U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

39–010 

" ! SENATE 113TH CONGRESS

2d Session 

REPORT

2014

113–257 

Calendar No. 565 

PREVENTING CONFLICTS OF INTEREST 

WITH CONTRACTORS ACT 

R E P O R T 

OF THE

COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

TO ACCOMPANY

S. 2061 

TO PREVENT CONFLICTS OF INTEREST RELATING TO CONTRACTORS PROVIDING BACKGROUND INVESTIGATION FIELDWORK 

SERVICES AND INVESTIGATIVE SUPPORT SERVICES 

SEPTEMBER 16, 2014.—Ordered to be printed 


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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

THOMAS R. CARPER, Delaware Chairman 

CARL LEVIN, Michigan 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

GABRIELLE A. BATKIN, Staff Director 

JOHN P. KILVINGTON, Deputy Staff Director 

MARY BETH SCHULTZ, Chief Counsel 

TROY H. CRIBB, Chief Counsel for Governmental Affairs 

KEITH B. ASHDOWN, Minority Staff Director 

CHRISTOPHER J. BARKLEY, Minority Deputy Staff Director 

ANDREW C. DOCKHAM, Minority Chief Counsel 

MARK K. HARRIS, Minority U.S. Coast Guard Detailee 

LAURA W. KILBRIDE, Chief Clerk 


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Calendar No. 565 

113TH CONGRESS SENATE REPORT " ! 2d Session 113–257 

PREVENTING CONFLICTS OF INTEREST WITH 

CONTRACTORS ACT 

SEPTEMBER 16, 2014.—Ordered to be printed 

Mr. CARPER, from the Committee on Homeland Security and 

Governmental Affairs, submitted the following 

R E P O R T 

[To accompany S. 2061] 

The Committee on Homeland Security and Governmental Affairs, 

to which was referred the bill (S. 2061), to prevent conflicts of interest relating to contractors providing background investigation 

fieldwork services and investigative support services, having considered the same, reports favorably thereon with an amendment in 

the nature of a substitute and recommends that the bill, as amended, do pass. 

CONTENTS 

Page 

I. Purpose and Summary .................................................................................. 1 

II. Background and Need for the Legislation ................................................... 2 

III. Legislative History ......................................................................................... 5 

IV. Section-by-Section Analysis of the Bill, as Reported .................................. 5 

V. Evaluation of Regulatory Impact .................................................................. 7 

VI. Congressional Budget Office Estimate ......................................................... 7 

VII. Changes in Existing Law Made by the Bill, as Reported ........................... 7 

I. PURPOSE AND SUMMARY

The United States government performs background investigations of individuals to determine an individual’s suitability to work 

as a federal employee or fitness to serve as an employee of a federal contractor, to assess whether to allow an individual to have access to classified information or to hold a national security sensitive position in the government, and to assess whether to allow 

an individual to have access to sensitive government facilities or information systems. Often the government employs contractors to 

compile the information required for the background checks. Final 


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1Suitability and Security Clearance Performance Accountability Council, Suitability and Security Process Review Report to the President (February 2014), p.2. 

quality reviews of the contractor’s work product ensure that the 

background investigation is complete and meets all applicable 

standards. 

S. 2061 would prohibit agencies, when they employ a contractor 

to perform background investigations, from hiring the same contractor to perform the final quality review of the contractor’s own 

work. This simple rule will prevent a conflict of interest that may 

otherwise undermine the impartiality and objectivity of the quality 

review, or give a contractor an unfair competitive advantage over 

other contractors. 

II. BACKGROUND AND NEED FOR LEGISLATION

Federal agencies conduct background investigations of individuals for purposes related to civilian or military service with the federal government or employment with a federal contractor. The level 

of detail of the investigation depends on the nature of the job or 

responsibility. General background checks help determine whether 

an individual is suitable for employment, and more detailed investigations are used to determine whether to allow an individual to 

have access to classified information and hold a security clearance 

or whether to allow an individual to occupy a national security sensitive position with the government. Investigations are also used to 

check background information about individuals to determine 

whether to allow them access to sensitive federal facilities or federal information technology systems. 

The federal government relies heavily on contractors to assist 

with the process of background investigations. For example, contractors are hired to search educational and employment records, 

research criminal and other legal records, check credit histories, 

and interview the individual who is the subject of the background 

check, as well as the family, friends, employers and other acquaintances of the individual. Final decisions based on records compiled 

by contractors, though, rest with the federal government. For example, the final decision of whether to grant a security clearance 

must be made by federal employees and rests with the agency that 

performed the background investigation, or requested that the 

background investigation be performed, for a particular individual. 

Flaws in the background investigation upon which an agency relies 

may result in the agency granting a security clearance to an individual who may be a risk to national security. The final quality review of an investigation, therefore, is a critical step to ensure that 

documentation is complete, interviews have been conducted properly, and the investigation complies with all applicable standards. 

Twenty-two agencies (many within the intelligence community) 

are authorized to perform background investigations, and these 

agencies may have background checks performed by their own employees or a contractor. The vast majority of background investigations (over 90 percent) are performed by the Federal Investigative 

Services (FIS) within the Office of Personnel Management (OPM), 

at the request of other agencies.1 OPM hires contractors to perform 

investigative services for a majority of the investigations it conducts. A company called United States Investigations Services, 


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2 Ibid. Staff of OPM informed Committee staff on September 9, 2014 that OPM would not exercise its options to extend its contracts with USIS, effective September 30, 2014. 3 U.S. Department of Justice press release (Oct. 30, 2013), http://www.justice.gov/opa/pr/ 

2013/October/13-civ-1158.html. 4 United States complaint (Jan. 22, 2014), United States of America ex rel. Blake Percival v. 

U.S. Investigations Services, M.D. Ala. (No. 11–CV–527–WKW). 5 ‘‘The Navy Yard Tragedy: Examining Government Clearances and Background Checks,’’ 

Hearing before the Committee on Homeland Security and Governmental Affairs, 113th Cong. 

(October 31, 2013). 6 Ibid. 7See ‘‘Safeguarding Our Nation’s Secrets: Examining the Security Clearance Process,’’ hearing 

before the Subcommittee on the Efficiency and Effectiveness of Federal Programs and the Federal Workforce, 113th Cong. (June 20, 2013). 8Letter from Acting Director Elaine Kaplan, U.S. Office of Personnel Management, to Ranking Member Tom Coburn, Committee on Homeland Security and Governmental Affairs, Oct. 31, 

2013. 9Final Audit Report: Audit of the Quality Assurance Process Over Background Investigations, 

U.S. Office of Personnel Management, Office of the Inspector General, Office of Audits, Report 

No. 4A–IS–00–09–060 (June 22, 2010). 

LLC (USIS) has, until very recently, performed almost half of the 

investigative work contracted out by OPM,2 and has also provided 

similar investigative services to several other agencies. 

On October 30, 2013, the Department of Justice joined a civil 

fraud lawsuit against USIS, alleging that the company engaged in 

a systemic failure to adequately conduct security clearance background investigations.3 Specifically, the Department of Justice has 

alleged that the senior management of USIS ‘‘dumped’’ incomplete 

investigations on OPM in order to increase the company’s revenue 

and profit. This began at least as early as March 2008, according 

to the complaint, and continued through at least September 2012, 

and involved 665,000 background investigations—approximately 40 

percent of the total investigations conducted by USIS during that 

time frame.4

The day after the Department of Justice announced its intervention in the lawsuit against USIS, the Committee held a hearing on 

background checks conducted for security clearances and other purposes.5 One issue raised by Committee members was the appropriate role of contractors in conducting background investigations, 

and whether contractors ever conduct the final quality reviews of 

their own work. This concern was heightened by the announcement 

of the fraud allegations against USIS, and the fact that USIS conducted security clearance background investigations for both Navy 

Yard shooter Aaron Alexis 6 and former National Security Agency 

contractor employee Edward Snowden.7

In a letter to Ranking Member Coburn following up on her testimony, OPM Acting Director Elaine Kaplan explained that some 

lower-level investigations may be reviewed by contract employees, 

rather than federal employees.8 This work, in fact, was being performed by USIS under its support contract with OPM and had previously been identified by the Inspector General (IG) of OPM as 

raising quality concerns. Specifically, the IG reported in 2010 that 

internal OPM audits showed that in March 2009, 28.24 percent of 

sampled cases closed by USIS were unacceptable, and in June 

2009, 26.87 percent of sampled cases were deficient.9

OPM reversed its policy on February 6, 2014, when OPM Director Katherine Archuleta announced that only federal employees 

would conduct the final quality review before an investigative prodVerDate Sep 11 2014 23:35 Sep 18, 2014 Jkt 039010 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\SR257.XXX SR257

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10 E-mail communication from Office of Congressional and Legislative Affairs, U.S. Office of 

Personnel Management, to Committee staff (Feb. 6, 2014). 11Federal Acquisition Regulation 9.504(a). 12Federal Acquisition Regulation 2.101. 13 United States complaint (Jan. 22, 2014), United States of America ex rel. Blake Percival v. 

U.S. Investigations Services, M.D. Ala. (No. 11–CV–527–WKW), p. 22. 

uct is sent by OPM to the agency that requested the review.10 This 

decision, though, is an administrative one and does not preclude a 

future OPM Director from again allowing contractors to review 

their own work. Nor does this decision preclude other agencies 

from permitting contractors to conduct the final quality reviews of 

their own work. 

Federal procurement regulations already lay out general principles that are designed to prevent organizational conflicts of interest (OCI). Those regulations state that agency contracting officers 

should identify and evaluate potential conflicts of interest as early 

as possible in the acquisition process, and to avoid, neutralize or 

mitigate potential conflicts of interest before contract award.11 The 

regulations explain: 

An OCI arises when, because of other relationships or 

circumstances, a contractor may be unable, or potentially 

unable, to render impartial advice or assistance to the government, the contractor’s objectivity in performing the contract work is or might be impaired, and/or the contractor 

would have an unfair advantage.12

Despite these admonitions in the regulations, OPM, until February, did in some circumstances rely on USIS to conduct the final 

quality review of its own work. This conflict of interest raised a 

risk that the contractor could show favorable bias toward its own 

work, or use its position to gain an unfair advantage over competitors. Additionally, the Department of Justice has alleged that this 

conflict of interest facilitated the scheme by USIS to ‘‘dump’’ incomplete investigations on OPM, because USIS personnel working on 

the quality reviews used information gained through this work to 

identify cases that were likely to be selected by OPM for review by 

federal employees, as opposed to USIS employees. According to the 

complaint filed by the Department of Justice, this information was 

then improperly given to the investigative branch of USIS, which 

avoided ‘‘dumping’’ cases likely to be reviewed by federal employees 

in order to minimize the risk of raising concerns at OPM about the 

quality of the review process.13

S. 2061 would prohibit this type of conflict of interest. As reported by the Committee, S. 2061 would prohibit OPM, or any 

other agency that hires a contractor to perform background investigation work, from hiring the same contractor to do the final quality review of the contractor’s own work. The bill in no way discourages a contractor performing background investigations from conducting internal quality reviews to ensure that the product meets 

requisite standards before the product is presented to OPM (or to 

any other agency that hired the contractor). However, the bill will 

ensure that the final quality review is not performed by the same 

contractor. This conflict of interest rule will increase the overall 

quality of background investigations by removing the risk that the 

final quality review would be conducted with the best interests of 


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14The PAC was established by Executive Order 13467, Reforming Processes Related to Suitability for Government Employment, Fitness for Contractor Employees and Eligibility for Access 

to Classified National Security Information (June 30, 2008). The PAC is chaired by the Deputy 

Director for Management of the Office of Management and Budget and also includes the Office 

of the Director of National Intelligence and the Office of Personnel Management. 

the contractor in mind, rather than the best interests of the government. 

III. LEGISLATIVE HISTORY

On February 27, 2014, Senators Tester, McCaskill and Begich introduced the Preventing Conflicts of Interest with Contractors Act 

(S. 2061). S. 2061 was referred to the Senate Committee on Homeland Security and Governmental Affairs. 

The Committee considered S. 2061 at a business meeting on 

June 25, 2014. Senators Tester and McCaskill offered a substitute 

amendment. The substitute contains a number of changes based on 

staff discussions with agencies that participate in the Suitability 

and Security Performance Accountability Council (PAC), which is 

the inter-agency committee responsible for promoting reforms related to background investigations and the decisions that are based 

on those investigations.14 The substitute provides that the bill’s 

conflict of interest rule, in addition to applying to background investigations for security clearances, will also apply to investigations related to eligibility to occupy a national security sensitive position, eligibility for logical and physical access to federal-controlled 

facilities or information systems, suitability or fitness for federal 

employment, and fitness to preform work for or on behalf of the 

federal government as a contractor or employee. The substitute 

also ensures that the conflict of interest rule will apply to any federal agency that contracts for background investigation fieldwork 

or support services, not just OPM, and that the rule applies to both 

original contracts and extensions or options exercised on those contracts. Finally, the substitute ensures that the definitions of key 

terms used in the bill are consistent with those terms as used by 

the PAC. 

The Committee adopted the Tester-McCaskill substitute amendment by unanimous consent and ordered S. 2061 reported favorably 

by voice vote as amended by the Tester-McCaskill substitute 

amendment. Senators present for the vote were Carper, Levin, 

McCaskill, Tester, Heitkamp, Coburn, McCain, Johnson and 

Portman. Senators Coburn and McCain asked to be recorded as 

voting no. 

IV. SECTION-BY-SECTION ANALYSIS OF THE BILL, AS REPORTED

Section 1. Short title 

This section establishes the title of the legislation as the ‘‘Preventing Conflicts of Interest with Contractors Act.’’ 

Section 2. Definitions 

This section establishes that, for purposes of this Act: (1) The 

term ‘‘agency’’ means: 

(a) an Executive agency as defined in 5 U.S.C. 105 (an Executive department, a government corporation, and an independent establishment); 


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(b) a military department as defined in 5 U.S.C. 102 (Army, 

Navy, Air Force); 

(c) an element of the intelligence community as defined in 50 

U.S.C. 3003 (the Office of the Director of National Intelligence; 

the Central Intelligence Agency; the National Security Agency; 

the Defense Intelligence Agency; the National Geospatial-Intelligence Agency; the National Reconnaissance Office; other offices within the Department of Defense for the collection of 

specialized national intelligence through reconnaissance programs; the intelligence elements of the Army, the Navy, the 

Air Force, the Marine Corps, the Coast Guard, the Federal Bureau of Investigation, the Drug Enforcement Administration, 

and the Department of Energy; the Bureau of Intelligence and 

Research of the Department of State; the Office of Intelligence 

and Analysis of the Department of the Treasury; the Office of 

Intelligence and Analysis of the Department of Homeland Security; such other elements of any department or agency as 

may be designated by the President, or designated jointly by 

the Director of National Intelligence and the head of the department or agency concerned, as an element of the intelligence community); 

(d) the United States Postal Service; and 

(e) the Postal Regulatory Commission. 

(2) The term ‘‘background investigation fieldwork services’’ 

means the investigatory fieldwork conducted to determine the eligibility of an individual for logical and physical access to federallycontrolled facilities or information systems, suitability or fitness for 

federal employment, eligibility for access to classified information 

or to hold a national security sensitive position, or fitness to perform work for or on behalf of the federal government as a contractor or employee. This work includes: interviews of the individual, former and current employers, friends, family and other 

sources; and reviews of educational and employment records, criminal and other legal records, and credit history. 

(3) The term ‘‘background investigation support services’’ means 

the clerical, administrative, and technical support services provided 

to various functions critical to the background investigation process, including: the initial processing and scheduling of investigative 

requests; information technology and information technology support, file maintenance, imaging or copying of investigation documents, and mail processing. 

(4) The term ‘‘quality review process’’ means performing the final 

review of a background investigation to ensure investigative, administrative, and other required standards have been met before 

the completed background investigation is delivered to the adjudicating agency (i.e., the agency that requested the background check 

and that has final decision-making authority). 

Section 3. Limitation on contracting to prevent organizational conflicts of interest 

This section provides that, notwithstanding any other provision 

of law, after the date of enactment of this Act, an agency may not 

enter a contract, or extend or exercise an option on a contract, with 

a contractor to conduct a quality review process relating to background investigation fieldwork services or background investigation 


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support services if the contractor is performing the services to be 

reviewed. 

V. EVALUATION OF REGULATORY IMPACT

Pursuant to the requirements of paragraph 11(b) of rule XXVI of 

the Standing Rules of the Senate, the Committee has considered 

the regulatory impact of this bill and determined that the bill will 

have no regulatory impact within the meaning of the rules. The 

Committee agrees with the Congressional Budget Office’s statement that the bill contains no intergovernmental or private-sector 

mandates as defined in the Unfunded Mandates Reform Act 

(UMRA) and would impose no costs on state, local, or tribal governments. 

VI. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

JULY 10, 2014. 

Hon. TOM CARPER, 

Chairman, Committee on Homeland Security and Governmental Affairs, U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 2061, the Preventing Conflicts of Interest with Contractors Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 2061—Preventing Conflicts of Interest With Contractors Act 

CBO estimates that enacting S. 2061 would have no impact on 

the federal budget. Enacting the bill would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply. 

S. 2061 would amend federal law to prevent security clearance 

contractors from reviewing and approving their own background investigations. Because this legislation would put into statute the 

current policy and practice of the Office of Personnel Management, 

CBO estimates that implementing S. 2061 would have no effect on 

the budget. 

S. 2061 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

impose no costs on state, local, or tribal governments budget. 

The CBO staff contact for this estimate is Matthew Pickford. The 

estimate was approved by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 

VII. CHANGES IN EXISTING STATUTE MADE BY THE BILL, AS REPORTED

Because this legislation would not repeal or amend any provision 

of current law, it would make no changes in existing law within the 

meaning of clauses (a) and (b) of paragraph 12 of rule XXVI of the 

Standing Rules of the Senate. 

Æ 


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