National Security

Exclusive: Pentagon Withholds Internal Report About Flawed $2.7 Billion Intel Program

Why won't senior officials show Congress evidence of a cheaper, off-the-shelf alternative to the military's Afghan battlefield needs?

The Army has spent years defending a multibillion-dollar intelligence system that critics say costs too much and does too little. A new internal report has found that there's a simple, relatively inexpensive program that could handle many of the same jobs at a fraction of the cost. For the past eight months, though, the Pentagon has kept the report hidden away.

Members of Congress have been asking Defense Department officials to send them the assessment, a copy of which was obtained by Foreign Policy, but the Pentagon has yet to do so. At issue is the Army's Distributed Common Ground System, expected to cost nearly $11 billion over 30 years and built by a consortium of major Beltway contractors, including Raytheon, Northrop Grumman, Lockheed Martin, and General Dynamics. The system is meant to give troops on the ground an easy way to collect intelligence about terrorists and enemy fighters, and then create detailed reports and maps that they can share with each other to plan and conduct operations. But critics -- and even some troops -- have long complained that the system doesn't actually work. They say it's too slow and hard to use, and that it has left them searching for alternatives in the war zone.

The system's high cost and technical failings prompted a search for other options. Palantir Technologies, a fast-growing Silicon Valley firm, told the Pentagon that its off-the-shelf systems could accomplish most of the same tasks but cost far less -- millions, rather than billions. The Marine Corps, Special Operations forces, the CIA, and a host of other government agencies already use it. Army officials, though, said Palantir wasn't up to the job. Now, a 57-page report by the Pentagon's acquisitions arm basically says the Army was wrong to dismiss the Palantir system. The study instead gives Palantir high marks on most of the Army's 20 key requirements for the intelligence system, including the ability to analyze large amounts of information, including critical data about terrorist networks and the locations of explosive devices, and synchronize it in a way that helps troops on the ground combat their enemies more effectively.

Palantir "can be utilized to partially meet DCGS-A requirements," the report concludes, using the acronym for the Distributed Common Ground System.

The report is likely to sharpen concerns about the Distributed Common Ground System, which has been facing mounting criticism on Capitol Hill. Rep. Jim Moran (D-Va.), one of many long-time detractors, had asked the Pentagon for its findings as recently as last month.

"It's a scandal that commercially available, battlefield-proven technology is ready to go at a fraction of the billions of dollars the Pentagon is spending to build a similar analysis tool in-house," Moran said in a statement to FP. "I appreciate [Under Secretary of Defense for Acquisition, Technology and Logistics] Frank Kendall taking this issue seriously, and look forward to hopefully resolving it once and for all when the long overdue report's findings are finally released."

The report, commissioned roughly one year ago, won't deal a fatal blow to the controversial Army program. But it raises new questions about why the service is wedded to its own system and why officials have been so quick to dismiss Palantir's capabilities, especially at a time when the Pentagon's budget is shrinking and Congress is pressing Defense Department officials to find ways of saving money.

An Army official referred a query from FP to the Pentagon's acquisition arm. Maureen Schumann, a spokeswoman, acknowledged that the Defense Department's acquisition officials had commissioned a "top level analysis" last summer and presented its findings to officials internally. This spring, Schumann said, Kendall will respond to queries from members of Congress on the findings of that analysis. But it remains unclear if the assessment itself will ever be released. Officials at Palantir declined to comment for this story.

The report that was obtained by FP is steeped in bureaucratese, but at its heart, it says the Palantir system it assesses could play a key role in Afghanistan or future warzones. The assessment, completed last summer, was first commissioned by Kendall after Moran and others asked more pointed questions about what the Palantir system could and could not do for the Army. Ultimately, the hope is to obtain an effective intelligence system that will help troops hunt terrorists, predict insurgent attacks, and plan safe missions. With the wars of the future likely to be guerilla wars like Iraq and Afghanistan, the Army intelligence program will only grow more important in the years to come.

The report consists of a detailed set of charts, graphs, and analyses. It doesn't say that Palantir could replace the Army system, and its authors didn't conduct a head-to-head comparison of the two. But it concludes that Palantir, which has collected legions of fans in national security circles and has contracts with the CIA and FBI, performs "very good" or "excellent" on most key requirements, including some that Army brass had long insisted the company was unable to fulfill.

Palantir has "a rich suite of [applications] applicable to" the Army system and has "robust" capabilities to collect many different kinds of information that can be used to create intelligence reports and allow troops to share information with each other, the review finds.

Army officials have long complained that Palantir cannot be used with other applications that are already incorporated into the Army system. An Army spokesman compared the problem last year to being able to download and read a document, but not make changes or be able to share the new version. That lack of "interoperability" has been a key reason why the Army has said that it couldn't move to Palantir's cheaper system.

Palantir is just one application, and "is not interoperable with all the other apps right now, so that's the problem," Army Chief of Staff Gen. Raymond Odierno said in May 2013. In July 2012, Lynn Schnurr, the chief information officer for the Army's intelligence office, said, "Palantir addresses a segment of the capabilities" of DCGS-A and "does not interoperate" with certain command and control systems that the Army has to use. And in December of that year, Maj. Gen. Harold Greene, a top Army acquisitions official, said the lack of interoperability in any system was a "red line."

But according to the Pentagon report, dated July 2013, Palantir received a score of three, indicating "good," on a one-to-five scale measuring interoperability. And its front-end, or user interface, allows people to collaborate on documents at the same time, the report concluded.

That's not the same as saying Palantir is completely interoperable with the Army DCGS-A, but it undermines the assertions by Odierno, Schnurr, and others who say Palantir's alleged inability to properly work with the Army system is a key weakness that prevents the military from switching to it.

Palantir's overall report card consisted of "very good" and "excellent" on 11 of the 20 criteria. It received a rating of "good" in three areas, and "minimal" in four others, including the ability to synchronize surveillance and reconnaissance information, such as video feeds from drones. The report didn't rank Palantir in two of the 20 areas, including its ability to handle signals intelligence, or intercepted communications of the kind captured by the National Security Agency.

Rep. Duncan Hunter, a California Republican, got into a public spat with Odierno last year over the program that helped put the controversy into broader public view. In a video that quickly went viral, Hunter told Odierno and Army Secretary John McHugh that he wanted to cut through Army bureaucracy to help troops who were complaining the intelligence system the Army provides was insufficient. "What we want is the best for the warfighter in the most economic way possible, the most efficient and least bureaucratic way forward to get into the warfighter's hand what they need," Hunter said during a House hearing in April 2013.

But Odierno, a passionate commander who can get emotional when it comes to issues of protecting his own troops, didn't take the implicit criticism lightly. "I object to this," he told Hunter in a departure from the typically tame back-and-forth of hearings among public officials. "I'm tired of somebody telling me I don't care about our soldiers and that we don't respond."

Pointedly referring to the locations in Afghanistan where the system is already in use, Odierno pointedly added that he "could go to 30 places that tell me it's working tremendously. Is it perfect? No. Will we have iterative processes that can inject more technology? Absolutely."

Hunter told FP in a statement that the Army's system still has "wide gaps in capability" that can easily be filled with the software that is available commercially, like Palantir. "That's something that the Army has been stubbornly resistant to acknowledge, even though Palantir as a plug-in would solve the Army's problems and deliver soldiers a whole new set of capabilities that they have yet to acquire," he said. "From day one, the problems with DCGS have been apparent but so too has the solution."

Sgt. 1st Class Kristine Smedley


Clean Slate?

Russia's annexation of Crimea could wipe away billions of dollars of Ukrainian debt.

Russia's appropriation of Ukrainian assets as part of its de facto takeover of Crimea could, perversely, provide some relief to the beleaguered Ukrainian economy.

It may be cold comfort when enemy tanks are still on its border, but some observers suggest that Kiev should be able to write off at least $5 billion of its debt to Russia because Moscow has effectively stolen Ukrainian territory and energy resources, as well as military hardware and bases.

"An obvious focal point for the Ukrainian government now that Russia has intervened across its border, and actually seized land/assets is debts owed to Russia," said Tim Ash, head of emerging markets research at Standard Bank Group. "No doubt the lawyers are sharpening their pencils as we speak."

There are already a few ways in which Russian takeover could end up alleviating Ukraine's debt, the most pressing of which is probably the $1.8 billion (and counting) that Kiev owes Gazprom for natural-gas shipments over the last year.

News reports suggest that Russia has already appropriated small Ukrainian energy firms operating in and near the Crimean peninsula. Russian troops in helicopters descended on a natural gas terminal just outside Crimea, the New York Times reported Saturday. And Tuesday, Crimean authorities took over a Ukrainian offshore drilling operation, which is expected to be sold to Gazprom, according to the Wall Street Journal. The operation, owned by Kiev's state-owned energy conglomerate, had just spent $800 million on new equipment, which is now lost.

Then there is the rent from the Sevastopol navy base, which under the 1997 and 2010 bilateral accords was worth $98 million a year in cash to Kiev. It is not clear now, with Crimea formally severed from the rest of Ukraine, if Russia would be under any obligation to continue paying for the base.

Another part of the 2010 Kharkiv Accords, which extended the naval base lease to 2042, was to lock-in a long-term discount on Russian gas sold to Ukraine. However, that gas-for-basing deal had already broken down by the time of last year's protests. One of the carrots Moscow had offered Kiev to pry Ukraine away from Europe, in fact, was a 33 percent discount on natural gas -- essentially, what it had already promised to deliver under the terms of the 2010 accord. That discount is revised quarterly and will come to an end this month.

Russia's military aggression is also calling into question the validity of the loan Moscow extended to the now-deposed Ukrainian President Viktor Yanukovych. Late last fall, after Yanukovych turned away from a political and trade agreement with the European Union, Russia offered to lend him $15 billion to aid the struggling Ukrainian economy. Only $3 billion of the loan -- in the form of bonds due in 2015 -- came through before Yanukovych was run out of Kiev. The question many observers are asking is whether Ukraine should have to pay back that money given Russia's subsequent annexation of Crimea.

Anna Gelpern, a Georgetown law professor, suggested a creative legal maneuver that might allow Britain, a close ally of the new Ukrainian central government, to invalidate those bonds as part of a sanctions package against Russia. Because the bonds are English law contracts, Gelpern said the U.K. could refuse to honor them in British courts, making them effectively void and worthless to private buyers.

"If you close the courts to this debt you make it worthless to the market," Gelpern said. While the plan wouldn't erase the debt, Russia would be effectively left with an unenforceable I.O.U., instead of a tradeable financial contract.

Governments are usually loathe to change the terms of bonds after they've been issued because it can undermine investor confidence, but Gelpern points out it has been done before. After the International Monetary Fund (IMF) spearheaded a global effort to forgive the debt of poor countries like Afghanistan and Rwanda, the U.K. limited private bondholders' ability to sue those countries for repayment in the British courts. After former Iraqi leader Saddam Hussein was ousted in 2003, the United Nations moved to shield the war-torn country's oil and gas proceeds from creditors and then the world's big lender countries agreed to reduce the country's debt, so that its coffers wouldn't be wiped clean by loans taken out by the previous government.

"Of all the sanctions the U.K. could impose, this is really targeted and doesn't hurt too many people," Gelpern said. She first wrote about the idea in a blog post on the Peterson Institute for International Economics website.

It's unclear whether British leaders would embrace the idea. Western officials have been threatening Russia with unspecified "costs" since troops first moved across the border in Crimea more than two weeks ago, but so far they have proceeded cautiously. The United States sanctioned seven Russian officials Monday, but it did nothing to stop, or slow, Russia's de facto takeover of Crimea.

Even if the U.K successfully scratches $4 billion of debt off the ledger, it still wouldn't solve Ukraine's financial problems. The interim Ukrainian government estimated last month that it would need $35 billion over the next two years. The IMF has a team of people on the ground in Kiev now trying to sort out the country's finances and put together a package of loans and reforms that will help the economy recover.

And Russia still holds the ultimate trump card. While lawyers can calculate the price tag for Russia's Crimean adventure, Moscow still has the power to shut off the natural gas supply that Ukraine depends on.

Filippo Monteforte / AFP / Getty Images