Civilian Warriors: The Inside Story of Blackwater and the Unsung Heroes of theWar on Terror (11 page)

It’s true that not all those ideas panned out. The Army ultimately decided against buying the Grizzly. There were no Blackwater blimps in the skies over Baghdad. And the idea of “relief with teeth,” as I called the humanitarian team, didn’t sit well with some Washington insiders. But such is the price of continually innovating: Whatever the government needed—whatever the government might suddenly realize it needed—my team was determined to offer it.

All told, I probably spent $100 million on various Blackwater projects that never went anywhere. But I knew that if we threw enough darts at the board, we were bound to hit the bull’s-eye—more than once. I’d learned that early on, watching my father design a propeller-driven snowmobile that never caught on. Then he built a ham-deboning machine—which sold all right, apparently, in Bulgaria—and a light for a sock drawer. They were misfires, all of them, but he was never at a loss for ideas. And then one day he decided to stick that light in a car visor. GM ordered five thousand of those before Prince Manufacturing had even manufactured the first one. And by the end of
2006, Blackwater had hit the bull’s-eye enough to bring in a total of one billion dollars in federal contracts.

•   •   •

G
rowing up in Michigan, I knew the “Big Three” as Ford, GM, and Chrysler. With Blackwater, they became the State Department, the CIA, and the Department of Defense. Large clients are an obvious blessing, but when there are only a few of them, they’re guaranteed to set prices as low as possible. It’s logical business from their standpoint—you squeeze the producer to get a better deal. In my father’s line of work, auto parts manufacturers competed with one another by accepting slim profit margins. I was forced to do the same with Blackwater. And you know what? I was all for it.

From 2000 to 2005, the span when my company really gained traction,
government procurement spending rose by 86 percent
, to $377.5 billion annually, according to a special investigation by the House Committee on Oversight and Government Reform.
By 2005, the federal government spent a record
forty cents of every discretionary dollar on contracts with private companies. Considering world events, it’s no surprise the department with the largest contract dollar growth during that time was the DoD: “
In 2000, the Defense Department spent $133.5 billion
on federal contracts. By 2005, this spending had leaped by $136.5 billion to $270 billion, an increase of 102 percent,” according to the report. “In 2005, the Defense Department consumed over 70 percent of the total federal procurement budget.”

Meanwhile, the department with the largest contract
percentage
growth over that span? State. In 2000 it spent $1.2 billion on federal contracts.
Five years later, the department’s contract spending
had increased by $4.1 billion, to $5.3 billion—a jump of more than 330 percent.

My company was working for both of them. But the huge difference between the customers I sold to and the ones my father did was
that the government is buying contractor services with your money. And my money. It’s taxpayer dollars that fund wars, and fund private military contracts. The government
should
be fighting for the best deal it can get. And to do that, it should procure those goods and services at fixed costs. Make the provider assume the risk of losing money if he’s sloppy. In exchange for that risk, assuming he does his job, the supplier can anticipate a reasonable profit. That fixed-cost approach is how Blackwater did business every time we could. You might not think it’s so revolutionary, but with government contracting it is.

Traditionally, suppliers angle for a cost-based model, wherein the contractor is reimbursed for his total costs to get the job done, whatever they end up being. Or even worse, they use a “cost-plus” model that then tacks on an extra percentage of those total costs as pure profit. Not only does that system disincentivize a contractor from being careful with taxpayer dollars, but it achieves exactly the opposite. “
The incentive for businesses in a regular free market
is to drive down costs to maximize profit margins,” says Peter W. Singer, the Brookings Institution scholar. “In the cost-plus mechanism, an incentive exists to raise costs, because your profit is based on the costs and goes up the more there are. It’s a wicked reversal of the free market. [The cost-plus model] completely turned Adam Smith on his head.”

Put another way: It’s an absurd way to do business. And equally absurd is that it isn’t just cavalier contractors who seem to prefer it. We found many preprogrammed federal contracting officers were just as fond of the lazy accounting of simply paying a set percent on top of the total costs. In fact, between 2000 and 2005 the government’s use of cost-plus contracts increased by 75 percent, to $110 billion, according to that congressional investigation. Worse,
according to the report, “nearly half was spent
on cost-plus-award-fee contracts, a type of cost-plus contract in which it is possible for the contractor to receive millions in profits even if the contract goes over budget.” No wonder some contractors get such a reputation for greed—and that the issue came up in the very first presidential
debate between Senators John McCain and Barack Obama in 2008. “Particularly in defense spending, which is
the largest part of our appropriations
,” McCain insisted, “we have to do away with cost-plus contracts.”

By 2005, less than two years after the invasion of Iraq, the Defense Department was responsible for
roughly 70 percent of the federal government’s expenditures
on cost-plus contracts—and it oversaw seven of the eleven individual contracts worth over a billion dollars apiece. (NASA and the Department of Energy each had a pair of projects on that list.) Combined, those seven DoD contracts were worth nearly $18 billion in 2005 alone.
At the top of the cost-plus list
, Halliburton–Kellogg Brown & Root took home more than $5 billion in 2005 for its LOGCAP contract with the Army to provide food, shelter, and other support services to troops in Iraq, Afghanistan, and beyond.

That’s important for two reasons: First, Blackwater wasn’t on those lists. My background, and my company’s name recognition, always led to some cartoonish public perception of how much revenue we must be generating. And it’s true we didn’t argue when people suggested we were successful. But compared to a DoD provider making $5 billion on one contract in one year, our cumulative total of $1 billion in contracts by 2006 meant we were always punching way above our weight class. The second reason: There was plenty of money flying around without having to rig the system with shadowy cost-plus contracts. Looking back on it, I’m almost embarrassed I didn’t make
more
money with Blackwater. But here’s one example of why I didn’t:

On November 22, 2003, not long after our Little Birds made it to Baghdad, terrorists shot down a DHL Airbus cargo plane with a surface-to-air missile.
The heroic landing by the three members
of the flight crew—who wrestled the severely damaged A300 to the ground from eight thousand feet up without the use of any functional flight control surfaces while the plane was leaking fuel and on fire—has become famous in aviation circles. It also led to a prompt reevaluation of risks by DHL’s insurance company, which happened to be our
insurance company, too. They immediately yanked our aircraft coverage, then offered to sell it back to us at twice the rate for half the protection. So after a little back-of-the-envelope math, we decided to self-insure our helicopters—meaning that if any were shot down, Blackwater would simply eat the material loss. And those losses would come.

Under a cost-plus contract, a firm could simply bundle those insurance fees in with their overhead, slide it past a contracting agent, and let the taxpayers foot the bill. Yet my company could still be aggressive, I knew, still be profitable, and that didn’t require padding the paperwork. Our tack was more honest, more straightforward, and saved the taxpayers money by keeping us focused on delivering a great product at a competitive price.

No surprise: That approach appealed to a number of high-ranking personnel trapped in the federal bureaucracy. And soon they brought us another opportunity for Blackwater to expand.

•   •   •

J
oseph Cofer Black once told me he thought about leaving government work when he found himself climbing out a car window.

The man who would one day become vice chairman
of Blackwater began his CIA career in 1974. Nearly twenty years later, he became the agency’s station chief in Khartoum, Sudan. His appointment coincided with the State Department
labeling the country a state sponsor of terrorism
, thanks in part to its harboring the leadership of what was then a fledgling militant group known as al-Qaeda. At the time, thirty-five-year-old rebel leader Osama bin Laden was largely unknown to anyone outside the Muslim world or intelligence circles. And people within those circles had a far larger target in Khartoum, anyway: Ilich Ramírez Sánchez, a Venezuelan-born killer aligned with the Popular Front for the Liberation of Palestine, whose nearly two-decade-long bombing spree had earned him the nickname “Carlos the Jackal.” He was
perhaps the most famous terrorist of his time
—and a figure Cofer Black was hell-bent on hunting down.

For months under Black’s watch, CIA personnel in Khartoum collected intelligence about the Jackal, eventually collaborating with French secret service agents who would apprehend the terrorist. After a minor surgical procedure on August 13, 1994, Sánchez was reportedly
moved from Ibn Khaldoun hospital
to a private villa by Sudanese police, who claimed they’d uncovered a plot to kill him.
In reality, the police were cooperating with Black’s team
—and the villa’s “security guards” tranquilized the terrorist in the middle of the night, bound his hands and feet, and tossed him onto a private jet bound for France.

It was a career-making success, leading to
Black’s appointment as CIA task force chief
for the Near East and South Asia Division in 1995, followed by a prominent role with the agency’s Latin America Division in 1998. By then, however, bin Laden had proven himself an international menace. The CIA knew that the terrorist, now living in Afghanistan, was responsible for the 1993 deaths of eighteen Army personnel working in Somalia as part of Operation Restore Hope, which delivered food to starving children. Bin Laden was also behind the murder of five more Americans in a November 1995 truck bombing at a U.S.-operated Saudi Arabian National Guard training center in Riyadh, along with the hundreds dead from the embassy bombings in Nairobi and Tanzania in 1998.

Al-Qaeda’s ambition, and destructive power, were growing. In December 1998, CIA director
George Tenet circulated a memo
among the intelligence community declaring “we are at war” with the terrorist organization. Soon after, Black was named the head of the CIA’s Counterterrorism Center, or CTC, and tasked with overseeing Alec Station—a special unit focused on stopping bin Laden.

The twenty-five-year intelligence veteran was a logical choice for the job. For one, Black held the distinction of being one of the few people bin Laden had ever personally marked for death yet failed to kill. Back in Khartoum in 1995
bin Laden had discovered Black
was CIA—and put the crosshairs on him. Black’s travel through town was soon watched by insurgents;
intelligence personnel countersurveilling
the terrorists even saw them stage a mock ambush on a city backstreet as practice for murdering the station chief. (Ultimately, the
U.S. ambassador to Sudan complained
about the threat to the local government, shutting down the plot.) Tenet knew Black would have a personal stake in bin Laden’s downfall.

Black was also a colorful character. This was, after all, the man who would one day demand the Jawbreaker team in Afghanistan bring back bin Laden’s head in a box. (Little wonder why.) The veteran’s confidence has been misrepresented by some as loose-cannon cockiness, but make no mistake: That swagger is just what the intelligence realm needed at the time. Even Richard Clarke, the White House counterterrorism czar with whom Black would later publicly butt heads about pre-9/11 intelligence failures, saw Black as a key member of the team. “
He had a reputation as a bit of a cowboy
,” Clarke said. “So when I was urging Tenet to get someone to run CTC who had balls, he came back to me and said, ‘Well, all right. I found this guy, and I don’t know him personally, but by all reports he’s got big
cojones
.’ And when [Black] showed up, it was really a breath of fresh air.”

In the days following 9/11, Black spearheaded the agency’s push to crush al-Qaeda and the Taliban in Afghanistan. It would be a decade, of course, before bin Laden was finally killed; in that time, the CTC chief’s role with the government, and his interest in working for it, would shift.

In late 2002 President Bush appointed Black the State Department’s coordinator for counterterrorism, making him the man responsible for coordinating America’s counterterrorism cooperation with foreign governments. Black was granted the rank of ambassador at large.

His transition away from the CIA came at a time the intelligence community was undergoing its own transition. By the early 2000s, the CIA and National Security Agency were outsourcing intelligence work almost as feverishly as the Defense Department farmed out security.
At the start of the decade, government agencies
were
spending roughly $20 billion per year on intelligence contracts.
By 2003, a snowballing dependence on contractors
had pushed that number to more than $40 billion.

Beyond budgets going haywire, the politics within the intelligence community had become more volatile than usual after 9/11, and the overnight escalation of sheer manpower was dizzying. Black saw that firsthand as a new ambassador at State, driving back to Langley one afternoon for a friend’s retirement party. He reportedly pulled into the CIA’s parking lot, only to find it completely packed.
Even the VIP lot was full
, but for a tiny spot way too narrow for his car. Black wedged into the space, shut off the ignition—and with no other option, climbed out the driver’s-side window.