230. Memorandum From the Assistant Director, Office of Management and Budget (Schlesinger) to the Director (Shultz)1


  • Reorganizing the Intelligence Community

This memorandum is intended to apprise you of the several responses within the intelligence community to the Overview paper,2 which has been distributed on a highly selected basis. Copies went to the DCI, DOD, State, and the Science Adviser. As might be expected, each agency tended to the protective of its own interests. In terms of resources, the critical response is that of the Department of Defense which was very cautious, though not negative. The other three agencies strongly endorsed the attempt to reform the community, to bring better management, and to achieve greater resource control. In the case of the DCI, the endorsement was qualified by his strong conviction that legislation should be avoided and that no restructuring require “the disembodying of the CIA.” In addition, all of the members of PFIAB have reviewed the paper. The response from that quarter is less clear, as each member has somewhat different views. The next meeting of the PFIAB is scheduled for June 4, and there is a belief on the part of [Page 514] the members that nothing will or should be done before they have a chance to meet with the President.3

Let me summarize the responses from the agencies.

  • • The State Department was unequivocally enthusiastic about the paper. The Department strongly endorsed Option 2, for a drastic strengthening of the management authority of the DCI over the community. The Department suggested that some experience should be obtained with a new style of organization before attempting to go to the Congress with a legislative package. State also emphasized its own interest and capabilities as a collector, producer, and consumer of intelligence products.
  • • Speaking as both the DCI and the Director, Central Intelligence Agency, Helms, not surprisingly, endorsed Option 2, which would strengthen his own influence in dealing with the rest of the community—particularly over the resources in the Department of Defense. Quite plainly, Helms would not like to move to the White House or to be separated from the facilities at Langley. Given the sentiment on the Hill, Helms has a genuine fear of approaching Congress at this time with any package that would open up Congressional criticism of intelligence operations. More directly in response to institutional interests, Helms also wishes to avoid splitting off the DCI’s production activities from the Agency’s responsibilities on the collection side. In the PFIAB and in OST, there is recognition that continuation of the competing activities of the CIA in the collection field would compromise the ability of the DCI to serve as a disinterested referee. The DCI does recognize the need for a focal point of authority on intelligence matters within the Department of Defense and endorses the establishment of a DDI. He fully appreciates the continued difficulty that the DCI would have in grappling with service interests, particularly in tactical intelligence, from the outside.
  • • The Science Adviser strongly endorses the position that the DCIUSIB structure should be separated from the institutional interests of the CIA. Consequently, Option 2 is endorsed with a number of amendments. The thrust of the suggested changes is to strengthen the role of the Ex-Com mechanism and to broaden its functions. Under no circumstances, it is argued, should the Ex-Com (on which the Science Adviser sits) be weakened. Given a strengthening of the Ex-Com, it is OST’s view that an Assistant Secretary of Defense for Intelligence will provide adequate staffing for the Deputy Secretary in the attempt to get better control of Defense intelligence activities not within the purview of the Ex-Com at the present time.
  • • The Department of Defense is concerned about the authority of the Secretary of Defense over his own assets. This is hardly a surprising reaction. With respect to community-wide reform, therefore, the [Page 515] DOD is prepared to go with Option 3, which is the weakest of the options, and barely more than a patch-up mechanism. With respect to reform within the DOD, the Department (speaking through Bob Froehlke) favors an “evolutionary” rather than a revolutionary approach. What this means is the establishment of an ASDI rather than a DDI with the ASDI being responsible primarily for fiscal guidance. Late last year Froehlke did a review for the Secretary of Defense on intelligence activities. He discovered that all of the managers of intelligence agencies within Defense were opposed to the establishment of a Director of Defense Intelligence to whom they would report. This was scarcely a surprising development, but it did convince Froehlke that DOD should be very cautious in establishing greater central control and authority over the various intelligence activities. It has been indicated to me that Mel Laird will do whatever the President wants. However, it is clear that Defense is somewhat reluctant to go ahead with major reform, and will have to be pushed. From other sources in the Pentagon I know that Laird feels that he has been badly burned on intelligence issues because of non-support from the White House. Before he goes ahead he would want to be sure that there will be strong support from the White House, when Service resistance (which will be formidable) is encountered.

All in all the response has been more forthcoming than might have been expected. Even the DOD reaction is less adamant than might have been predicted given the interests and the bureaucratic difficulties involved in a major restructuring. Quite plainly people in the community are aware that the President feels very strongly about this issue, and that something will have to be done. Under the circumstances, even the affected parties feel that they should be creative. The State Department, with the least vested interests at stake, and therefore the most disinterested, is most willing to embrace immediate change.

I suggest that you (and Henry, if he wishes to be involved) discuss with the President what he wishes to do next. A number of major tactical issues remain to be resolved.

  • • Does the President wish to send legislation to the Hill altering the role of the DCI and the CIA? If he does not, it will be possible to sit down with Helms and to discuss the internal restructuring of the Agency to accomplish most of the President’s objectives. At a minimum the DCI would require an additional deputy for management of agency affairs. The DCI should be placed at a considerable distance from the activities of the clandestine services. Perhaps most important of all, a structure should be elaborated to prevent the promotional activities of DDS&T from biasing the recommendations of the DCI with respect to new systems to be developed and deployed. While less elegant than Option 2, most of our objectives can be obtained if we can discuss them seriously with Helms.
  • Helms would be reluctant to make these concessions unless his role in dealing with the rest of the community is strongly enhanced. The President will have to decide whether he will inform the Secretary of Defense that the DCI will now have a major role in deciding how intelligence resources within the Department of Defense will be [Page 516] utilized. The President would have to be exceedingly forceful on this issue, because the cooperation of the OSD will be essential in order to overcome the expected recalcitrance of the three Services.
  • • In this connection, the President should decide whether there will be a strong focal point within the DOD on intelligence matters. If so, he will have to inform the DOD to establish a DDI rather than an ASDI and to press the Congressional committees to provide an additional Level III slot.
  • • No formidable resistance is expected from Defense on this issue, but Defense could undercut the President’s desires through its private negotiations with the Armed Services Committees. The establishment of a strong focal point within Defense with authority over the several intelligence activities within the Department—rather than DOD’s preferred evolutionary approach—seems to me to be essential to achieving the reduction in resources going into existing programs, with minimal effect on output. A possible alternative is to discuss with Secretary Laird the use of the second Deputy Secretary slot now being requested from Congress for control over intelligence activities. Given the compartmentalization and sprawl of intelligence activities in the Department, whoever is responsible for management of intelligence activities will have to have considerable clout.
  • • As soon as a direction is charted, we should seek Mel Laird’s agreement to sit down and talk to the managers of the Defense intelligence programs—Admiral Gayler, John McLucas, General Bennett, etc., as well as David Packard.
  • • What role is expected for the PFIAB? Should any announcement be delayed until the President has a chance to meet with the PFIAB. Such a meeting is likely to develop little that is new substantively, but may be essential for cosmetic reasons.

As you are aware, we have drawn up directives to implement the proposals in Option 2. These directives can, of course, be modified to achieve whatever changes and objectives the President now contemplates. We have prepared briefing books and other material, which we are prepared to use at short notice. What we need is a signal. However, you may wish once again to bring to the President’s attention how strong the resistance from the JCS and the Services is likely to be to the recommended changes within the DOD. He will have to be prepared to overcome resistance from a quarter, where he may be disinclined to take on a major battle.

J.R. Schlesinger
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 332, Intelligence Reorganization, Vol. I. Top Secret. A copy was sent to Kissinger. In a May 17 memorandum to Kissinger, Wayne Smith provided a more detailed summary of the comments by CIA, DOD, State, and the Science Adviser, and he attached copies of the respective comments. (Ibid.)
  2. One of two attachments to Document 229.
  3. In an April 12 memorandum to Kissinger, Anderson reported that PFIAB had reviewed the OMB/NSC study at its meetings on April 1 and 2 and, while it reached no consensus, felt that the study’s findings raised serious and far-reaching issues that deserved the most searching consideration. The Board members thus wanted personally to discuss the matter with the President during their June meeting or earlier. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 276, President’s Foreign Intelligence Advisory Board, 1971, Vol. VI)