Do the PRISM Leaks Spell Trouble for the Consulting Industry?

If you're in the business of providing services that require your employees to hold security clearances, there are two things that you definitely don't want to happen: for a leak to come from one of your contractors; and for the leaker to come forward and draw attention to themselves and your company.

Imagine, then, how Booz Allen Hamilton executives must have felt no more than ten seconds into the Guardian's video interview with Ed Snowden, the man behind the PRISM revelations that have been making headlines over the past week or so. For the record, here are the opening remarks from the interview:

"My name is Ed Snowden. I'm 29 years old. I work for Booz Allen Hamilton."

Ouch.

The truth about Snowden and his allegations is still emerging (and may never be fully known), while reactions to what he has done have literally run the gamut from "hero" to "traitor." Whatever the rights and wrongs of the situation, Snowden's actions have shone a spotlight onto the intelligence community and, by extension, the world of the government contractors who service it.

While Snowden was an employee of Booz Allen, he had been so for less than three months at the time of the leaks (he has since been fired by the firm for breaching its code of conduct and ethics). Given the short tenure of his employment, the incident raises several questions, first about the reliability of Snowden's information—there have been suggestions that such a new employee couldn't possibly have had access to all the data Snowden claims to have seen—and about the manner in which such information is handled by contractors. It is this latter question that has most relevance for those within the industry, together with an accompanying issue: namely, whether this incident is likely to spell trouble for government contractors further down the line.

On the surface, the question of ramifications for contractors—and Booz Allen in particular—seems like a no-brainer. After all, if you hired a contractor to fix your plumbing and they responded by publishing the diary they found under your sink, you'd not only fire the contractor, but probably hit them with a lawsuit, in addition to bad-mouthing him/her to all your friends and acquaintances. But the situation here is not that simple. Sure, Booz Allen might find that its reputation has been dented somewhat, but it remains one of a very select group of firms that has the capabilities to do this kind of work at all.

On an industry level, meanwhile, the work certainly isn't going to go anywhere in the near future—the entire system was built and is currently maintained by contractors; upending that would mean the government would have to find an entirely new way of operating (it would also open it up to having to hire thousands of employees, with all the attendant healthcare costs, retirement benefits and the like that the sequester is currently in the process of reducing). Meanwhile, any changes that do go through—like tougher oversight or increased levels of security clearance—likely mean that government contractors would see either an increase in the amount of work they need to do, or a decrease in the number of appropriately credentialed employees—a fact that would simply drive rates up.

(A quick anecdote on how insulated contractors are: we distributed the survey for Vault's upcoming 2014 consulting rankings to participating firms in February this year—right around the time that the budget sequester was kicking in. On the question of "firm outlook," government contractors rated their firm more highly than consultants in any other practice area—meaning those contractors predicted a bright outlook and steady flow of work ahead, at a time when almost every department they served was trying to figure out how to cut its budget. The likely reason: several of the consultants pointed out that, in order to figure out the impact of the cuts, departments were enlisting consulting firms to do the analysis and, in some cases, outsourcing operations to them.) 

Bottom line, then: short of the government responding to the substance of the PRISM revelations by ending the practices—email and phone meta-data collection, which critics claim violate the Constitution—the outlook for the section of the consulting industry that makes its living from government contracts is likely to remain unchanged.

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