

In other situations NSA is able to compartmentalize some activities and make use of

specialists who do not need access to sensitive information. Some observers warn,

however, that contract personnel will tend not to be as committed to the Agency’s

missions, and may work subsequently for non-government concerns with an increased

possibility of unauthorized sharing of classified information.

Charting NSA’s Future Direction

In recent years, congressional oversight committees have become concerned

about the effect of the changed international threat environment and new technologies

on NSA’s future effectiveness. The requirement to replace aging satellite systems in

particular have placed pressures on intelligence spending across the board; the size

and extent of NSA’s budget inevitably meant that it would be subject to close

scrutiny. Thus, in 1997 the Senate Select Committee on Intelligence established a

Technical Advisory Group (TAG) to review the U.S. sigint effort along with other

technical challenges facing the Intelligence Community. The TAG was composed of

leading U.S. scientists and experts in technology and intelligence and has made two

classified reports on NSA’s capabilities. According to the Senate Committee, the

TAG identified serious deficiencies; “as resources have been reduced, the NSA

systematically has sacrificed infrastructure modernization in order to meet day-to-day

intelligence requirements. Consequently, the organization begins the 21st Century

lacking the technological infrastructure and human resources needed even to maintain

the status quo, much less meet emerging challenges.”15 One media account indicates

that the TAG’s conclusions were highly critical: “`We told them that unless you

totally change your intelligence-collection systems you will go deaf,” one involved

official [stated]. “You’ve got ten years.”’ According to the account, the Group

13

U.S. Congress, 106th Congress, 2d session, Committee of Conference, Intelligence

Authorization Act for Fiscal Year 2001, H.Rept. 106-969, October 11, 2000, p. 46.

14

George Cahlink, “NSA May Outsource 5,000 High-Technology Jobs,” Defense News, June

12, 2000, p. 4.

15

U.S. Congress, 106th Congress, 2d session, Senate, Select Committee on Intelligence,

Authorizing Appropriations for Fiscal Year 2001 for the Intelligence Activities of the United

States Government and the Central Intelligence Agency Retirement and Disability System,

S.Rept. 106-279, May 4, 2000, p. 6.

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“urged that the agency immediately begin a major reorganization, and start planning

for the recruitment of several thousand skilled computer scientists.”16

According to the Senate report, the TAG also recommended new business

procedures and additional resources. The report indicated that the FY2001

authorization bill would likely reflect TAG recommendations, with resources being

shifted to long-term infrastructure modernization at the expense of some short-term

collection.17

The House Permanent Select Committee on Intelligence also reached the

conclusion in 1998 that “very large changes in the National Security Agency’s culture

and method of operations need to take place.”18 The Committee indicated its

approach:

First, the committee is funding and mandating external management reviews.

Second, the committee is attempting to infuse fresh thought, needed expertise

(especially in systems engineering), and greater fairness by insisting that

significant portions of certain categories be contracted out and that outside

proposals and expertise be solicited, notably in systems engineering, advanced

research and development, and in development activities.... Third, fences have

been placed on portions of the budget, with the prospect that a considerable

amount of money could be reprogrammed for other [Intelligence Community]

needs if NSA does not develop detailed strategic and business planning.19

The House committee envisioned “a far more radical revision of the budget process

than presently contemplated.” Emphasis would be placed on “a new culture in which

all team together on a new architecture.”

Director Hayden’s Initiatives

Aware of the challenges facing the Nation’s sigint effort and responsive to

congressional concerns, the senior leadership of NSA has been moving to make

drastic changes in NSA’s operations and organization. Upon becoming NSA’s

director in March 1999 Air Force Lt. General V. Michael Hayden assigned a number

of mid-level NSA officials to review the Agency’s organizational structure. Known

as the New Enterprise Team, the group recommended a new executive leadership

team, the development of strategic business plans, the acquisition of agency wide

management information systems, and hiring a financial management officer. A

16

Seymour M. Hersh, “The Intelligence Gap,” New Yorker, December 6, 1999, pp. 62, 64.

17

Additional background on NSA’s managerial challenges is provided in “NSA Overhauls

Corporate Structure in Effort to Improve Operations,” Inside the Air Force, June 23, 2000.

18

U.S. Congress, 105th Congress, 2d session, House of Representatives, Permanent Select

Committee on Intelligence, Intelligence Authorization Act for Fiscal Year 1999, H. Rept.

105-508, May 5, 1998, pp. 9-10.

19

Ibid., p. 10.

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separate report by a smaller group of outside experts with experience in the

telecommunications industry made similar recommendations.20

The two sets of recommendations reflected a consensus by these advisory groups

(and by congressional overseers) that NSA requires more centralized management,

that separate divisions that had long enjoyed functional independence need greater

coordination to reduce duplicative functions, and that there needs to be a strategic

vision of how the Agency is to adapt to changed geopolitical and technological

environments. Both reports reflected confidence in the importance of NSA’s

missions, but both were highly critical of NSA’s management and personnel

structures. The outside experts concluded: “The most serious issues are leadership,

accountability, and empowerment, as evidenced by great dissatisfaction with decision

making within the Agency.”21 The NSA officials noted the Agency’s fundamental

problems: “lack of governance, lack of leadership, and lack of strategic alignment.”

Although some specific criticisms reflect the inherent limitations of government

agencies in comparison with the civilian telecommunications industry, NSA was urged

to take special steps to hold middle managers responsible for personnel decisions.

Although NSA has traditionally hired recent college graduates and retained them until

retirement, changes in technology, in the international environment, as well as

disparities in government and civilian salaries, imply that in the future there may be

fixed-term positions and upgraded salary levels for some critical technical specialists.

NSA was also urged to move away from its traditional preference for performing

all functions in-house rather than to look for creative ways to find civilian contractors

not just as sources of manpower but as “solution providers,” and to make hard

choices over priorities rather than to make across-the-board budgetary reductions.

The outside team of experts urged NSA not only to take advantage of the potential

advantages of outsourcing but also to bring in mid- and upper-level managers from

successful businesses.

In November 1999, Hayden launched “100 Days of Change”–another series of

managerial initiatives responsive to the recommendations of these groups. He

subsequently summarized NSA’s challenges: “maintaining a strong infrastructure of

people and facilities in a time of constrained budgets; accurately forecasting

technology trends in the face of an explosion of information systems; and reacting

agilely to new technological innovations.”22

With congressional support Hayden has brought in industry experts from civilian

firms to develop a comprehensive business plan for the Agency that will enable it to

perform in a transformed global information technology arena. An initial step was the

20

Bob Brewin, Daniel Verton, and William Matthews, “NSA Playing IT Catch-Up,” Federal

Computer Week, December 6, 1999, p. 1. The report by NSA officials, New Enterprise Team,

The Director’s Work Plan for Change, October 1, 1990, and the External Team Report,

October 22, 1999, were subsequently made available on NSA’s Web site

[http://www.nsa.gov].

21

22

External Team Report, October 22, 1999, p. 4.

NSA Press Release, 7 January 2000, Director of National Security Agency Welcomes Ms.

Beverly Wright, Chief Financial Manager.

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appointment of a new chief financial manager from private industry in January 2000.

He has also hired a chief information officer, a senior acquisition executive, and

created a transformation office. It is hoped that these officials will provide the

capability for strategic planning and centralized coordination that NSA has been

criticized for not maintaining. In July 2000 it was announced that William Black, Jr.,

a former NSA official who had retired and found employment in a high-tech

consulting firm, Science Applications International Corporation, would be appointed

deputy director. Black replaces Barbara McNamara who has been widely blamed in

some media accounts23 as part of an “old guard” that has delayed NSA’s transition to

post-Cold War challenges. McNamara has been assigned as head of NSA’s liaison

office in London.

In October 2000, further adjustments in NSA’s management structure were

announced. General Hayden will serve as Director and Chief Executive Officer and

intends to focus on implementing the changes necessary to keep NSA relevant to the

needs of the rest of the Government. Deputy Director Black will also serve as Chief

Operating Officer and be responsible for day-to-day operations. A new Executive

Leadership Team will be created to concentrate on overall strategic planning issues,

composed of Hayden, Black, and the deputy directors for operations, information

assurance, and technology. 24

In June 2000 NSA announced that it intended to contract out “non-mission

related” information technology (IT) support–information technology functions that

are not part of its core cryptologic efforts.25 A $4 billion IT contract, to be known

as Project Groundbreaker, will be awarded for handling many of the Agency’s

extensive and varied requirements for information processing including desktop and

workstation computers, email, network operations, software and telephone systems.26

Hayden indicated that NSA divisions traditionally had undertaken much of their own

IT work to support their ongoing operations, with inadequate concern for overall

financial implications for the entire Agency. He was quoted in one account:

I knew exactly how much activity X cost. I knew when we spent the money, I

knew what it cost, I knew when it was appropriated. But we didn’t really have the

ability to aggregate all activity Xs and portray them to the agency as, “Hey, by the

way, do you realize that is what activity X cost you around the world and do you

really want to be spending [this] percentage of your budget on activity X as

opposed to activity Y?” We couldn’t do that. We couldn’t pull the thread and

23

Especially by Hersh, “The Intelligence Gap,” p. 62.

24

“NSA Chief Pushes Ahead with Overhaul,” Defense Information and Electronics Report,

October 20, 2000, pp. 1,4.

25

For additional background on outsourcing issues, see Valerie Grasso, Defense Outsourcing:

the OMB Circular A-76 Policy, CRS Report RL30392, April 12, 2000.

26

Cahlink, “NSA May Outsource 5,000 High-Technology Jobs.” The Request for Proposal

for Groundbreaker is anticipated in January 2001 with the award of a contract in July 2001.

CRS-11

aggregate what it was we were doing as an enterprise in order to make strategic

decisions on direction.27

Hayden realizes that a more centralized system, with much work outsourced to a

civilian contractor, may result in having to say “no to legitimate daily operational

needs because the system can’t handle it. That is the big change.”28

On November 8, 2000 NSA announced the accomplishment of the initial phase

of its new acquisition program and indicated an intention to solicit industry for

concept studies for sigint modernization. This initiative is known as Trailblazer and

the studies are expected to be undertaken in 2001.

Elements of Uncertainty

Few observers deny that significant structural changes in NSA’s organization are

warranted, but some caution that the changes thus far envisioned may not resolve the

expected problems. Skeptics note, in particular, that outsourcing is no panacea, that

it may mean the loss of experienced personnel with longstanding ties to NSA without

necessarily reducing overall costs to the taxpayers. Further, they argue, the necessity

of granting sensitive clearances to contractor personnel may increase risks of

compromising classified information and processes. All agree that costs of

background security investigations will increase.

Other objections may be raised concerning the consolidation of IT functions in

a centralized office. The flexibility of individual components to design unique systems

may be jeopardized, and the NSA Director has acknowledged that certain legitimate

functions may have to be curtailed. Observers note that many of the technological

advances in the past decade have been made by decentralized organizations that

permit component divisions to establish their own operational practices and develop

their own IT solutions without micro-management from a headquarters staff.

The External Team argued that “intelligence targets will continue to be

increasingly transnational in nature, and . . . alignment to geographical locations and

entities is obsolete.” Although all observers would agree that NSA cannot maintain

uniform depths of area expertise for all potential concerns, some suggest that there

are areas that will be of intense concern to the U.S. Government for decades to come

and dispersing area familiarities acquired over many years would be seriously

mistaken.

Congressional observers strongly support the use of NSA’s budget to establish

priorities. They do not indicate that they believe NSA has mishandled funds; they do

maintain that the Agency has not managed its budget to achieve managerial goals. In

1999 the House Intelligence Committee noted that “In the last two Congresses, the

27

Quoted in “NSA Overhauls Corporate Structure in Effort to Improve Operations,” Inside

the Air Force, June 23, 2000, p. 1.

28

“NSA Overhauls corporate Structure to Improve Operations.” Also, “NSA to Pursue

Government-Industry Partnership for Information Technology Infrastructure Services,” NSA

Press Release, June 7, 2000.

CRS-12

committee has been direct in its identification of process and management problems

that required attention,” but “NSA management has not yet stepped up to the line.”

The committee added that it “looks forward to the opportunities for change that

present themselves with the introduction of a new Director of NSA.”29

The Senate Intelligence Committee has urged that the NSA Director should have

greater authority over the 70% of cryptologic resources that are currently managed

by the military services. The military services operate collection sites, undertake

initial analysis, and provide direct support to military commanders. NSA is responsible

for tasking their efforts and for final analysis of the data they collect. Since service

cryptologic elements support both NSA and military commanders there are inevitably

differences over their disposition and responsibilities. Although the Senate Intelligence

Committee advocates the NSA Director have “centralized direction across the

SIGINT infrastructure as he implements his modernization strategy,”30 some in DOD

(and perhaps in Congress as well) would argue, however, that the need to configure

sigint resources in direct support of operational commanders would argue against

such augmented authorities for the leader of a Washington-area agency.

The House Committee, in reporting its version of the FY2001 Intelligence

Authorization Act in May 2000 (H.R. 4392), accepted the need for managerial

changes at NSA. Criticizing the traditional independence of NSA’s divisions, the

Committee argued that:

Each type of communication–radio, satellite, microwave, cellular, cable–is

becoming connected to all the others. Each new type of traffic shows up on every

type of communication. Unfortunately, as the global network has become more

integrated, NSA’s culture has evolved so that is seemingly incapable of responding

in an integrated fashion.

The House Committee argued that NSA must, as a result, “prepare itself for complex,

prioritized, carefully timed and integrated systems acquisitions that, in aggregate, rival

the complexity of programs commonly managed by the NRO, the Defense

Department, and commercial industry.”31

The House Intelligence Committee’s recommendations for significant shifts in

NSA’s budget have not yet been accepted. DOD urged that the changes not be

approved pending a review of the results of Hayden’s initial reorganization efforts.32

In particular, DOD, with support by the Senate Armed Services Committee, views

with concern any efforts to give the DCI influence over NSA that would detract from

29

H.Rept. 106-130, pp. 12-13.

30

S.Rept. 106-279, p. 7.

31

U.S. Congress, House of Representatives, 106th Congress, 2d session, Permanent Select

Committee on Intelligence, Intelligence Authorization Act for Fiscal Year 2001, H.Rept. 106620, p. 16.

32

Letter from the Chairman of the Joint Chiefs of Staff and the Secretary of Defense to

Chairman, Senate Armed Services Committee, reprinted in U.S. Congress, 106th Congress,

2d session, Senate, Committee on Armed Services, Intelligence Authorization Act for

FY2001, S.Rept. 106-325, pp. 8-9.

CRS-13

that of the Secretary of Defense. These separate approaches may not easily be

reconciled.

A major issue related to sigint in the post-Cold War environment is the erosion

of distinctions between foreign and domestic threats. For example, an attack from

outside the borders of the country through cyberspace could result in major damage

to U.S. institutions, but responsibilities for monitoring potential threats are complex

and in some ways ill-defined. Constitutional principles and statutes sharply distinguish

between information gathering by foreign intelligence and domestic law enforcement

agencies and efforts to involve NSA in surveillance of U.S. persons have been sharply

restricted. Various administrative arrangements have been made to facilitate

cooperation between NSA and the FBI and other law enforcement agencies in

gathering information on threats with both foreign and domestic components, but

many uncertainties remain. Many observers strongly oppose the use in court cases

of information derived from sigint provided by NSA at the same time, sigint specialists

are highly reluctant to see NSA diverted from its foreign intelligence missions to tasks

that may risk involvement in domestic controversies. Congress, included in the

FY20001 Intelligence Authorization bill (H.R. 4392, section 606) a requirement for

a report from the Attorney General regarding actions taken in regard to the

dissemination of intelligence information within the Justice Department. (This

provision replaced an earlier version that would have required the establishment of

procedures to accomplish this dissemination.)33

NSA and counterpart agencies in a number of other countries, especially Great

Britain, have come under much criticism in the European Parliament for allegedly

monitoring private communications of non-U.S. businessmen in a coordinated

electronic surveillance effort known as Echelon in order to support domestic

corporations. Some critics go further and charge that NSA’s activities represent a

constant threat to civil liberties of foreigners and U.S. persons as well. Though NSA

has reassured congressional oversight committees that the Agency complies strictly

with U.S. law, these controversies will undoubtedly continue.34

Conclusion

The National Security Act establishes sigint as a recognized function of the U.S.

Government and requires that it is usually to be carried out by NSA. The U.S.

Government thus has accepted responsibility for electronic surveillance activities that

are condemned (but not necessarily eschewed) by some foreign countries. Although

some specialists in international law argue that electronic surveillance is inherently

illegal, U.S. officials contend, based on constitutional responsibilities, statutes, and

long-established practice, that electronic surveillance related to national security and

33

See Richard A. Best, Jr., Intelligence and Law Enforcement: Countering Transnational

Threats to the U.S., CRS Report RL30252, July 2, 1999; also, J.M. McConnell, “The Future

of SIGINT: Opportunities and Challenges in the Information Age,” Defense Intelligence

Journal, Summer 2000, especially pp. 46-47.

34

For further information, see Appendix B.

CRS-14

preventing terrorism and international narcotics smuggling is a legitimate function of

the U.S. government. Unlike some foreign countries, the U.S. has not asserted a right

to conduct electronic surveillance to support its “economic well-being.”

Managing this effort in a changing geopolitical and technological environment,

according to knowledgeable observers and congressional overseers, requires that

NSA’s organization and operations be substantially altered. This process is currently

underway to strengthen the NSA Director’s role in managing the Agency, but many

uncertainties remain that will determine NSA’s future. No national security official

can confidently predict what collection priorities will exist in five years time, nor can

the equipment acquisition priorities be firmly projected very far into the future. With

congressional encouragement, the current leadership of NSA is drawing increasingly

on talent available in the civilian community to offset the difficulties involved in

retaining talented technological experts in a very tight sector of the labor market.

This effort may not result in the stable, loyal workforce that, in the past, led to NSA’s

gradual successes against Cold War targets. Some observers also believe that NSA

will ultimately require significant budgetary increases at a time when there is a

determination to restrict overall government spending.

The future success of NSA is by no means guaranteed. The current NSA

Director’s managerial initiatives and the move to use outside contractors have

widespread support, but these efforts may not achieve all their intended goals. NSA

may not be adaptable to radically changing developments in international

telecommunications and the bewildering emergence of terrorist groups previously

unheard of. The wider public may come to view NSA’s activities as inherent threats

to privacy that outweigh the value of information acquired. Attention will be paid to

the costs and benefits of allocating additional funds to NSA at a time when there are

sure to be competing demands.

The current level of congressional concern with NSA is unlikely to diminish.

Observers expect that, in the face of attacks on NSA by some in the media and by a

number of European parliamentarians, members of Congress will be asked to defend

or criticize not only NSA’s operations, but also its statutory roles and missions.

Funding for NSA’s efforts to adapt to altered geopolitical and technological

environments will have to be balanced against other competing needs. To a much

greater extent than in the past, observers expect that Congress will continue to

involve itself in internal changes in the Agency designed to acquire technological

capabilities to acquire information at a time when the volume of communications is

expanding exponentially, and access is greatly complicated by the spread of

sophisticated encryption systems.

CRS-15

Appendix A. Congressional Oversight of NSA:

A Brief Review

Codemaking and signals intelligence (sigint) have long been functions of

governments and military organizations.35 Although the United States gave less

attention to codemaking and codebreaking than the major European powers, U.S.

forces during World War I established a fairly extensive military sigint effort. In the

1920s and 1930s, the services maintained a small sigint effort and, for a time, the

State Department collaborated with the Army in operating an American “Black

Chamber” that attempted, with limited success, to intercept and decrypt foreign

diplomatic communications. By the time the United States entered World War II,

U.S. codebreakers were able to decrypt some codes of Japan, Germany, and other

foreign countries. Success in breaking Japanese diplomatic codes, achieved through

“the exercise of the greatest ingenuity and utmost resourcefulness”was acknowledged

publicly after the end of the war in the congressional report regarding the attack on

Pearl Harbor.36

During the course of World War II, sigint efforts proved to be exceptionally

valuable especially in regard to acquiring military information. The crucial victory at

Midway in June 1942 that halted Japan’s advance in the Pacific was gained through

sigint. The Allies’ ability to keep supplies flowing across the North Atlantic

depended on limiting U-boat attacks; this too was accomplished through good sigint.

Some observers have concluded that sigint enabled the Allies to end the war at least

a year earlier than would otherwise have been possible.

During World War II, cooperation with the British in sigint collection and

analysis proved very fruitful. Although both countries were initially reluctant to share

their codebreaking secrets, they gradually came to appreciate the advantages of

sharing both collection and analysis. Anglo-American cooperation did not end with

the conclusion of hostilities in 1945, but actually expanded with the beginning of the

Cold War and the expansion of U.S. security interests throughout the world. The

relationship with the British would eventually encompass the Canadians, Australians,

and, to a lesser extent, the New Zealanders.

35

For background, see David Kahn, The Codebreakers: the Story of Secret Writing (London:

Weidenfeld and Nicolson, 1967). The first substantial description of NSA’s activities was

James Bamford, The Puzzle Palace: A Report on America’s Most Secret Agency (Boston:

Houghton Mifflin, 1982). The creation of NSA is described in a 1952 document known as

the Brownell Report that was later declassified and published as George A. Brownell, The

Origins and Development of the National Security Agency (Laguna Hills, CA: Aegean Park

Press, 1981).

36

See U.S. Congress, 79th Congress, 2nd session, Joint Committee on the Investigation of the

Pearl Harbor Attack, Investigation of the Pearl Harbor Attack, Joint Committee Print, 1946,

p. 179. Congressional pressure led the Truman Administration to authorize public release of

information on the prewar sigint effort against Japan and the ensuing report included detailed

discussion of sigint efforts prior to the Japanese attack since they were part of a major

controversy surrounding the extent of preparedness at Pearl Harbor in 1941.

CRS-16

After the War, the Army and the Navy, and subsequently the newly independent

Air Force all continued sigint collection. An effort was made to coordinate the

services’ sigint efforts in a single organization known as the Armed Forces Security

Agency established by the Secretary of Defense in 1949. Coordination problems were

not, however, resolved until October 1952 when President Truman established the

National Security Agency in an effort to provide a more effective structure for

coordinating signals intelligence activities. Truman had determined that the sigint

function was “national,” that it would serve civilian policymakers in the State

Department and the White House as well as the military. This action was taken in a

secret memorandum that was not made public at the time.

NSA became the U.S. focal point of a global sigint effort. Signals are collected

at field stations throughout the world, most of which operated by the military services.

Some initial processing and analysis may have be performed at the collection site, but

in general the “take” is forwarded to NSA, which moved its headquarters from

Arlington, Virginia to Fort Meade, Maryland in 1957. After decryption and analysis,

the resultant data is provided to “all-source” intelligence agencies such as the CIA or

the Defense Intelligence Agency (DIA). NSA has always been staffed by a

combination of civil servants and active duty military personnel, but the Agency also

provides operational guidance to sigint collection stations maintained by the

cryptologic elements of the military services (collectively described as the Central

Security Service (CSS)).

During the Cold War, NSA’s operations, along with those of allied countries)

were primarily directed at the Soviet Union, its Warsaw Pact allies, and Communist

China. Massive efforts were made to collect sigint dealing with military threats to the

U.S. and its allies. In addition to sigint provided to national-level decision makers,

tactical sigint collection, analysis and reporting was incorporated in military

operations, including those occurring in the Korean and Vietnam Wars.

For many years NSA’s efforts did not receive much public scrutiny.

Congressional oversight was conducted by small sub-committees of armed services

and appropriations committees without public hearings. The first major legislation

dealing directly with NSA was the National Security Agency Act of 1959 (P.L. 8636). This Act did not describe the functions of NSA, but dealt with “housekeeping”

matters such as pay and allowances, training, property acquisition, and leasing, It

exempted NSA from the requirement to provide detailed information regarding

organizational and functional matters to the Civil Service Commission (the

predecessor of the Office of Personnel Management). These authorities are, in

general, similar to those exercised by the Director of Central Intelligence (DCI) in

regard to the CIA. The act has been amended from time to time and serves as the

statutory basis for NSA’s personnel policies that derive from its unique mission,

including special pay and allowances for overseas travel, professional and foreign

language training, and property leasing, and use of the NSA.

An exception to the practice of congressional reticence regarding NSA was a

report on a widely publicized defection in 1960 of two NSA employees to the Soviet

CRS-17

Union.37 The committee criticized personnel security procedures as shockingly lax

and in part as a result of congressional criticism of the handling of the Mitchell/Martin

case DOD tightened the security practices at NSA to ensure that background

investigations were completed prior to granting access to cryptologic materials. In

1964 P.L. 88-290 (known as Title III of the Internal Security Act of 1950) was

enacted to establish requirements for security investigations for persons working at

NSA. Observers note that it was an early reflection of the importance of congressional

oversight. It gave the NSA Director authority to terminate the employment of NSA

personnel “whenever he considers that action to be in the best interest of the United

States.” Such actions can be taken notwithstanding usual civil service procedures for

personnel actions. In 1996 these provisions were superseded by enactment of the

FY1997 National Defense Authorization Act (P.L. 104-201, sections 1631-1635)

which established intelligence personnel policies for the entire Defense Department,

including authority to terminate employees “in the interests of the United States.”

Appeals of decisions to terminate can only be made to the Secretary of Defense.38

In the mid-1970s, public concerns that U.S. intelligence agencies were spying on

domestic groups opposed to the Vietnam War led to hearings by select committees

in both chambers.39 Interest in NSA centered on “watch lists” that had been

maintained to collect communications of U.S. citizens who were suspected of ties to

hostile foreign countries and groups.40 There was also interest in a project, known as

Shamrock, by which copies of international telegrams were provided to NSA on a

daily basis by three telegraph companies. These practices had been terminated by the

early 1970's, but Members of Congress considered that the Agency should be held

accountable for them.41 (The desire to bring such practices under the constraints of

statutory law contributed to passage of the Foreign Intelligence Surveillance Act of

1978.)

During the hearings conducted by the Senate Select Committee to Study

Governmental Operations with respect to Intelligence Activities (known as the

Church Committee after its chairman, Senator Frank Church), for the first time a

Director of NSA testified in open session to give a public overview of NSA’s

37

U.S. Congress, 87th Congress, 2d session, House of Representatives, Committee on UnAmerican Activities, Security Practices in the National Security Agency (Defection of

Bernon F. Mitchell and William H. Martin), Report [Committee Print], August 13, 1962.

38

See General Accounting Office, Intelligence Agencies: Personnel Practices at CIA, NSA,

and DIA Compared with those of Other Agencies, GAO/NSIAD-96-6, March 1996.

39

See Loch K. Johnson, A Season of Inquiry: Congress and Intelligence (Chicago: Dorsey

Press, 1988).

40

See Morton H. Halperin, The Lawless State: the Crimes of the U.S. Intelligence Agencies

(New York: Penguin, 1976).

41

See U.S. Congress, 94th Congress, 2d session, Senate, Select Committee to Study

Governmental Operations with respect to Intelligence Activities, Supplementary Detailed Staff

Reports on Intelligence Activities and the Rights of Americans, Book III, 1976, pp. 765-776.

The congressional investigation of Shamrock is described by a participant, L. Britt Snider,

“Unlucky Shamrock: Recollections from the Church Committee’s Investigation of NSA,”

Studies in Intelligence, Winter 1999-2000.

CRS-18

responsibilities. Lt. General Lew Allen, Jr., citing the statutory and other authorities

under which NSA carried out its responsibilities, stated:

This mission of NSA is directed to foreign intelligence, obtained from foreign

electrical communications and also from other foreign signals such as radars.

Signals are intercepted by many techniques and processed, sorted and analyzed by

procedures which reject inappropriate or unnecessary signals. The foreign

intelligence derived from these signals is then reported to various agencies of the

government in response to their approved requirements for foreign intelligence.42

Allen also explained in some detail the practice of establishing “watch lists” by which

“words, including individual names, subjects, locations, etc.” could be identified

within a stream of communications to separate useful information from the vast

quantities of chatter. Particular attention was paid to retrieving information relating

to terrorism, narcotics, and–a particular concern of the Johnson and Nixon

Administrations–foreign influences on domestic groups suspected of fomenting civil

disturbances in the U.S. in protest against the U.S. role in the Vietnam war.

Allen indicated that, pursuant to presidential direction, the Secretary of Defense

had established NSA in accordance with his statutory authorities. He noted further

that “for the past 22 years [i.e., since circa 1953], Congress has annually appropriated

funds for the operation of the NSA, following hearings before the Armed Services and

Appropriations Committees of both Houses of Congress in which extensive briefings

of the NSA’s signals intelligence mission have been conducted.”43

The Church Committee concluded:

The National Security Agency is one of the largest and most technically

oriented components of the United States intelligence community. Its basic

function is collecting and processing foreign communications and signals for

intelligence purposes. NSA is also responsible for creating and supervising the

cryptography of all United States Government agencies, and has a special

responsibility for supervising the military services’ cryptologic agencies. Another

major responsibility is protecting the security of American communications.

The Committee regards these functions as vital to American security. NSA’s

capability to perform these functions must be preserved. The Committee notes

that despite the fact that NSA has been in existence for several decades, NSA still

lacks a legislative charter. Moreover, in its extensive investigation, the Committee

has identified intelligence community abuses in levying requirements on NSA and

abuses by NSA itself in carrying out its functions. These abuses are detailed in

the domestic portion of the Committee report. The Committee finds that there is

a compelling need for an NSA charter to spell out limitations which will protect

42

Testimony of Lt. Gen. Lew. Allen, Jr., Director, National Security Agency in U.S.

Congress, 94th Congress, 1st session, Senate, Select Committee to Study Governmental

Operations with Respect to Intelligence Activities, Hearings, vol 5. The National Security

Agency and Fourth Amendment Rights, 1976, p. 17.

43

Ibid., p. 8.

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individual constitutional rights without impairing NSA’s necessary foreign

intelligence mission.44

Thus, even a committee widely perceived as antagonistic to intelligence agencies

concluded that NSA’s sigint mission is “vital to American security.” It urged,

however, a better statutory framework for the Agency and an enhanced role for

congressional oversight to ensure that NSA was not misused in ways that would

undermine American liberties.

The complete final report of the House Select Committee on Intelligence (known

as the Pike Committee) was never made public, but its published recommendations

also included a proposal that the existence of NSA be recognized by specific

legislation, that such legislation provide for civilian control of NSA, and that the role

of NSA with reference to the monitoring of communications of Americans be

defined.45

Many of the most important statutory provisions relating to NSA were enacted

in the wake of these congressional investigations. Congress passed the Foreign

Intelligence Surveillance Act of 1978 (FISA) (50 USC 1801) which establishes

procedures for electronic surveillance in the United States for foreign intelligence

purposes.46 It provides that the Attorney General may authorize surveillance in

situations wherein the target is communications of foreign powers; in cases in which

communications of U.S. persons might be acquired, then approval of a court, created

pursuant to the FISA, would be required. Information acquired in accordance with

FISA provisions is to be used for foreign intelligence purposes (even though in recent

years Congress has expanded FISA to permit use of some types of information

acquired under its provisions to be used for law enforcement purposes in certain

circumstances). FISA, in essence, ensures that foreign intelligence electronic

surveillance operations within the United States are conducted in accordance with

statutory authorities and with supervision by the Justice Department (and with

oversight by Congress).

Although in the Pearl Harbor investigations, the U.S. Government officially

revealed its prewar sigint efforts, ongoing sigint activities had not been acknowledged.

FISA provided authority in U.S. statutory law for electronic surveillance activities to

be conducted for foreign intelligence (rather than law enforcement) purposes. In

enacting the statute the United States Government accepted responsibility for NSA’s

activities no matter how they might be regarded in other countries. FISA does of

course provide ample warning to foreign countries and foreign groups that the U.S.

undertakes electronic surveillance when it perceives it necessary. While the argument

44

U.S. Congress, 94th Congress, 2d session, Senate, Select Committee to Study Governmental

Operations with respect to Intelligence Activities, Foreign and Military Intelligence, Book

I, Final Report, S.Rept. 94-755, April 26, 1976, p. 464.

45

U.S. Congress, 94th Congress, 2d session, House of Representatives, Select Committee on

Intelligence, Recommendations of the Final Report of the House Select Committee on

Intelligence, H.Rept. 94-833, February 11, 1976, p. 3.

46

See (name redacted),

The Foreign Intelligence Surveillance Act: An Overview of the

Statutory Framework for Electronic Surveillance, CRS Report RL30465, May 17, 2000.

CRS-20

was made that such activities are best undertaken without formal legal authorization

and without the Government’s accepting responsibility for them, Congress specifically

rejected that argument in the belief that intelligence activities, including electronic

surveillance, are necessary to protect the national security and that the U.S.

Intelligence Community should be subject to law and to oversight by Congress.

In addition to FISA, there were also efforts to establish a “legislative charter” for

the agencies of the Intelligence Community, including NSA. Testifying in February

1980, the then Director of NSA, Vice Admiral Bobby R. Inman, supported charter

legislation, noting that “while the Agency has been provided with significant

Congressional guidance and protection with respect to the information and products

produced by the Agency, there was little Congressional guidance on the functions and

responsibilities of the Agency and few Congressionally provided statutory tools to be

used to perform those functions.”47 Charter legislation for the entire Intelligence

Community became very complex and ultimately was a victim of partisan disputes in

the late 1970s.48 It was not until 1992 that the National Security Act was amended to

provide a functional charter for NSA.49 The Act now gives the Secretary of Defense

the responsibility to ensure:

through the National Security Agency (except as otherwise directed by the

President or the National Security Council), the continued operation of an effective

unified organization for the conduct of signals intelligence activities and shall

ensure that the product is disseminated in a timely manner to authorized

recipients....

Guidance for NSA’s activities has been further detailed in a series of executive

orders.50 E.O. 12333, signed by President Reagan on December 4, 1981 after

extensive consultation with Congress, and still in effect, tasks the Secretary of

Defense with responsibilities for NSA including:

(1) Establishment and operation of an effective unified organization for signals

intelligence activities, except for the delegation of operational control over certain

operations that are conducted through other elements of the Intelligence

Community. No other department or agency may engage in signals intelligence

activities except pursuant to a delegation by the Secretary of Defense;

(2) Control of signals intelligence collection and processing activities, including

assignment of resources to an appropriate agent for such periods and tasks as

required for the direct support of military commanders;

47

Testimony of B.R. Inman, Vice Admiral, U.S. Navy and Director of National Security

Agency, U.S. Congress, 96th Congress, 2d session, Senate, Select Committee on Intelligence,

National Intelligence Act of 1980, Hearings, 1980, p. 67.

48

See John M. Oseth, Regulating U.S. Intelligence Operations: A Study in Definition of the

0National Interest (Lexington, KY: University Press of Kentucky, 1985).

49

50

By the Intelligence Authorization Act for FY1993 (P.L. 102-496, section 705).

The first, E.O. 11905, was issued by President Ford on February 18, 1976; the second,

E.O. 12036, was issued by President Carter on January 24, 1978.

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(3) Collection of signals intelligence information for national foreign intelligence

purposes in accordance with guidance from the Director of Central Intelligence;

(4) Processing of signals intelligence data for national foreign intelligence purposes

in accordance with guidance from the Director of Central Intelligence;

(5) Dissemination of signals intelligence information for national foreign

intelligence purposes to authorized elements of the Government, including the

military services, in accordance with guidance from the Director of Central

Intelligence;

(6) Collection, processing and dissemination of signals intelligence information for

counterintelligence purposes;

(7) Provision of signals intelligence support for the conduct of military operations

in accordance with tasking, priorities, and standards of timeliness assigned by the

Secretary of Defense. If provisions of such support requires use of national

collection systems, these systems will be tasked within existing guidance from the

Director of Central Intelligence.

(8) Executing the responsibilities of the Secretary of Defense as executive agent

for the communications security of the United States Government;

(9) Conduct of research and development to meet the needs of the United States

for signals intelligence and communications security;

(10) Protection of the security of its installations, activities, property, information,

and employees by appropriate means, including such investigations of applicants,

employees, contractors, and other persons with similar associations with the NSA

as are necessary;

(11) Prescribing, within its field or authorized operations, security regulations

covering operating practices, including the transmission, handling and distribution

of signals intelligence and communications security material within and among the

elements under control of the Director of NSA, and exercising the necessary

supervisory control to ensure compliance with the regulations;

(12) Conduct of foreign cryptologic liaison relationships, with liaison for

intelligence purposes conducted in accordance with policies formulated by the

Director of Central Intelligence; and

(13) Conduct of such administrative and technical support activities within and

outside the United States as are necessary to perform the functions described in

sections (1) through (12) above, including procurement.

As noted above, in 1976 the Pike Committee urged civilian leadership for NSA.

NSA has always been headed by military officers, but they have served under the

direction of both the civilian Secretary of Defense and the (usually) civilian Director

of Central Intelligence. In accordance with subsequent amendments to the National

Security Act, Directors of NSA are now appointed by the President upon the

recommendation of the Secretary of Defense with the concurrence of the DCI

(although a recommendation can be submitted without the DCI’s concurrence if the

CRS-22

fact of non-concurrence is stated). In recent years, few observers express concerns

about the NSA Director being a serving officer.

The amended National Security Act also provides that the DCI develops budgets

for the annual National Foreign Intelligence Program which includes NSA. The DCI

also establishes the requirements and priorities that govern the collection of national

intelligence. These provisions provide authority for the DCI to oversee NSA’s budget

and operations. There are, however, multiple occasions for differences between the

roles of the Secretary of Defense and the DCI. The Defense Secretary is inevitably

more focused on aligning NSA closely with the operating forces of DOD and tends

to emphasize collection of direct interest to military commanders. The DCI, for his

part, tends to see NSA as one component of an interagency effort to gather

intelligence for senior policymakers in Washington; he approves collection and

analysis priorities that reflect their requirements. These respective responsibilities are

well understood; defense and intelligence staffs attempt to make adjustments to

accommodate differing requirements within budgetary constraints. Any major

reorganization or redirection of efforts, however, that could affect NSA’s ability to

support either national policymakers or military commanders would be sure to

generate criticism from one quarter or another.

The Pike and Church Committees also laid the groundwork for permanent

intelligence committees. Subsequent to the establishment of the committees (the

Senate Select Committee on Intelligence and House Permanent Select Committee on

Intelligence) in 1976-1977, Members and staff have regularly reviewed NSA

programs and adjusted budgetary priorities with almost all hearings being conducted

in closed sessions. NSA spending (along with the cryptologic activities of the services

and other agencies) is authorized in annual intelligence authorization laws with

funding levels indicated only in classified annexes. The two armed services

committees also have oversight of most intelligence programs since they involved

Defense Department assets.

CRS-23

Appendix B. Cooperation with Other Countries and the

Echelon Controversy51

Although sigint collection and analysis are among the most sensitive activities

undertaken by the U.S. Government, close cooperation in these efforts is maintained

with several other countries–principally, but not limited to, the United Kingdom,

Canada, Australia, and New Zealand. These relationships began during the Second

World War when agreements to share signals intelligence were made between the

military services of the United States and Great Britain, with separate arrangements

made with other Commonwealth countries. This cooperation was widely considered

by senior military leaders at the time, and by historians subsequently, with having

significantly reduced the amount of time needed to defeat Nazi Germany and Japan

as well as the number of Allied casualties. Although both the United States and Great

Britain tackled various communications links of the Japanese and Germans (along

with those of other countries), arrangements were worked out whereby the American

effort was concentrated on the Japanese and the British on the Germans. The division

of labor reflected resource limitations–especially among skilled cryptologists–and

possession of geographical sites from which enemy transmissions could be

intercepted.

With the end of hostilities in 1945, both British and American intelligence

officials were reluctant to terminate a highly productive cooperative arrangement.

There was continued military cooperation between the two countries in occupation

duties in various areas and, when the Soviet Union began to be considered a threat

to both countries, intelligence cooperation continued. Cooperation with Canada was

considered essential in view of potential Soviet military activities originating in Arctic

regions. Formal arrangements to cooperate in collecting and analyzing sigint were

made by the two countries (and others) given shared geostrategic interests and limited

resources that did not permit expansive unilateral efforts. These agreements were

conducted in great secrecy at the time and remain largely classified a half-century

later.52

The sigint relationship with the British and other Commonwealth countries has

attracted criticism from a number of sources over the years.53 To an extent a close

intelligence relationships arguably predispose military and political leaders to

51

See also Richard A. Best, Jr., Project Echelon: U.S. Electronic Surveillance Efforts, CRS

Report RS20444, Updated March 2, 2000.

52

Post-World War II sigint cooperation with the British was authorized by President Truman

as early as September 1945 in approving a recommendation by the Secretaries of State, War,

and the Navy. See Christopher Andrew, “The Making of the Anglo-American SIGINT

Alliance,” in Hayden B. Peake and Samuel Halpern, eds., In the Name of Intelligence: Essays

in Honor of Walter Pforzheimer (Washington: NIBC Press, 1994), pp. 104-105; also,

Bradley F. Smith, The Ultra-Magic Deals and the Most Secret Special Relationship (Novato,

CA: Presidio Press, 1993); Stephen Budiansky, “The Difficult Beginnings of US-British

Codebreaking Cooperation,” Intelligence and National Security, Summer 2000.

53

See, for instance, Duncan Campbell, The Unsinkable Aircraft Carrier: American Military

Power in Britain (London: Michael Joseph, 1984).

CRS-24

coordinated policies. Some observers object to international agreements made without

the formal advice and consent of the U.S. Senate. The secret relationships have been

criticized by observers in the U.S., Britain, Australia and elsewhere who oppose

international entanglements. Some observers from European Union countries express

concern that sigint cooperation among the “Anglo-Saxons” might work against their

own economic interests.

Supporters of the such relationships with other countries point to the advantages

in shared efforts that conserve intelligence resources. The United States, Britain,

Canada, Australia, and New Zealand often have common policies on important

international issues, but the existence of close intelligence ties has not precluded

different policies (or even, as at Suez in 1956, opposing policies) when national

leaders felt them necessary. In the post-Cold War environment, observers believe

that sigint cooperation with a number of friendly countries maximizes opportunities

to obtain information regarding disparate regional threats from terrorist groups,

narcotics traffickers, and dealers in nuclear and other substances used in making

weapons of mass destruction.

NSA has long been the target of criticism from those who view intelligence

agencies as inevitable threats to civil liberties. In general, however, the Agency’s low

public profile and the esoteric nature of its work attracted less attention than the more

dramatic covert actions undertaken by the CIA. In the past few years, however,

reports prepared under the auspices of the Directorate-General for Research of the

European Parliament have described U.S. electronic surveillance efforts. The studies,

known as Scientific and Technological Options Assessments (STOA), are prepared

by contractors and not by European Parliament’s official staff. A series of these

reports have severely criticized NSA, charging it with working together with sigint

organizations of the United Kingdom, Canada, Australia, and New Zealand to gather

commercial communications and providing the intercepts to U.S. business interests

to give them advantages over foreign firms.54

The criticisms of NSA by these reports have been echoed by media commentary.

One account claims that

It is the new Cold War. The United States intelligence agencies, facing downsizing

after the fall of the Berlin wall, have found themselves a new role spying on

foreign firms to help American business in global markets.

Echelon is part of a British and American-run world-wide spy system that can

“suck up” phone calls, faxes and e-mails sent by satellite. America’s intelligence

agencies have been able to intercept these vital private communications, often

between foreign governments and European businesses, to help the US win major

contracts.55

54

See especially Interception Capabilities: Report to the Director General for Research of

the European Parliament, Scientific and Technical Options Assessment Programme Office,

European Parliament, April 1999.

55

Duncan Campbell and Paul Lashmar, “The New Cold War: How America Spies on Us for

(continued...)

CRS-25

Some media accounts state that this entire cooperative endeavor has the codename

Project Echelon; others believe that Echelon refers only to the process by which

computers operated by cooperating sigint agencies sift through many thousands of

intercepts for ones containing pre-programmed key words.56

U.S. intelligence officials have responded to these charges by describing the

statutory framework under which NSA operates and the oversight mechanisms in

place in both the Executive and Legislative Branches. There have been categorical

denials that intelligence is passed to U.S. companies to provide them commercial

advantages although it is freely acknowledged that sigint is used to provide the U.S.

Government with information about bribery and other illegal practices of foreign firms

and that this information has been used as the basis for diplomatic complaints.57

NSA has successfully persuaded the congressional leadership that it faithfully and

responsibly conducts its electronic surveillance activities in accordance with law and

relevant executive orders. Section 309 of the Intelligence Authorization Act for

FY2000 (P.L. 106-120) required that the Director of NSA submit a report (to be

prepared jointly by the Director of NSA, the DCI, and the Attorney General)

providing a detailed analysis of the legal standards used in conducting signals

intelligence activities, including electronic surveillance. The report was submitted in

February 2000 and set forth the legal bases for NSA’s activities, emphasizing its

commitment to respect the privacy rights of U.S. persons. In a public hearing to

discuss the report, Representative Goss, Chairman of the House Intelligence

Committee, concluded that “our safeguards are in place and are working.”58

Most U.S. observers give credence to the official U.S. position, especially given

the absence of evidence that U.S. companies are pressuring the Government for help

in learning about foreign technologies. Observers suggest, in addition, that any U.S.

intelligence assistance to a U.S. firm in winning a foreign contract would provoke

strong criticism by a disadvantaged U.S. competitor.59 Former DCI R. James

55

(...continued)

its Oldest Friend–the Dollar,” Independent (London), July 2, 2000. Campbell and Lashmar

detail instances in which the U.S. Government complained to foreign countries that European

firms were attempting to bribe their officials and, as a result, the contracts ultimately went to

U.S. firms. They quote others as maintaining that U.S. officials pass intelligence information

directly to U.S. corporations.

56

See Jeffrey Richelson, “Desperately Seeking Signals,”Bulletin of Atomic Scientists,

March/April 2000.

57

“With respect to allegations of industrial espionage, the notion that we collect intelligence

to promote American business interests is simply wrong. We do not to [sic] target foreign

companies to support American business interests.” Federal News Service, Prepared

Testimony of George J. Tenet, Director of Central Intelligence Before the House Committee

on Intelligence, April 12, 2000, p. 4.

58

Federal News Service, Hearing of the House Permanent Select Committee on Intelligence,

April 12, 2000, p. 33.

59

There is no provision in U.S. law for foreign intelligence agencies to assist U.S. firms and

(continued...)

CRS-26

Woolsey has maintained that U.S. intelligence agencies do not collect information

about foreign technology because American technology is, in general, far superior.

There is, however, he argues, a real need to seek information about corrupt practices

by foreign competitors and activities such as transfers of dual-use technologies for use

in production of weapons of mass destruction as well as activities in countries subject

to U.N. sanctions.60

Some foreign observers continue to dispute U.S. claims and they will not easily

be persuaded that their concerns are ill-founded. Suggestions of NSA electronic

eavesdropping have clearly had resonance among members of the European

Parliament which voted on July 5, 2000 to undertake a lengthy investigation of

Echelon. The investigation will not include the calling of witnesses and, interestingly,

an amendment calling for an investigation of eavesdropping by all EU governments

was not adopted.61 In part, foreign objections stem from concern about the

capabilities of NSA to monitor their communications and those of European

companies. There is also, especially among some, irritation that the United States has

a closer sigint relationship with some of its allies than with others. In part, however,

observers perceive attacks on NSA’s activities as instinctive hostility among political

elements long skeptical of close U.S.-European relations and determined to forge a

more independent European identity. Some objections also undoubtedly arise from

deep-seated opposition to the work of all intelligence agencies.

There is no question that the worldwide capabilities of NSA cause suspicion and

resentment among some foreign elements. U.S. officials justify NSA’s activities on

international law, the necessity to acquire information about threats to national

security, international terrorism, and the narcotics trade. While the potential for abuse

is acknowledged, the United States has a legal structure that regulates electronic

surveillance. In addition, intelligence derived from sigint supports many collective

military and diplomatic efforts with European and other allies.

59

(...continued)

there are important privacy protections mandated by FISA. On the other hand, Article 8 of

the European Convention on Human Rights recognizes a right of privacy that is not to be

interfered with except as is necessary in “the interests of national security, public safety or the

economic well-being of the country.” (Emphasis added.) The full implications of this

provision are uncertain, but it would not necessarily preclude the interception of

communications by intelligence agencies to obtain commercial advantages for their country’s

businesses.

60

61

R. James Woolsey, “Why We Spy on Our Allies,” Wall Street Journal, March 17, 2000.

Ambrose Evans-Pritchard, “GCHQ Faces Inquiry over US `Spying’ on Europe,” Electronic

Telegraph, July 6, 2000.

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