GAO

United States Government Accountability Office

A

Testimony

Before the Subcommittee on Oversight of Government 

Management, the Federal Workforce, and the District of 

Columbia, Committee on Governmental Affairs

For Release on Delivery 

Expected at 9:30 a.m. EST

Tuesday, September 14, 2004

INTELLIGENCE REFORM

Human Capital 

Considerations Critical to 

9/11 Commission’s 

Proposed Reforms

J. Christoper Mihm, Managing Director 

Strategic Issues

GAO-04-1084T
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-04-1084T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact J. Christopher 

Mihm (202) 512-6806 or mihmj@gao.gov. 

Highlights of GAO-04-1084T, a testimony 

to Subcommittee on Oversight of 

Government Management, the Federal 

Workforce, and the District of Columbia, 

Committee on Governmental Affairs 

September 14, 2004

INTELLIGENCE REFORM 

Human Capital Considerations Critical to 

9/11 Commission’s Proposed Reforms 

Recognizing that people are the critical element in transformation initiatives 

is key to a successful transformation of the intelligence community and 

related homeland security organizations. GAO’s work in successful mergers 

and transformations shows that incorporating strategic human capital 

management approaches will help sustain any reforms in the intelligence 

community. Successful major change management initiatives in large public 

and private sector organizations can often take at least 5 to 7 years to create 

the accountability needed to ensure this success. As a result, committed and 

sustained leadership is indispensable to making lasting changes in the 

intelligence community. Accordingly, the Congress may want to consider 

lengthening the terms served by the directors of the intelligence agencies, 

similar to the FBI Director’s 10-year term. One of the major challenges 

facing the intelligence community is moving from a culture of a “need to 

know” to a “need to share” intelligence information. The experience of 

leading organizations suggests that performance management systems—that 

define, align, and integrate institutional, unit, and individual performance 

with organizational outcomes—can provide incentives and accountability for 

sharing information to help facilitate this shift. 

Significant changes have been underway in the last 3 years regarding how 

the federal workforce is managed. The Congress passed legislation 

providing certain governmentwide human capital flexibilities, such as direct 

hire authority. While many federal agencies have received human capital 

flexibilities, others may be both needed and appropriate for intelligence 

agencies, such as providing these agencies with the authority to hire a 

limited number of term-appointed positions on a noncompetitive basis. 

Human capital challenges are especially significant for the intelligence 

organizations, such as the FBI, that are undergoing a fundamental 

transformation in the aftermath of September 11, 2001. For the last 3 years, 

we have been using the lessons learned from successful transformations to 

monitor the FBI’s progress as it transforms itself from its traditional crime 

enforcement mission to its post 9/11 homeland security priorities—

counterterrorism, counterintelligence and cyber crimes. For example, the 

FBI has undertaken a variety of human capital related initiatives, including 

major changes in realigning, retraining, and hiring special agents and 

analysts with critical skills to address its top priorities. 

The 9/11 Commission recommended that a single federal security clearance 

agency should be created to accelerate the government’s security clearance 

process. Several factors must be considered in determining the approach to 

this process. The large number of requests for security clearances for 

service members, government employees, and others taxes a process that 

already is experiencing backlogs and delays. Existing impediments—such as 

the lack of a governmentwide database of clearance information, a large 

clearance workload, and too few investigators—hinder efforts to provide 

timely, high-quality clearance determinations. 

GAO has performed extensive 

work and gained experience on 

government transformation and the 

critical role that human capital 

management can play in driving 

this change. Valuable lessons from 

these efforts could help guide the 

proposed reforms in the 

intelligence community envisioned 

by the 9/11 Commission. 

At the request of this 

subcommittee, this statement 

focuses on (1) the lessons GAO has 

learned from successful mergers 

and organizational transformations; 

particularly the need for committed 

and sustained leadership and the 

role of performance management 

systems in these changes; 

(2) human capital flexibilities that 

can be used as essential tools to 

help achieve these reforms; 

(3) how the Federal Bureau of 

Investigation (FBI) is using these 

lessons and human capital 

flexibilities to transform to meet its 

evolving mission in the post 9/11 

environment, and (4) GAO’s 

findings to date on the factors that 

must be considered in the 

approach to the government’s 

security clearance process, as a 

means to accelerate the process for 

national security appointments. 
Page 1 GAO-04-1084T 

Chairman Voinovich, Senator Durbin, and Members of the Subcommittee:

I am pleased to be here today to discuss how strategic human capital 

management can drive the transformational challenges of the intelligence 

community. The work of the 9/11 Commission has clearly demonstrated 

the need to fundamentally change the organization and culture of the 

intelligence community to enhance its ability to collect, analyze, share, and 

use critical intelligence information—a crucial mission of the community. 

In a knowledge-based federal government, including the intelligence 

community, people—human capital—are the most valuable asset. How 

these people are organized, incentivized, enabled, empowered, and 

managed are key to the reform and ultimate effectiveness of the 

intelligence community and other organizations involved with homeland 

security. 

To this end, we have conducted extensive work on government 

transformation, and the critical role that human capital management plays 

in driving this change over the past several years. In August 2004, 

Comptroller General David M. Walker testified before the Committee on 

Government Reform, U.S. House of Representatives, on how the valuable 

lessons we learned from this work can be applied to address the challenges 

of reform in the intelligence community.1

 He stated that while the 

intelligence community has historically been addressed separately from the 

remainder of the federal government, and while it undoubtedly performs 

some unique missions that present unique issues (e.g. the protection of 

sources and methods), many of its major transformational challenges are 

similar, or identical to those that face most government agencies, such as 

changing their cultures to fit evolving missions. Experience has shown that 

strategic human capital management must be the centerpiece of any 

serious change management initiative. As the Comptroller General also 

recently noted, many of the challenges facing the intelligence community 

as knowledge-based organizations, are similar to those he faced when he 

began his tenure at GAO. As a result, GAO has gained valuable experience 

and knowledge in government transformation that can be shared with the 

intelligence community. We also stand ready to use the experience and 

knowledge we have gained to offer GAO’s assistance in support of the 

Congress’ legislative and oversight activities for the intelligence 

community.

1

GAO, 9/11 Commission Report: Reorganization, Transformation, and Information 

Sharing, GAO-04-1033T (Washington, D.C.: Aug. 3, 2004).
Page 2 GAO-04-1084T 

As I recently testified before your subcommittee, more progress in 

addressing human capital challenges has been made in the last 3 years than 

in the last 20 years; nevertheless, much more needs to be done.2

 Federal 

human capital strategies are not yet appropriately constituted to meet 

current and emerging challenges or to drive the needed transformation 

across the federal government. The basic problem has been the longstanding lack of a consistent approach to marshaling, managing, and 

maintaining the human capital needed to maximize government 

performance and ensure accountability because people define the 

organization's culture, drive its performance, and embody its knowledge 

base. Human capital (or people) strategy is the critical element to 

maximizing performance and ensuring accountability. Thus, federal 

agencies, including our intelligence and homeland security communities, 

will need the most effective human capital systems to address these 

challenges and succeed in their transformation efforts during a period of 

sustained budget constraints. 

Under the leadership of this subcommittee and others in Congress, we have 

seen major efforts to address the human capital challenges involved in 

transforming these communities, such as the transformation of the Federal 

Bureau of Investigation (FBI) and the creation of the Department of 

Homeland Security (DHS). Nevertheless, as the 9/11 Commission and our 

work indicate, much more needs to be done to ensure that agencies’ 

cultures are results-oriented, customer-focused, and collaborative in 

nature—characteristics critical to high performing organizations.3

 As 

agreed, my statement today will cover four major points. First, I will 

discuss how we can use the lessons we have learned to date from 

successful private and public sector mergers and transformations to guide 

the intelligence community’s human capital reforms; particularly the need 

for committed and sustained leadership, and the use of performance 

management systems to help achieve the necessary change. Second, I will 

discuss several human capital flexibilities that could be used as essential 

tools to help achieve these reforms, such as providing agencies with the 

authority to hire a limited number of term-appointed positions. Third, I will 

also discuss GAO’s prior work on FBI’s efforts to use these lessons and 

2

GAO, Human Capital: Building on the Current Momentum to Transform the Federal 

Government, GAO-04-976T (Washington, D.C.: July 20, 2004).

3

GAO, Comptroller General’s Forum: High-Performing Organizations: Metrics, Means 

and Mechanisms for Achieving High Performance in the 21st Century Public Management 

Environment, GAO-03-343SP (Washington, D.C.: Feb. 13, 2004).
Page 3 GAO-04-1084T 

human capital flexibilities as it transforms to meet its evolving mission in 

the post 9/11 environment. Finally, I will summarize our findings to date on 

the factors that must be considered in the approach to the government 

security clearance process, as a means to accelerate the process for 

national security appointments.

My comments are based on our completed GAO work and our institutional 

knowledge on organizational transformation and human capital issues, as 

well as on homeland security. We conducted our work in accordance with 

generally accepted government auditing standards.

Key Mergers and 

Transformation 

Practices Can Be Used 

to Guide Intelligence 

Community Reforms

Experience shows that failure to adequately address—and often even 

consider—a wide variety of people and cultural issues are at the heart of 

unsuccessful organizational transformations. Recognizing the people 

element in these initiatives and implementing strategies to help individuals 

maximize their full potential in the new environment are key to a 

successful transformation of the intelligence community and related 

homeland security organizations. Mergers and transformations require 

more than just changing organizational charts. They require fundamental 

changes in strategic human capital management approaches, particularly in 

defining, aligning, and integrating key institutional, unit, and individual 

performance management and reward systems to achieve desired 

outcomes.

The 9/11 Commission has recommended several transformational changes, 

such as the establishment of a National Counterterrorism Center for joint 

operational planning and intelligence, and the creation of a National 

Intelligence Director position to oversee national intelligence centers 

across the federal government. The Director would manage the national 

intelligence program, oversee agencies that contribute to it, and establish 

important aspects of a human capital system. Specifically, the Director 

would be able to set common personnel and information technology 

policies across the intelligence community. In addition, the Director 

would have the authority to evaluate the performance of the people 

assigned to the Center. 

The creation of a National Counterterrorism Center and a National 

Intelligence Director would clearly represent major changes for the 

intelligence community. Recent structural and management changes have 

occurred and are continuing to occur in government that provide lessons 

for the intelligence community’s transformation. For example, in 
Page 4 GAO-04-1084T 

anticipation of the creation of DHS, in September 2002, the Comptroller 

General convened a forum of private and public sector experts to help 

identify useful practices and lessons learned from mergers, acquisitions, 

and transformations that DHS and other federal agencies could use to 

successfully transform their cultures.4

 In a follow-up report, we also 

identified specific steps that organizations can adopt to help implement 

these practices, as seen in table 1.5 These practices and steps also provide 

guidance on what must occur to effectively transform the intelligence 

community.

4

GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned for a 

Department of Homeland Security and Other Federal Agencies, GAO-03-293SP

(Washington, D.C.: Nov. 14, 2002).

5

GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and 

Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).
Page 5 GAO-04-1084T 

Table 1: Key Practices and Implementation Steps for Mergers and Transformations

Source: GAO.

I would now like to discuss how two of these key practices, providing 

leadership commitment and using performance management systems, can 

help guide the intelligence community reforms.

Practice Implementation Steps

Ensure top leadership drives the transformation. • Define and articulate a succinct and compelling reason for 

change.

• Balance continued delivery of services with merger and 

transformation activities.

Establish a coherent mission and integrated strategic goals to guide 

the transformation.

• Adopt leading practices for results-oriented strategic planning and 

reporting.

Focus on a key set of principles and priorities at the outset of the 

transformation.

• Embed core values in every aspect of the organization to reinforce 

the new culture.

Set implementation goals and a timeline to build momentum and 

show progress from day one. 

• Make public implementation goals and timeline.

• Seek and monitor employee attitudes and take appropriate followup actions.

• Identify cultural features of merging organizations to increase 

understanding of former work environments.

• Attract and retain key talent.

• Establish an organizationwide knowledge and skills inventory to 

exchange knowledge among merging organizations.

Dedicate an implementation team to manage the transformation 

process.

• Establish networks to support implementation team.

• Select high-performing team members.

Use the performance management system to define the 

responsibility and assure accountability for change.

• Adopt leading practices to implement effective performance 

management systems with adequate safeguards.

Establish a communication strategy to create shared expectations 

and report related progress.

• Communicate early and often to build trust.

• Ensure consistency of message.

• Encourage two-way communication.

• Provide information to meet specific needs of employees.

Involve employees to obtain their ideas and gain ownership for the 

transformation.

• Use employee teams.

• Involve employees in planning and sharing performance 

information.

• Incorporate employee feedback into new policies and procedures.

• Delegate authority to appropriate organizational levels.

Build a world-class organization. • Adopt leading practices to build a world-class organization.
Page 6 GAO-04-1084T 

Ensuring Committed and 

Sustained Leadership Is a 

Key Practice to Drive 

Transformation in the 

Intelligence Community

Committed, sustained, highly qualified, and inspired leadership, and 

persistent attention by all key parties in the successful implementation of 

organizational transformations are indispensable to making lasting changes 

in the intelligence community. Experience shows that successful major 

change management initiatives in large public and private sector 

organizations can often take at least 5 to 7 years to help to create the 

accountability needed to ensure that long-term management and 

transformation initiatives are successfully completed. This length of time 

and the frequent turnover of political leadership in the federal government 

have often made it difficult to obtain the sustained and inspired attention to 

make the needed changes. For example, while the FBI Director has a 10-

year term appointment, most of the intelligence agency heads have shorter 

term appointments. In his August 2004 testimony on the proposed 9/11 

Commission reforms, the Comptroller General suggested that the Congress 

may want to place attention on lengthening the period of time served by the 

directors of the other intelligence agencies to provide the continuity and 

management needed to make the tremendous changes that occur during 

organizational transformations.

We have also reported that the appointment of agency chief operating 

officers is one mechanism that should be considered to provide continuity 

by elevating attention on management issues and transformation, 

integrating these various initiatives, and institutionalizing accountability 

for addressing them.6

 We believe that to provide such leadership 

continuity during reform of the intelligence community, one option that the 

Congress could consider is for the National Intelligence Director to appoint 

a Chief Operating Officer. This executive could serve under a term 

appointment to institutionalize accountability over extended periods and to 

help ensure that the long-term management and organizational initiatives 

of the National Counterterrorism Center and the Director are successfully 

completed. In general, the Chief Operating Officer could be responsible to 

the National Intelligence Director for the overall direction, operation, and 

management within the intelligence community to improve its 

performance. These responsibilities include implementing strategic goals, 

and assisting the National Intelligence Director in promoting reform, 

measuring results, and other responsibilities. 

6

GAO, Highlights of a GAO Roundtable: The Chief Operating Officer Concept: A Potential 

Strategy to Address Federal Governance Challenges, GAO-03-192SP (Washington, D.C.: Oct. 

4, 2002).
Page 7 GAO-04-1084T 

Finally, there are also leadership continuity challenges that occur during 

transitions between administrations, and in the Presidential appointment 

process. For example, the 9/11 Commission noted that recent 

administrations did not have their full leadership teams in place for at least 

6 months after the transitions occurred. The Commission recommended 

that the disruption of national security policymaking during a change of 

administrations be minimized as much as possible. The Comptroller 

General suggests that one way to avoid disruption and to provide 

continuity during transitions is that if the Congress creates Deputy or 

Assistant National Intelligence Directors, to designate one of them as the 

Principal Deputy, such as the Director of the Central Intelligence Agency 

(CIA), whose term appointment, as previously discussed, would not 

coincide with the term of the National Intelligence Director.

Using Performance 

Management Systems Is 

Another Key Practice to 

Help Transform the 

Intelligence Community

A central theme of the 9/11 Commission report was that one of the major 

challenges facing the intelligence community is moving from a culture of a 

“need to know” to a “need to share.” The Congress and the President are 

separately considering a series of important structural and policy changes 

that would facilitate this shift. The experiences of leading organizations 

suggest that a performance management system can also be a part of the 

solution. Senator Voinovich, at your request and others, we previously 

identified leading performance management practices that should prove 

helpful for intelligence agencies seeking to move to a culture of “need to 

share” and thus improve their performance.7

 The key practices are as 

follows:

7

GAO, Results-Oriented Cultures: Creating a Clear Linkage Between Individual 

Performance and Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003).
Page 8 GAO-04-1084T 

Figure 1: Key Practices for Effective Performance Management

Source: GAO.

An effective performance management system is a vital tool for aligning the 

organization with desired results and creating a “line of sight” showing how 

team, unit, and individual performance can contribute to overall 

organizational results. In addition, to be successful, transformation 

efforts, such as the one envisioned for the intelligence community, must 

have leaders, managers, and employees who are capable of integrating and 

creating synergy among the multiple organizations involved. A 

performance management system can help send unmistakable messages 

about the behavior that the organization values and that support the 

organization’s mission and goals, as well as provide a consistent message to 

employees about how they are expected to achieve results. Thus, as 

transformation efforts are implemented, individual performance and 

contributions are evaluated on competencies such as change management, 

1. Align individual performance expectations with organizational goals. An explicit 

alignment helps individuals see the connection between their daily activities and 

organizational goals.

2. Connect performance expectations to crosscutting goals. Placing an emphasis on 

collaboration, interaction, and teamwork across organizational boundaries helps 

strengthen accountability for results.

3. Provide and routinely use performance information to track organizational priorities. 

Individuals use performance information to manage during the year, identify 

performance gaps, and pinpoint improvement opportunities.

4. Require follow-up actions to address organizational priorities. By requiring and 

tracking follow-up actions on performance gaps, organizations underscore the 

importance of holding individuals accountable for making progress on their priorities.

5. Use competencies to provide a fuller assessment of performance. Competencies 

define the skills and supporting behaviors that individuals need to effectively contribute 

to organizational results.

6. Link pay to individual and organizational performance. Pay, incentive, and reward 

systems that link employee knowledge, skills, and contributions to organizational results 

are based on valid, reliable, and transparent performance management systems with 

adequate safeguards.

7. Make meaningful distinctions in performance. Effective performance management 

systems strive to provide candid and constructive feedback and the necessary objective 

information and documentation to reward top performers and deal with poor performers.

8. Involve employees and stakeholders to gain ownership of performance management 

systems. Early and direct involvement helps increase employees' and stakeholders' 

understanding and ownership of the system and belief in its fairness. 

9. Maintain continuity during transitions. Because cultural transformations take time, 

performance management systems reinforce accountability for change management 

and other organizational goals.
Page 9 GAO-04-1084T 

cultural sensitivity, teamwork, collaboration, and information sharing. 

Leaders, managers, and employees who demonstrate these competencies 

are rewarded for their successful contributions to the achievement of the 

transformation process.

Human Capital 

Flexibilities Are Also 

Essential Tools for 

Intelligence 

Community 

Transformation

Significant changes have been underway in the last 3 years regarding how 

the federal workforce is managed. For example, the Congress passed 

legislation providing certain governmentwide human capital flexibilities, 

such as direct hire authority.8

 In addition, individual agencies—such as the 

National Aeronautical and Space Administration, the Department of 

Defense (DOD), and DHS—received flexibilities intended to help them 

manage their human capital strategically to achieve results. While many 

federal agencies have received additional human capital flexibilities, others 

may be both needed and appropriate for the intelligence and other selected 

agencies. For example, the 9/11 Commission recommends rebuilding CIA’s 

analytical capabilities, enhancing the agency’s human intelligence 

capabilities, and developing a stronger language program. Human capital 

flexibilities can help agencies like the CIA meet these critical human capital 

needs.

Therefore, to further enable the intelligence agencies to rapidly meet their 

critical human capital needs and workforce plans, the Comptroller General 

suggests that Congress could consider, as necessary, legislation granting 

selected agency heads the authority to hire a limited number of positions 

for a stated period of time (e.g., up to 3 years) on a noncompetitive basis. 

The Congress has passed legislation granting this authority to the 

Comptroller General of the United States and it has helped GAO address a 

range of critical needs in a timely, effective, and prudent manner over many 

years. The Comptroller General was also provided the authority to carry 

out early retirement offers which may be made to any employee or group of 

employees based on a number of factors including (1) geographic area, 

organizational unit, or occupational series or level; or (2) skills, knowledge, 

or performance, which he suggests would further assist intelligence 

agencies in planning and shaping their future workforces. For GAO, the 

Comptroller General can deny any requests for early retirement if he 

determines that granting them would jeopardize GAO’s ability to achieve its 

mission.

8

GAO, Human Capital: Increasing Agencies’ Use of New Hiring Flexibilities, GAO-04-

959T (Washington, D.C.: July 13, 2004).
Page 10 GAO-04-1084T 

As the Congress considers reforms to the intelligence community’s human 

capital policies and practices, it should also consider whether agencies 

have the necessary institutional infrastructure to effect these changes. At a 

minimum, this infrastructure includes a human capital planning process 

that integrates the agency's human capital policies, strategies, and 

programs with its program goals, mission and desired outcomes; the 

capabilities to effectively develop and implement a new human capital 

system; and importantly, a performance management system with a set of 

appropriate principles and safeguards—including reasonable transparency 

and appropriate accountability mechanisms—to ensure the fair, effective, 

credible, nondiscriminatory implementation and application of a new 

system. 

FBI Is Using Strategic 

Human Capital 

Management to 

Transform and Meet 

Post 9/11 Challenges

Human capital challenges are especially significant for the intelligence 

organizations, such as the FBI, that are undergoing a fundamental 

transformation in the aftermath of September 11, 2001. For the last 3 years, 

we have been monitoring the FBI’s progress as it transforms itself from its 

traditional crime enforcement mission to its post September 11 homeland 

security priorities—counterterrorism, counterintelligence, and cyber 

crimes. In terms of human capital, this has meant major changes in 

recruiting, training, and deploying FBI’s staff resources. Specifically, the 

9/11 Commission recommends that the FBI create a specialized and 

integrated national security workforce, consisting of agents, analysts, 

linguists, and surveillance specialists who are recruited, trained, rewarded, 

and retained to ensure the development of an institutional culture with 

expertise in intelligence and national security. While the FBI has made 

admirable progress on a number of these human capital fronts, substantial 

challenges remain.9

Linchpins of any successful transformation are (1) a strategic plan to guide 

an organization’s mission, vision, and the steps necessary to achieve its 

long-term goals; and (2) a strategic human capital plan linked to the 

strategic plan that guides recruitment, hiring, training, and retention 

decisions for staff with skills critical to the organization’s mission and 

goals. In March 2004, we reported that the FBI had completed both of these 

9

GAO, FBI Transformation: Human Capital Strategies May Assist the FBI in Its 

Commitment to Address Its Top Priorities, GAO-04-817T (Washington, D.C.: June 3, 2004).
Page 11 GAO-04-1084T 

plans.10 With respect to strategic human capital planning, FBI has 

developed a strategic human capital plan that contains many of the 

principles that we have laid out for an effective human capital system.11 For 

example, it highlights the need for the FBI to fill identified skill gaps, in 

such areas as language specialists and intelligence analysts, by using 

various personnel flexibilities including recruiting and retention bonuses.12

In addition, in the immediate aftermath of September 11, 2001, the FBI 

undertook a variety of human capital-related initiatives to align with its 

transformation efforts. These initiatives included realigning, retraining, and 

hiring special agents and analysts with critical skills to address its top 

priorities, and taking initial steps to revamp its performance management 

system. 

In relation to realigning resources to fit the new agency priorities, the FBI 

has transferred agents from its drug, white-collar crime, and violent crime 

programs to focus on counterterrorism and counterintelligence priorities. 

This realignment of resources has permanently shifted 674 field agent 

positions from drug, white-collar, and violent crime program areas to 

counterterrorism and counterintelligence since September 11, 2001. About 

550 of these positions were drawn from the drug crime area. Yet because 

of demands in the counterterrorism and counterintelligence programs, the 

FBI has had a continuing need to temporarily redirect special agent 

resources from traditional criminal investigative programs to address its 

top priorities.13

In terms of retraining its existing staff, the FBI also revamped its special 

agent training curriculum to enhance skills in counterterrorism 

investigation techniques. The revised training for new agents was instituted 

in April 2003 and by the end of that calendar year, it was expected that 

10GAO, FBI Transformation: FBI Continues to Make Progress in Its Efforts to Transform 

and Address Priorities, GAO-04-578T (Washington, D.C.: Mar. 23, 2004).

11GAO, A Model of Strategic Human Capital Management, GAO-02-373SP (Washington, 

D.C.: March 2002).

12GAO, Human Capital: Effective Use of Flexibilities Can Assist Agencies in Managing 

Their Workforces, GAO-03-2 (Washington, D.C.: Dec. 6, 2002).

13GAO, FBI Transformation: Data Inconclusive on Effects of Shift to CounterterrorismRelated Priorities on Traditional Crime Enforcement, GAO-04-1036 (Washington, D.C.: 

Aug. 31, 2004).
Page 12 GAO-04-1084T 

agents transferring from more traditional crime areas to work in the 

priority areas would have received specialized training. To enhance the 

skills and abilities of FBI analysts, the FBI created the College of Analytic 

Studies at the Quantico training facility in October 2001. This program, with 

assistance from CIA personnel, provides training to both new and inservice analysts in tools and techniques for both strategic and technical 

analysis. 

The FBI set ambitious goals for hiring in many specialty areas over the last 

few years. While it has achieved success in some areas, such as increasing 

the number of special agents hired with intelligence and foreign language 

proficiency, achieving other hiring goals has been more challenging. 

Specifically, the FBI has had some difficulty in retaining and competing 

with other government agencies and the private sector for intelligence 

analysts. These problems may be related to the truncated career ladder for 

intelligence analysts at the FBI compared to the career ladders for the same 

types of positions at other federal agencies. For example, both the CIA and 

the National Security Agency (NSA) maintain a career ladder for 

intelligence staff that includes both senior executive (managerial) and 

senior level (nonmanagerial) positions. Although, the FBI has actively 

moved towards establishing a GS-15 senior managerial level position for its 

intelligence staff, this would still not create a level playing field with the 

rest of the intelligence community that has the authority to provide 

positions at the Senior Executive Service (SES) level. Should the FBI 

decide to adopt senior managerial and SES positions for its intelligence 

staff, the agency will need to develop and implement a carefully crafted 

plan that includes specific details on how such an intelligence career 

service would integrate into its strategic plan as well as its strategic human 

capital plan, the expectations and qualifications for the positions, and how 

performance would be measured.

As discussed previously, an effective performance management system is a 

vital tool for aligning the organization with desired results and showing 

how team, unit, and individual performance can contribute to overall 

organizational results. As we have previously reported, the current FBI 

system for rating agents and analysts—a pass/fail system—is inadequate to 

achieve that needed linkage. A successful performance management 

system should make meaningful distinctions in performance so that staff 

can understand their role in relation to agency objectives. It should also 

map a course of progress to improve performance so that it more closely 

aligns with agency goals. The FBI has made progress in adjusting its 

performance management system for senior executives to conform to the 
Page 13 GAO-04-1084T 

performance management principles that I previously discussed. Although 

FBI’s human capital plan indicates that it is also moving in the direction of 

changing the performance management system for agents and analysts, a 

major effort will be needed before it is operational.

As we have highlighted, in recent years, the FBI has used a variety of 

available human capital flexibilities, such as recruitment bonuses and 

retention allowances, to help recruit and retain valuable staff resources. As 

with any organization undergoing transformation and considering the use 

of additional human capital strategies, the FBI would have to weigh all 

options that are available to it before implementing a successful human 

capital strategy, including using existing administrative flexibilities and 

requesting new legislative alternatives. The FBI would also need to ensure 

that it has the institutional infrastructure in place so that any human capital 

flexibilities are used appropriately. 

Many Factors Must Be 

Considered in 

Approach to 

Government Security 

Clearance Process

The 9/11 Commission also raised concerns about minimizing national 

security policymaking disruptions during the change of administrations by 

accelerating the process for national security appointments. The 

Commission recommended that a single federal agency should be 

responsible for providing and maintaining security clearances and for 

ensuring uniform security clearance standards, including maintaining a 

single governmentwide database of clearance information, as a way to 

address this concern. In prior work, we have found that many factors must 

be considered in addressing the government security clearance process. 

These factors include the personnel security clearance criteria and 

process, recent actions that DOD has taken to consolidate investigative and 

adjudicative functions, and existing impediments and internal control 

concerns for security clearance programs.

All Security Clearances Are 

Already Governed by the 

Same Criteria and General 

Process

In considering ways in which to approach the government’s security 

clearance process, it is helpful to note that since 1997, all agencies have 

been subject to a common set of personnel security investigative standards 

and adjudicative guidelines for determining whether service members, 

government employees, industry personnel, and others are 
Page 14 GAO-04-1084T 

eligible to receive a security clearance.14 Classified information is 

categorized into three levels—top secret, secret, and confidential.15 The 

expected damage to national defense or foreign relations that unauthorized 

disclosure could reasonably be expected to cause is “exceptionally grave 

damage” for top secret information, “serious damage” for secret 

information, and “damage” for confidential information.

In addition, all agencies generally follow a similar clearance process. 

DOD’s process for determining eligibility is used here to illustrate the 

stages required in making such a determination for federal agencies. We 

are highlighting DOD’s process because, as of September 30, 2003, DOD 

was responsible for the clearances issued to approximately 2 million 

personnel, including nearly 700,000 industry personnel who work on 

contracts issued by DOD and 22 other federal agencies16 as well as staff in 

the legislative branch of the federal government. (see fig. 2).

Figure 2: DOD’s Personnel Security Clearance Process

14The White House, “Implementation of Executive Order 12968,” Memorandum, 

(Washington, D.C.: Mar. 24, 1997). This memorandum approves the adjudication guidelines, 

temporary eligibility standards, and investigative standards required by Executive Order 

12968, Access to Classified Information, (Aug. 2, 1995).

15Classification of National Security Information, 5 C.F. R. §1312.4 (2003).

16GAO, DOD Personnel Clearances: Additional Steps Can Be Taken to Reduce Backlogs and 

Delays in Determining Security Clearance Eligibility for Industry Personnel, GAO-04-632

(Washington, D.C.: May 26, 2004) for a listing of the 22 agencies. DOD Regulation 5200.2-R, 

DOD Personnel Security Program (Feb. 23, 1996) describes the clearance process for 

legislative staff.

Preinvestigation stage Investigation stage Adjudication stage

After determining that a postion

requires an employee to have

access to classified information,

a security officer submits an 

individual's personnel security

questionnaire to the Defense 

Security Service or the Office of

Personnel Management.

Source: DOD.

Steps in granting

clearance eligibility The Defense Security Service, 

Office of Personnel 

Management, or one of their 

contractors conducts an 

investigation and forwards an 

investigative report to a central 

adjudication facility.

On the basis of information 

contained in the investigative 

report, an adjudicator 

determines eligibility for access 

to classified information and 

forwards this determination to 

the requesting organization.
Page 15 GAO-04-1084T 

Recent Attempts to 

Consolidate Some 

Investigative and 

Adjudicative Functions

In terms of centralizing personnel investigations, The National Defense 

Authorization Act for Fiscal Year 2004 authorized an action that, if taken, 

would result in the Office of Personnel Management (OPM) being 

responsible for an estimated 80 percent of the personnel investigations 

conducted for the federal government.17 The Act authorized the transfer of 

DOD’s personnel security investigative functions and 1,855 investigative 

employees to OPM. OPM indicated that it will not accept the transfer at 

least during fiscal year 2004 because of concerns about the financial risk 

associated with the authorized transfer. DOD and OPM have, however, 

signed a memorandum of understanding that, among other things, results 

in OPM providing DOD investigative staff with training on OPM’s 

investigative procedures as well as training on and access to OPM’s case 

management system.

As for centralizing the adjudication steps in the clearance process, in May 

2004, we reported that DOD’s Senior Executive Council was considering 

the consolidation of the clearance adjudicative functions that two of DOD’s 

10 central adjudication facilities perform.18 A DOD official told us that the 

consolidation would provide greater flexibility in using adjudicators to 

meet changes in the clearance approval workload and could eliminate 

some of the time required to transfer cases between adjudication facilities. 

A wider-ranging adjudicative initiative is also being undertaken in DOD. 

When fully implemented, the Joint Personnel Adjudication System (JPAS) 

is supposed to enhance DOD’s adjudicative capabilities by—among other 

things—consolidating information into a DOD-wide security clearance data 

system (instead of maintaining the data on 10 adjudication facility-specific 

systems), providing near real-time input and retrieval of clearance-related 

information, and improving the ability to monitor overdue reinvestigations 

and estimate the size of that portion of delayed clearances. JPAS, identified 

as mission critical by the DOD Chief Information Officer, was supposed to 

be implemented in fiscal year 2001 and is now projected for full 

implementation sometime in fiscal year 2004. Even though JPAS may 

consolidate adjudicative data on the approximately 2 million clearances 

17 Pub. L. 108-136 § 906 (Nov. 24, 2003).

18GAO-04-632; GAO, DOD Personnel Clearances: DOD Needs to Overcome Impediments to 

Eliminating Backlog and Determining Its Size, GAO-04-344 (Washington, D.C.: Feb. 9, 

2004) lists DOD’s current 10 central adjudication facilities and the roles that each plays in 

awarding clearances.
Page 16 GAO-04-1084T 

that DOD had on September 30, 2003, other agencies, such as the FBI, 

maintain their own databases with adjudicative information.

Addressing Existing 

Impediments and Internal 

Control Concerns is 

Important to Any 

Consolidation Decision

Regardless of the decision about whether or not to consolidate 

investigative and adjudicative functions governmentwide, existing 

impediments—such as the lack of a governmentwide database of clearance 

information— hinder efforts to provide timely, high-quality clearance 

determinations. I will discuss two of those major impediments—large 

workloads and too few investigators, and two internal control issues. The 

remainder of this section relies heavily on work that we conducted on 

DOD’s investigative and adjudicative functions because there is a dearth of 

reports available on these functions in other federal departments and 

agencies.

The large number of requests for security clearances for service members, 

government employees, and industry personnel taxes a process that 

already is experiencing backlogs and delays. In fiscal year 2004, GAO 

published reports documenting the numbers of clearance requests and 

delays in completing investigations by DOD (for service members, 

government employees and industry personnel), OPM (for DOD and the 

Federal Air Marshal Service), and the FBI (for state and local law 

enforcement officials).19 In fiscal year 2003, DOD submitted over 775,000 

requests for investigations. The large number of investigative and 

adjudicative workload requirements is also found in the form of a growing 

portion of the requests requiring top secret clearances, in at least one 

segment of the population. From fiscal year 1995 through fiscal year 2003, 

the proportion of all requests requiring top secret clearances for industry 

personnel grew from 17 to 27 percent. According to DOD, top secret 

clearances take 8 times more investigative effort to complete and 3 times 

more adjudicative effort to review than do secret clearances. In addition, a 

top secret clearance must be renewed twice as often as a secret 

clearance—every 5 years instead of every 10 years. The full effect of 

19GAO-04-344; GAO-04-632; GAO, DOD Personnel Clearances: Preliminary Observations 

Related to Backlogs and Delays in Determining Security Clearance Eligibility for 

Industry Personnel, GAO-04-202T (Washington, D.C.: May 6, 2004); GAO, Aviation 

Security: Federal Air Marshal Service Is Addressing Challenges of Its Expanded Mission 

and Workforce, but Additional Actions Needed, GAO-04-242 (Washington, D.C.: Nov. 19, 

2003); and GAO, Security Clearances: FBI Has Enhanced Its Process for State and Local 

Law Enforcement Officials, GAO-04-596 (Washington, D.C.: Apr. 30, 2004).
Page 17 GAO-04-1084T 

requesting a top secret, rather than a secret clearance, thus is 16 times the 

investigative effort and 6 times the adjudicative effort.

The limited number of investigative staff available to process requests 

hinders efforts to issue timely clearances. According to a senior OPM 

official, DOD and OPM together need roughly 8,000 full-time-equivalent 

investigative staff to eliminate the security clearance backlogs and deliver 

timely investigations to their customers. However, in our February report, 

GAO estimated that DOD and OPM have around 4,200 full-time-equivalent 

investigative staff who are either federal employees or contract 

investigators, slightly more than half as many as needed.20

Internal control concerns are also present with regard to personnel 

security clearances. A 1999 GAO report documented problems with the 

quality of DOD personnel security clearance investigations. The severity of 

these problems led DOD to declare its investigations program a systemic 

weakness under the Federal Managers’ Financial Integrity Act.21 That 

declaration has continued to be made each year in DOD’s annual statement 

of assurance. We continued to track these issues and in 2001, we 

recommended DOD establish detailed documentation requirements to 

support adjudicative decisions as a way to strengthen internal controls.22

Three years earlier, the DOD Office of the Inspector General stated that no 

DOD office is assigned the responsibility to ensure that the various 

adjudication facilities consistently implement adjudicative policies and 

procedures.

When OPM was privatizing its investigative function in 1996 to create the 

company that still conducts the vast majority of OPM’s investigations for 

the federal government, we raised an internal control concern, namely that 

OPM’s contract with the newly created company would require the 

contractor to conduct personnel security clearance investigations on its 

own employees.23 This remains one area of concern because OPM officials 

20GAO-04-344.

21GAO, DOD Personnel: Inadequate Personnel Security Investigations Pose National 

Security Risks, GAO/NSIAD-00-12 (Washington, D.C.: Oct. 27, 1999).

22GAO, DOD Personnel: More Consistency Needed in Determining Eligibility for Top 

Secret Security Clearances, GAO-01-465 (Washington, D.C.: Apr. 18, 2001).

23GAO, Privatization of OPM’s Investigations Service, GAO/GGD-96-97R (Washington, 

D.C.: Aug. 22, 1996).
Page 18 GAO-04-1084T 

told us in April 2003 that its contractors were still conducting the 

investigations on its own personnel. 

Conclusions The 9/11 Commission recognized that fundamental changes in the 

management of human capital in the intelligence and homeland security 

communities will improve the efforts of these communities to effectively 

carry out its fundamental mission—to gather and share intelligence that 

will ultimately help to protect the American people.

Human capital considerations, such as the recruitment and retention of key 

skills and competencies, performance incentives to share information, and 

more flexible approaches to the management of human capital, are crucial 

to the success of the intelligence community reforms envisioned by the 

9/11 Commission, and agencies involved with the intelligence community 

will need the most effective human capital systems to succeed in their 

transformation efforts. Thus, strategic management of human capital is 

one such reform critical to maximizing the performance of the intelligence 

community. 

Committed, sustained, highly qualified, and inspired leadership, and 

persistent attention by all key parties to the successful implementation of 

these reforms and organizational transformations will be essential, if 

lasting changes are to be made and the challenges we are discussing today 

are to be effectively addressed. 

Chairman Voinovich and Members of the Subcommittee, this concludes my 

prepared statement. I would be pleased to answer any questions you may 

have.

Contacts and 

Acknowledgments

For further information regarding this statement, please contact J. 

Christopher Mihm, Managing Director, Strategic Issues, on (202) 512-6806 

or at mihmj@gao.gov or Eileen Larence, Acting Director, Strategic Issues, 

at larencee@gao.gov. Individuals making key contributions to this 

statement included Carole Cimitile, Dewi Djunaidy, Jack Edwards, Laurie 

Ekstrand, Charles Johnson, Lisa Shames, Derek Stewart, and Sarah Veale.

(450360)
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