The gist from the NYT story:
Top military officials have continued to rely on a secret network of private spies who have produced hundreds of reports from deep inside Afghanistan and Pakistan, according to American officials and businessmen, despite concerns among some in the military about the legality of the operation.
Earlier this year, government officials admitted that the military had sent a group of former Central Intelligence Agency officers and retired Special Operations troops into the region to collect information — some of which was used to track and kill people suspected of being militants. Many portrayed it as a rogue operation that had been hastily shut down once an investigation began.
But interviews with more than a dozen current and former government officials and businessmen, and an examination of government documents, tell a different a story. Not only are the networks still operating, their detailed reports on subjects like the workings of the Taliban leadership in Pakistan and the movements of enemy fighters in southern Afghanistan are also submitted almost daily to top commanders and have become an important source of intelligence.
The American military is largely prohibited from operating inside Pakistan. And under Pentagon rules, the army is not allowed to hire contractors for spying.
Military officials said that when Gen. David H. Petraeus, the top commander in the region, signed off on the operation in January 2009, there were prohibitions against intelligence gathering, including hiring agents to provide information about enemy positions in Pakistan. The contractors were supposed to provide only broad information about the political and tribal dynamics in the region, and information that could be used for “force protection,” they said.
Some Pentagon officials said that over time the operation appeared to morph into traditional spying activities. And they pointed out that the supervisor who set up the contractor network, Michael D. Furlong, was now under investigation.
The private players were organized under a Lockheed Martin contract. Why resort to this effort?
The private contractor network was born in part out of frustration with the C.I.A. and the military intelligence apparatus. There was a belief by some officers that the C.I.A. was too risk averse, too reliant on Pakistan’s spy service and seldom able to provide the military with timely information to protect American troops. In addition, the military has complained that it is not technically allowed to operate in Pakistan, whose government is willing to look the other way and allow C.I.A. spying but not the presence of foreign troops.
So a classic improvisational response to a frontier integration situation: normal bureaucratic channels don't work (bit too "out there" for the CIA, apparently) and the lack of full-up connectivity (i.e., technically, our military cannot operate there) pushes the Pentagon to outsource the function to the private security sector.
Simply put: the frontier lies just beyond the normal rule-set, so you get this working-for-the-gov-but-not-belonging-to-the-gov result. Read your history of the American West, it happened all the time.