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28–534 PDF 2006

LOW CLEARANCE: WHY DID DOD SUDDENLY STOP

PROCESSING PRIVATE SECTOR SECURITY

CLEARANCES?

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MAY 17, 2006

Serial No. 109–156

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

(III)

C O N T E N T S

Page

Hearing held on May 17, 2006 ............................................................................... 1

Statement of:

Johnson, Clay, III, Acting Director, U.S. Office of Management and Budget; Robert Andrews, Deputy Under Secretary of Defense for Counterintelligence and Security, U.S. Department of Defense; Robert W.

Rogalski, Special Assistant to the Under Secretary of Defense for Intelligence, accompanied by Janice Haith, Acting Director, Defense Security Services, U.S. Department of Defense; Kathy L. Dillaman, Associate Director, Federal Investigative Services Division, U.S. Office of

Personnel Management; and Thomas F. Gimble, Principal Deputy Inspector General, U.S. Department of Defense ............................................ 11

Andrews, Robert ........................................................................................ 18

Dillaman, Kathy L. ................................................................................... 41

Gimble, Thomas F. .................................................................................... 50

Johnson, Clay, III ...................................................................................... 11

Rogalski, Robert W. ................................................................................... 30

Wagoner, Doug, chairman, Intelligence Subcommittee, Information Technology Association of America, on behalf of the Security Clearance

Coalition; William L. Gunst, vice president for business operations,

Anteon International Corp.; and Nicholas Karangelen, president, Trident Systems, Inc. ......................................................................................... 78

Gunst, William L. ...................................................................................... 88

Karangelen, Nicholas ................................................................................ 94

Wagoner, Doug .......................................................................................... 78

Letters, statements, etc., submitted for the record by:

Andrews, Robert, Deputy Under Secretary of Defense for Counterintelligence and Security, U.S. Department of Defense, prepared statement

of ..................................................................................................................... 19

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 103

Davis, Chairman Tom, a Representative in Congress from the State of

Virginia, prepared statement of ................................................................... 4

Dillaman, Kathy L., Associate Director, Federal Investigative Services

Division, U.S. Office of Personnel Management, prepared statement

of ..................................................................................................................... 43

Gimble, Thomas F., Principal Deputy Inspector General, U.S. Department

of Defense, prepared statement of ............................................................... 52

Gunst, William L., vice president for business operations, Anteon International Corp., prepared statement of ........................................................ 90

Johnson, Clay, III, Acting Director, U.S. Office of Management and Budget, prepared statement of ............................................................................. 13

Karangelen, Nicholas, president, Trident Systems, Inc., prepared statement of ........................................................................................................... 96

Rogalski, Robert W., Special Assistant to the Under Secretary of Defense

for Intelligence, prepared statement of ....................................................... 32

Wagoner, Doug, chairman, Intelligence Subcommittee, Information Technology Association of America, prepared statement of .............................. 81

Waxman, Hon. Henry A., a Representative in Congress from the State

of California, prepared statement of ........................................................... 8

(1)

LOW CLEARANCE: WHY DID DOD SUDDENLY

STOP PROCESSING PRIVATE SECTOR SECURITY CLEARANCES?

WEDNESDAY, MAY 17, 2006

HOUSE OF REPRESENTATIVES,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 1 p.m., in room 2154,

Rayburn House Office Building, Hon. Tom Davis (chairman of the

committee) presiding.

Present: Representatives Tom Davis, Platts, Waxman,

Cummings, Kucinich, Watson, Ruppersberger, and Higgins.

Staff present: David Marin, staff director; Larry Halloran, deputy

staff director; Keith Ausbrook, chief counsel; Ellen Brown, legislative director and senior policy counsel; Rob White, communications

director; Andrea LeBlanc, deputy director of communications; Brien

Beattie, professional staff member; Teresa Austin, chief clerk;

Sarah D’Orsie, deputy clerk; Phil Barnett, minority staff director/

chief counsel; Kristin Amerling, minority general counsel; Karen

Lightfoot, minority senior policy advisor and communications director; David Rapallo, minority chief investigative counsel; Michael

McCarthy, minority counsel; Earley Green, minority chief clerk;

and Cecelia Morton, minority office manager.

Chairman TOM DAVIS. The committee will come to order.

Good afternoon and welcome to today’s hearing to investigate the

decision of the Defense Security Service to institute a moratorium

on all private sector requests for personnel security clearance investigations.

Each year, the Federal Government hires private companies to

perform under defense and security-related contracts worth billions

of dollars. Much of that work requires employees to be issued security clearances—to be checked and approved for access to information classified as Confidential, Secret, or Top Secret. If workers

can’t get cleared, important national security work will not get

done on time, and costs will increase dramatically to the Government and the American taxpayer.

Unfortunately, this is not the first disruption of a troubled DOD

system that seems to be suffering a cyclic downward spiral. Intractable backlogs and lengthy delays in the security clearance process

have prompted other hearings, other promises of reform. In testimony before this committee in May 2004, GAO reported that processing time for private sector clearance requests had ballooned

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from an average of 56 days in fiscal year 2001 to more than a full

year. At that time, backlogged cases numbered almost 200,000.

To address that untenable situation, I and others authored Title

III of the Intelligence Reform and Terrorism Prevention Act of

2004, which called for better management, greater transparency,

and stronger accountability in the security clearance process. We

also mandated adherence to long-ignored rules on reciprocity—recognition by one agency of clearances granted by another. In short,

Congress has repeatedly indicated a strong desire to see the security clearance process function efficiently and effectively to meet

urgent security requirements.

So it came as a nasty surprise, to say the least, when we learned

that DSS had notified thousands of contractors that it would no

longer be accepting any requests for private sector security clearances because the agency was about to run out of money. How

could that happen? How could DSS or their partners in this process

at the Office of Personnel Management keep blithely driving at full

speed when the fiscal gas gauge on a critical national security vehicle was hitting ‘‘Empty?’’

The impact of this decision is already being felt across the Government and the corporate world. According to a May 8th story in

the Federal Times, contractor employees with clearances have already begun asking their bosses for pay raises, and one company

is reportedly paying an IT-related employee without a bachelor’s

degree a $100,000 premium because he has a Top Secret security

clearance. It is an insult to the taxpayers. These anecdotes illustrate two things: an instinctive understanding of the law of supply

and demand on the part of workers, and a penchant on the part

of the Federal Government to run afoul of that law.

Smaller companies are disproportionately hurt by a dearth of security clearances. The largest defense contractors, which employ

tens of thousands of people, are usually able to find someone on the

payroll with a clearance to fill important roles. And if not, they are

in a much stronger position to recruit cleared employees away from

small companies by offering salaries that small businesses are unable to afford, transforming them from competitive enterprises to

prime targets for acquisition. In a business environment where the

Government is best served by competition among contractors, the

kind of corporate consolidation that clearance shortages may lead

to can only serve to drive up costs and hurt the taxpayer.

There will always be some kind of salary premium for those

working on national security-related contracts because there will

always be a demand for employees who are willing and able to submit to the extensive background investigation required to gain access to our Nation’s secrets. But an inefficient system that leads to

unnecessary shortages of security clearances is a self-imposed tax

on the American people, and it is inexcusable.

I was pleased to learn yesterday that DOD has found the money

to restart the processing of Secret level clearance requests, and I

look forward to hearing that all requests have been reactivated in

the near future. However, I look forward to hearing today about

the steps that are being taken to ensure that we will never again

have to ask why, in a post-9/11 world, Federal security clearances

are not being processed in a timely and efficient manner. We owe

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nothing less to the American people and to the men and women,

both in and out of Government, who defend our National security.

I want to thank our distinguished witnesses for being here today.

I look forward to their testimony.

[The prepared statement of Chairman Tom Davis follows:]

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Chairman TOM DAVIS. The witnesses on our first panel are also

scheduled to testify at a Senate hearing at 2:30, so we would like

to limit opening statements to the chairman and ranking member.

It looks like we are in luck, Henry. Members’ statements will also

be entered into the record, and the Chair will be happy to recognize

members for statements before the second panel is sworn in.

I would now recognize my distinguished ranking member, Mr.

Waxman.

Mr. WAXMAN. Thank you, Mr. Chairman.

Two years ago, this committee held a hearing about delay and

mismanagement in the processing of security clearances. The most

serious problems included long backlogs in clearance investigations,

turf wars among Federal agencies, and a lack of accountability for

management of clearances across the entire Federal Government.

Two years ago, we heard assurances that the Bush administration was working to solve these problems. To improve accountability in 2004, Congress passed a law requiring that a single agency

manage security clearance processing and get the entire Federal

Government working together. The President designated the Office

of Management and Budget.

Today, 2 years later, not only have these problems not been

solved, they have actually gotten worse. Today’s hearing was

prompted by the Department of Defense’s abrupt announcement of

a freeze on accepting clearance applications from contractors because DOD mismanaged its budget and ran out of money. DOD is

now pointing fingers at the Office of Personnel Management, which

conducts background investigations on DOD’s behalf. OMB, which

was supposed to be eliminating these turf wars, is reportedly refusing to get involved.

Mismanagement and a lack of accountability have led to a crisis

that weakens our national security and drives up costs for the taxpayer. Defense contractors are now paying exorbitant salaries to

lure employees who already have security clearances, a cost that is

ultimately passed on back to the Government and our taxpayers.

In addition, the high salaries give an incentive to Government employees to jump ship and work for contractors, draining talent from

the civil service, and renewal background checks on contractor employees who currently have access to classified information are on

hold.

The problems with the system for issuing security clearances are

troubling enough, but there is also growing evidence that the system for revoking clearances is also being mishandled. In a hearing

earlier this year, national security whistleblowers told us how the

Bush administration had improperly suspended and revoked their

security clearances in retaliation for reporting illegal activities occurring in their agencies. Chairman Davis and I introduced a bill

to provide protections to national security whistleblowers. It passed

out of this committee in a unanimous bipartisan vote, though it has

not yet been allowed to go to the full House for a vote. I hope we

can also work together to fix the problem identified in today’s hearing.

I would like to thank the witnesses for testifying today. I hope

we can find some solution to these recurring problems so we don’t

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come back 2 years from now to have yet another hearing on mismanagement of security clearances.

[The prepared statement of Hon. Henry A. Waxman follows:]

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Chairman TOM DAVIS. Thank you.

Members will have 7 days to submit opening statements for the

record.

Our first distinguished panel, we have the Honorable Clay Johnson III, the Acting Director of the U.S. Office of Management and

Budget, no stranger to this committee, and thank you for being

here with us today.

We have Mr. Robert Andrews, the Deputy Under Secretary of

Defense for Counterintelligence and Security, U.S. Department of

Defense; Mr. Robert W. Rogalski, the Special Assistant to the

Under Secretary for Intelligence, accompanied by Ms. Janice Haith,

the Acting Director of Defense Security Services, U.S. Department

of Defense; and Ms. Kathy Dillaman, the Associate Director, Federal Investigative Services Division, U.S. Office of Personnel Management; and Mr. Thomas Gimble, the Principal Deputy Inspector

General, U.S. Department of Defense.

It is our policy we swear you in before your testimony, so if you

would just rise and raise your right hands.

[Witnesses sworn.]

Chairman TOM DAVIS. Mr. Johnson, we will start with you, and

thank you once again for being with us.

STATEMENTS OF CLAY JOHNSON III, ACTING DIRECTOR, U.S.

OFFICE OF MANAGEMENT AND BUDGET; ROBERT ANDREWS,

DEPUTY UNDER SECRETARY OF DEFENSE FOR COUNTERINTELLIGENCE AND SECURITY, U.S. DEPARTMENT OF DEFENSE; ROBERT W. ROGALSKI, SPECIAL ASSISTANT TO THE

UNDER SECRETARY OF DEFENSE FOR INTELLIGENCE, ACCOMPANIED BY JANICE HAITH, ACTING DIRECTOR, DEFENSE SECURITY SERVICES, U.S. DEPARTMENT OF DEFENSE; KATHY L. DILLAMAN, ASSOCIATE DIRECTOR, FEDERAL INVESTIGATIVE SERVICES DIVISION, U.S. OFFICE OF

PERSONNEL MANAGEMENT; AND THOMAS F. GIMBLE, PRINCIPAL DEPUTY INSPECTOR GENERAL, U.S. DEPARTMENT OF

DEFENSE

STATEMENT OF CLAY JOHNSON III

Mr. JOHNSON. Chairman Davis, Congressman Waxman, thank

you for having us here. Let me start off by saying that the security

clearance granting process has gotten better, not worse; that the

DOD is not pointing fingers at OPM for this recent problem with

their budget; and that OMB is as involved as any oversight organization you would ever want any oversight organization to be.

We are making progress in improving the process. In some cases,

the progress is significant. But we are not where we wanted to be

as of the month of May in our reform process. Overall, in April, we

have improved the timeliness of granting clearances versus fiscal

year 2005 by 40 days. It takes 11 days less time to submit clearances. It takes 40 days less time to investigate those clearances.

And it takes us 10 days longer to adjudicate.

The Department of Commerce and DOD have made significant

improvements and almost are at the desired level in terms of the

timeliness of submission. Adjudication at Commerce, Energy,

Transportation, and Homeland Security are significantly moving

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forward in the percentage of satisfactorily adjudicating their cases.

DOD is more than offsetting those gains in Commerce, Energy,

Transportation, and Homeland Security.

Everybody knows what they need to do to improve, everybody

has clear goals, and everybody is committed to the reform effort

and to achieving those goals. We are still committed to the goals

that were laid out in the intel bill for where we were to be by December 2006. It is too early to say we will not achieve them, but

we are making significant progress.

The biggest challenges, I believe, in the overall reform process

are in improving the timeliness of getting primarily FBI records

from FBI, and also in adjudicating our security clearances in 30

days or less. The reason I say I believe those are our biggest challenges is because the resources—we know what we need to do, but

the resources to do it are not yet in place. The extra people needed

at the FBI, the extra adjudicators needed at DOD are not yet in

place. We know how many need to be there. We know what they

need to do when they are there, what they need to be trained to

do. But it has not yet happened.

I would be glad to answer any questions at the end of

everybody’s statements.

[The prepared statement of Mr. Johnson follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Andrews.

STATEMENT OF ROBERT ANDREWS

Mr. ANDREWS. Mr. Chairman, I am Bob Andrews. The decision

to suspend security investigations was made shortly after I took up

my post. This was not the Defense Security Services’ finest hour.

We failed to estimate accurately the demand for security investigations. We failed, moreover, to understand the systemic problems

that further contributed to suspending the investigations.

Mr. Chairman, I am responsible for taking steps to resume the

investigations. I am also responsible for fixing the underlying problems. I will meet those responsibilities.

We have lifted the suspension for the secret security clearances,

as you mentioned. We have also submitted to Congress a reprogramming action to permit us to lift suspension for top secret

and periodic investigations. I believe we are on the patH toward

fixing the fundamental flaws in our process itself. In the coming

weeks, I will keep the committee abreast of our progress and, at

the committee’s convenience, will consult with you as we move forward.

I have asked Rob Rogalski, Special Assistant to the Under Secretary for Intelligence, to lay out what happened and to outline the

near-term and longer-term solutions we have identified.

[The prepared statement of Mr. Andrews follows:]

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Chairman TOM DAVIS. Mr. Rogalski, thanks for being with us.

STATEMENT OF ROBERT W. ROGALSKI

Mr. ROGALSKI. Good afternoon, Mr. Chairman.

Prior to the appointment of Bob Andrews, I was the Acting Deputy Under Secretary of Defense for Counterintelligence Security.

Today I am joined by Ms. Janice Haith, Acting Director, Defense

Security Service, DSS. Ms. Haith does not have an opening statement, so I ask your indulgence if I go briefly over the 5 minutes

allocated time.

The Under Secretary of Defense for Intelligence asked me to lead

a DOD team to diagnose what caused DSS to suspend industry investigations due to the $90 million funding shortfall.

The work we have done has uncovered a number of systemic

problems associated with the industrial security process. We have

identified immediate changes which I believe will help address

those problems.

By way of background, the Department of Defense budgets and

pays to OPM the cost of security clearance investigations for DOD

contractors and contractors for 23 other Federal agencies as part

of the national industry security program.

On April 25th, the Acting Director, DSS, directed the Defense Industrial Security Clearance Office [DISCO], which processes requests from industry for investigations, to suspend submissions to

OPM for two types of investigations; initial investigations and periodic reinvestigations.

On April 28th, DSS notified the industrial security community to

stop sending requests for investigations to DISCO because DSS

projected that it did not have sufficient funds available to pay OPM

for additional investigations. DSS took this action to comply with

the Anti-Deficiency Act. DSS cannot knowingly request investigations without available funding.

Let me stress that DSS did not direct OPM to stop work on any

industrial investigations, initial or periodic, submitted prior to

April 25th, and DSS has paid for all work submitted to OPM

through April 25th.

During fiscal year 2006 and prior to April 25th, DSS submitted

to OPM over 100,000 requests for industry investigations. Based on

our current projections, we anticipate submitting an additional

100,000 industry investigations for the remainder of fiscal year

2006.

But, again, none of the more than 100,000 industrial investigations submitted by DSS to OPM prior to April 25th have been affected by DSS’ action to suspend the submission of investigations.

A number of factors contributed to the problem faced by DSS.

First, DSS did not adequately budget for the cost of industry investigations in fiscal year 2006. In October 2004, the Department

signed an agreement with OPM to transfer the personnel security

investigation function from DOD to OPM. As part of the agreement, DOD agreed to pay to OPM up to a 25-percent premium of

the base cost of investigations to offset potential operating losses

incurred by OPM. The DOD budget request, which was delivered

to Congress in February 2005, prior to OPM publication of its fiscal

year 2006 rates, did not include funds to pay the premium to OPM.

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In addition, the DSS budget was reduced during congressional deliberation on the fiscal year 2006 budget, and DSS did not appropriately manage that reduction.

Second, when DOD transferred the personnel security function to

OPM, DSS had approximately 45,000 pending industry investigation requests, which they did not transfer to OPM. DSS directed industry to resubmit many of these investigations, and it appears

they are being submitted during this fiscal year. DSS failed to

track the status of these investigations and did not request funding

for them in its fiscal year 2006 budget submission.

Let me now address the immediate steps the Department has

taken to address the suspension. DOD’s Comptroller provided DSS $28 million to restart industry investigations. DSS has expended $5 million of these funds to pay

the most recent bill from OPM. Yesterday, DSS notified industry

to begin submitting requests for initial investigations for secret

clearances to ensure individuals requiring a clearance for employment are placed in the OPM processing queue. Based on present

projections, the remaining $23 million will allow DSS to send to

OPM for processing industry initial secret clearance requests

through the end of June 2006.

DOD, with OMB approval, submitted a reprogramming request to Congress for $90 million yesterday to enable DSS to submit the

remaining projected industry investigations through the end of fiscal year 2006.

The Deputy Under Secretary of Defense for Counterintelligence

and Security, Mr. Andrews, has directed the following actions to

address the systemic problems. The establishment within DSS of a

Central Oversight Office to perform a variety of functions, to include: develop a process to link security investigation requirements

and funding with current and future DOD contracts; monitor, initially on a daily basis, the industry investigation process and develop trip wires to reduce the probability of any need to impose a

future suspension.

The DOD Comptroller will immediately begin work with DSS to

develop new processes for DSS to use in preparing its budget submissions. DSS will continue to work with OPM so that the two organizations can identify and track investigations submitted to OPM

for processing, as well as the associated funding.

Mr. Chairman, the Department’s senior leadership is committed

to correcting the systemic problems that have been identified in the

personnel security process. The Department recognizes that inadequate oversight was a major contributor to the problem.

We are prepared to meet with the committee periodically to provide progress reports on our efforts to correct the problems identified.

Mr. Chairman, this concludes my statement.

[The prepared statement of Mr. Rogalski follows:]

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Chairman TOM DAVIS. Thank you very much.

Ms. Dillaman.

STATEMENT OF KATHY L. DILLAMAN

Ms. DILLAMAN. Mr. Chairman, it is my privilege to testify today

on behalf of the Office of Personnel Management to provide you

with an update of the progress that has been made to improve the

timeliness of the security clearance process and reduce the backlog

of background investigations, as well as answer any questions you

may have about OPM’s role in processing security clearance investigations for the Department of Defense.

OPM’s mission is to ensure the Federal Government has an effective civilian work force. To accomplish this mission, OPM provides

background investigation products and services to agencies to make

security clearance or suitability decisions on civilian, military, and

contractor personnel.

At OPM, the division responsible for conducting background investigations is our Federal Investigative Services Division,

headquartered in Boyers, PA. This division supports over 100 Federal agencies with thousands of security offices worldwide. Our

automated processing systems and vast network of field investigators handle a high volume of cases. In fact, this year we expect to

process over 1.7 million investigations.

Since February 2005, OPM has had responsibility for about 90

percent of all personnel background investigations for the Federal

Government. Subsequently, the Office of Management and Budget

formalized this by officially designating OPM as the lead investigative agency responsible for conducting investigations. We have been

working closely with OMB and the major clearance granting agencies to meet the timeliness requirements of the Intelligence Reform

and Terrorism Prevention Act of 2004. Last fall, when our performance improvement plan was released, it addressed four critical

areas of the investigation and security clearance process: workload

projections, timeliness and quality of agency submissions, timeliness of the investigations, and the adjudications process.

Since that time, I am happy to report that we have made great

strides in improving overall timeliness and reducing the inventory

of backlogged investigations.

OPM provides reports each quarter to OMB and the clearance

granting agencies on the progress that has been made to meet the

goals of the performance plan I referenced earlier. As an attachment to my testimony today, I am providing a chart which depicts

the overall performance improvement trends for all agencies.

To staff the investigative program responsibly, we need agencies

to work toward projecting their annual need within a margin of 5

percent. Overall, agencies’ projections are within 17 percent of actual submissions this fiscal year. The Department of Defense,

which represents 80 percent of the national security investigations,

has exceeded their annual projections by 59 percent for the first

half of the year. We have asked all agencies to re-evaluate the projections for the remainder of the year, and based on any adjustments provided, we may need to further increase our Federal and

contractor staff to keep pace with demand.

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The first step in improving the timeliness of the investigation

and clearance process is timely and accurate submission of the subject’s background information to OPM. The expanded use of the

electronic Questionnaires for Investigations Processing [e-QIP] by

submitting agencies has improved submission timeliness and lowered the rate of submission rejections because they contain inadequate or incomplete information.

OPM continues to make significant progress in reducing the

amount of time it takes to complete the investigations as well. I

have included a table in my written statement that demonstrates

this progress. The improvement in timeliness can be attributed

largely to our increased staffing and productivity by our field

agents. Currently, we are maintaining a staff of over 8,600 employees and contractors devoted to the background investigations program. In addition, we began deploying field agents overseas in August 2005 and currently have more than 40 field agents working

in more than 30 military installations around the world to handle

international coverage requirements.

Although we have been able to reduce the number of overdue initial clearance investigations, our inventory of pending investigations is increasing because of the difficulty we have in obtaining information from some national, State, and local record providers.

Working with OMB, Federal agencies that provide records have developed aggressive plans to improve their performance.

During the second quarter of this fiscal year, agencies reported

their adjudication actions to OPM. They averaged 78 days to complete this action, with 9 percent done within the required 30 days

of completion of the investigation. OPM is working with agencies

to improve this time and to automate the process of returning investigations and reporting updating of their actions.

Mr. Chairman, when the Senate confirmed OPM Director Linda

Springer last summer, I know she assured Members of Congress

that our work on security clearance reforms would be one of her

highest priorities. I am proud to have been given the opportunity

to work closely with our Director and put my own 30 years of Federal experience in this area to work in order to meet the expectations Congress and the President have set on this critical issue.

That concludes my remarks. I would be happy to answer any

questions.

[The prepared statement of Ms. Dillaman follows:]

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Chairman TOM DAVIS. Thank you.

Mr. Gimble.

STATEMENT OF THOMAS F. GIMBLE

Mr. GIMBLE. Mr. Chairman, thank you for the opportunity to appear before the committee today to discuss personnel security clearance program issues.

Since 1997, the DOD IG has issued 14 reports, including the

April 2006 report on ‘‘DOD’s Security Clearance Process at Requesting Activities.’’ Cumulatively, these reports address the five

phases of the personnel security clearance process. Although we

have not focused specifically on fiscal issues, many of the issues

that we have reported have fiscal ramifications. Also, our ongoing

‘‘Audit of Transition Expenditures for DOD Personnel Security Investigations for fiscal year 2005’’ will determine whether the expenditures for the transition of personnel security investigations

from DSS to OPM were in accordance with the agreement and

whether OPM’s rate structure and adjustments for DOD investigations are reasonable. Working jointly with the OPM Inspector General, we anticipate issuing our report by August 2006.

Our reports have identified longstanding issues and made numerous recommendations that, if implemented, would lead to a

more efficient and effective personnel security clearance program.

GAO’s findings have been consistent with ours. Unfortunately, the

implementation of key recommendations has been slow and, as a

result, longstanding issues remain uncorrected. I will discuss several longstanding issues.

In a 2002 report on ‘‘Security Clearance Investigative Priorities,’’

we reported that DOD lacked a meaningful process for prioritizing

security clearance requests. To date, our recommendation on

prioritization remains outstanding, and timely completion of security clearances for mission-critical and high-risk positions is still

very much an issue.

A 2001 report on the ‘‘Defense Clearance and Investigations

Index Data base,’’ the DCII, identified data integrity problems that

included incomplete and obsolete data. The DCII has not been updated, but was still used to populate the Joint Personnel Adjudication System [JPAS]. The new system is the single, central record

for investigative data. As a result, the data integrity problems are

still an issue.

For nearly 10 years, we have reported the need to update the

DOD Regulation 5200.2-R and DOD management has agreed. Yet,

to this date, the action remains to be completed and needs to be

given a higher priority.

A number of our reports, as well as GAO reports, have addressed

the impact of increasing workloads on both personnel and fiscal resources. Our most recent audit report focused on the impediments

to initiating security clearance requests at 26 DOD activities and

substantiated many of the longstanding issues that I just discussed. The report found that the Under Secretary of Defense Intelligence Office responsible for DOD personnel security clearance

program was understaffed, thus limiting the ability to issue DOD

policy and provide assistance and oversight to the military services

and defense agencies.

51

Security managers’ workloads have grown significantly because

of September 11th, the military deployments, the global war on terrorism, and increased use of sensitive classified technology. OPM

has also returned about 20 to 25 percent of the investigation reports to the DOD activities because of inaccurate data.

DSS Liaison Office was established to assist the Under Secretary

of Defense Intelligence with the oversight, communication, and

transition to OPM. Its existence was not well-known to security

managers at the requesting activities.

For almost a decade, our audits have highlighted serious flaws

in DOD’s security clearance process. DOD has taken steps to address some of the identified problems. But until systemic and growing problems receive DOD management attention, not much will

change.

The personnel security program needs to have strong senior leadership focus at the OSD level to include oversight of DSS; a current

integrated long-range strategic plan supported by resources and

senior leadership involvement that will enable OSD to have visibility and oversight of the entire program to effect the necessary

changes; a transparent process for DOD security personnel to understand the processes and resources and using the DSS Clearance

Liaison Office and other communications tools; a better identification of personnel security clearance requirements that will assist

both DOD and OPM in identifying the investigative and funding

needs; an updated current version of DOD Regulation 5200.2-R.

In conclusion, regardless of whether the investigative function remains at OPM or DOD, these longstanding issues must be resolved

to make meaningful progress in reducing backlog and ensuring a

more effective and efficient end-to-end security clearance process

which will contribute to a more fiscally sound program.

That concludes my statement.

[The prepared statement of Mr. Gimble follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Rogalski, let me start with you. In your testimony, you state

that one of the factors leading to the $90 million shortfall at DSS

in fiscal year 2006 was that at time DOD submitted its budget request in February 2005, DOD did not request funds to cover the

25-percent premium that DOD agreed to pay OPM in the Memorandum of Understanding that was signed in October 2004.

Considering that the Memorandum of Understanding clearly established that OPM could charge DSS at the rates it had been

charging, which was a known quantity, and that it could charge up

to a 25-percent premium on top of that figure, also a known quantity, why was DOD unable to estimate the amount of money it

would need to cover what it would owe OPM?

Mr. ROGALSKI. First of all, I might have to take part of this as

a question for the record because that is a DOD Comptroller answer. But let me give you what I understand from what the DOD

Comptroller told us.

It is clear that in the MOA between DOD and OPM it does say

that OPM may charge up to a 25-percent premium for the conduct

of investigations. Our understanding from the Comptroller is it is

very difficult to forecast a budget when you have a term such as

‘‘may’’ in there. So that is why, on the advice of the Comptroller,

we went in with our initial request, again, looking to having make

some budget adjustments once that surcharge, once that premium

was imposed on DOD, and we did not do that.

Chairman TOM DAVIS. So they looked at ‘‘may’’ as a possibility

and not——

Mr. ROGALSKI. That is correct.

Chairman TOM DAVIS [continuing]. As a ceiling in budget.

Mr. ROGALSKI. Yes, sir.

Chairman TOM DAVIS. Live and learn, I guess.

Why did I read about this in the paper? Why didn’t DOD notify

Congress that they were about to run out of money? I mean, you

know what the congressional interest in this has been. Do you

know the answer to that? Or maybe Mr. Andrews—can somebody

tell us why?

Mr. ROGALSKI. Very candidly, it was a mistake on our part. We

should have notified you prior to the announcement being made in

the press. We should have notified you first.

Chairman TOM DAVIS. It was a shock to me.

Mr. Andrews, do you have any comment on that?

Mr. ANDREWS. I was as shocked as my boss was, Mr. Chairman.

Chairman TOM DAVIS. Mr. Johnson, one of the reasons cited by

DOD is the 25 percent per investigation that they have to pay to

OPM. GAO has reported that DOD and OPM approached Office of

Management and Budget seeking arbitration of this matter, but

that OPM directed the agencies to continue to negotiate.

Why did you decline to mediate at the time? Did you think it

could——

Mr. ANDREWS. We have never declined. In fact, we were told by

DOD and OPM that they would come to us when it was the appropriate time. But they were still working through the issues and

making good progress.

66

Chairman TOM DAVIS. Well, let me ask this question: Were you

as surprised as we were when they came out with this announcement?

Mr. ANDREWS. Yes.

Chairman TOM DAVIS. So they did not check with you either.

Mr. ANDREWS. No. No. Let me comment also.

Chairman TOM DAVIS. Yes.

Mr. ANDREWS. Two things were going on here: their estimate of

volume was off by 50 percent, and their estimate of unit price was

off by 25 percent. The bigger of the two shortcomings is the volume

estimate, but in both cases, as I understand from my conversation

with Bob, they had the information to identify this and forecast

this problem earlier in the year. And as they said to me and to

themselves and to their bosses and we are saying to you today,

they did not do what they needed to do when they needed to do

it.

Chairman TOM DAVIS. Well, I would like to hear from DOD and

OPM. If you both accept the need for the premium, as well as

about the assumption underlying it and the empirical base that

they use to support it now, we have a year’s worth of data now on

the costs involved in the clearance investigation process. I would

just like to get both of your views on it.

Mr. ROGALSKI. Let me address the premium issue. It is correct

that we did ask OMB to mediate that, but we did agree that our

respective staffs, the DOD and OPM staffs, would meet to look at

the premium issue.

On May 5th, DOD did have a meeting with OPM, and we were

again advised that the premium would remain for the rest of the

fiscal year. Again, that was a business decision the Department

made when the MOA was signed. We did agree to that. And, again,

we did not adequately budget for that premium increase from

OPM.

Chairman TOM DAVIS. Not only did Congress NOT get notified,

but I guess the Office of Management and Budget was a little

taken by surprise, too, by your announcement.

Mr. ROGALSKI. That is correct.

Chairman TOM DAVIS. Ms. Dillaman.

Ms. DILLAMAN. Yes, Mr. Chairman. First, OPM’s investigations

program is totally a revolving fund program, fee-for-service program, unlike when DOD handled the background investigations.

We must recover all costs, full cost recovery in our process.

When we negotiated the Memorandum of Understanding, we had

concerns in three areas: The transferring staff, if they would be

able to cover their payroll; we inherited about a $10 million a

month payroll. Also, we needed to double our contracting capacity

to handle the additional workloads. And there were several infrastructure issues that had yet to be resolved.

We have provided all of our financial statements to DOD, and

they clearly demonstrated the need for the premium. The first

quarter after transfer, we went into the red. By the end of the year

last year, we broke even, and for this first quarter of this year, we

have a slight margin. All of that information has been provided.

We fully expect, barring any unforeseen circumstances, that we

may be able to eliminate the premium as soon as the end of this

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fiscal year, but there still lurk some variables that will have to be

considered.

Chairman TOM DAVIS. Well, let me just say this: On behalf of everybody who is out there—the companies that are involved, the

people that are involved, the American taxpayers, who are really

getting the short end of this—when the agencies look narrowly at

your focus and your budgets and you make those decisions based

on—you know, whatever, the Anti-Difficult Act or whatever—you

just jack up the cost that everybody is paying for these services. It

ends up costing the governmental entity money over the long term.

Your budget may be covered. And we just rely on everybody to not

just look at the narrow piece of paper and the regulations that are

operating, but at the mission as a whole, and to make sure that

we are complying with that mission. And in this case, the mission

has been clear for a couple years. We have a huge backlog that did

not exist in 2001, and it is backlogged there, and now this action

makes it worse over the short term. Then we get everybody up

here, and—I mean, that is the concern, is that nobody seems to

worry about the mission. Everybody is just worried about their bureaucratic niche and violating this act or that act or meeting their

budget, and we forget about the taxpayers and why we are in Government.

Yes, go ahead.

Mr. JOHNSON. The distinguished characteristic, I believe, of the

efforts by the six large security clearance granting agencies is their

commitment to fix this. You would be very proud of the level of

commitment by all the agencies and OPM to fix this and the time

and attention that is going into this. We are not where we want

to be. We are better than we have been. And there is a lot of looking at the big picture and not much looking at our budgets and so

forth. So I——

Chairman TOM DAVIS. But that is what caused the announcement in this case.

Mr. JOHNSON. Well, there was oversight, as I heard it reported,

and that Bob was not then—was not notified. His boss was not

identified. We were not identified that this was happening. And

this could have been identified and forecasted several months prior.

Error.

Chairman TOM DAVIS. That is what I am referring to.

Mr. JOHNSON. But two-thirds of the problem, their budget problem, the reason they ran out of money mid-year, two-thirds of the

reason is their volume of clearances was 50-plus-percent higher

than they thought. Only one-third of the problem is not budgeting

for the increased rate.

Chairman TOM DAVIS. I understand. Look, one of the outcomes

of the security language that was included in the intelligence reform legislation of 2004 was Executive Order 13381, which designates OMB as the oversight authority for clearance policy. I want

to congratulate you personally, Clay, for your hard work in bringing together all the stakeholders, developing a plan to reduce the

backlogs, and enforce reciprocity agreements.

However, this Executive order expires in July of this year, and

in light of the recent situation at DSS, it seems apparent that there

continues to be a need for high-level oversight at your level of this.

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Do you anticipate there being a continued oversight role for OMB

and maybe the Executive order being extended?

Mr. JOHNSON. There will be continued oversight. I think eventually the oversight for the proper activities of the security clearance

part of the Government will fall to DNI. When they are ready to

take on that oversight, it will pass to them, and we are in conversations with the DNI to determine whether they are ready now

or they would recommend that OMB continue in the oversight capacity. But there will continue to be oversight on this process.

Chairman TOM DAVIS. But it may not come in the form of an Executive order.

Mr. JOHNSON. We will issue another Executive order.

Chairman TOM DAVIS. OK. I have more questions, but I will

yield to Mr. Waxman.

Mr. WAXMAN. Thank you, Mr. Chairman.

Ms. Haith and Ms. Dillaman, you are both Directors of the two

primary Federal agencies that conduct background investigations

for security clearances. Your agencies conduct initial investigations

as well as periodic reinvestigations. I would like to ask you about

the process for reinvestigations, if I may.

I have here the adjudicative guidelines for determining eligibility

for access to classified information, which were approved by President Bush on December 29, 2005. These apply explicitly to ‘‘persons

being considered for continued eligibility for access to classified information.’’

Ms. Haith, to take a hypothetical example, when you are reinvestigating a Government employee’s background, Section 34 of the

President’s guidelines says you are supposed to examine incidents

in which an employee has engaged in a ‘‘deliberate or negligent disclosure of classified or other protected information to unauthorized

persons, including, but not limited to, the media.’’ The President’s

guidelines say this is a serious security concern. Would you agree?

Ms. HAITH. Yes, sir, I would agree.

Mr. WAXMAN. And it would be especially pertinent if it happened

on several occasions. Is that right?

Ms. HAITH. Yes.

Mr. WAXMAN. Ms. Dillaman, the President’s guidelines refer to

both intentional and negligent handling of classified information.

So we are not just concerned about intentional leaks. We are also

concerned with Government officials who are negligent in the way

they handle classified information. Is that right?

Ms. DILLAMAN. Yes, sir.

Mr. WAXMAN. So reinvestigations for security clearances are really very different from criminal investigations. We are not looking

for intentional actions, prove beyond a reasonable doubt. We are

looking for any activity that bears on a person’s honesty and integrity. Is that correct?

Ms. DILLAMAN. And their continued eligibility to have a security

clearance, yes, sir.

Mr. WAXMAN. Finally, Ms. Haith, Section 2(e) of the President’s

guidelines say that when a security concern becomes known about

someone who already has a clearance, it is important to determine

whether the person voluntarily reported the information and was

truthful and complete in responding to questions. So, in your opinVerDate 11-MAY-2000 12:14 Aug 24, 2006 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 D:\DOCS\28534.TXT HGOVREF1 PsN: HGOVREF1
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ion, if an agency employee lies to the head of the agency about improper disclosures, would that be relevant to whether that employee should continue to have access to classified information in

the future?

Ms. HAITH. Yes, sir it would be relevant. However, there is a due

process requirement, and we would have to implement the due

process according to the law.

Mr. WAXMAN. I thank you for that answer.

I did not get specific about a particular case, but the information

you provided raises serious questions about why Karl Rove retains

his security clearance today. Reports indicate that he leaked classified information, the identity of a CIA operative. Reports also indicate that he did so on more than one occasion. It appears that he

tried to cover it up by telling the White House Press Secretary that

he was not involved. It appears he may have also lied to President

Bush himself.

Given the President’s own guidelines, can either of you tell me

why Karl Rove still has a security clearance?

Ms. HAITH. Sir, he is not a DOD employee. I cannot comment on

that.

Mr. WAXMAN. Ms. Dillaman.

Ms. DILLAMAN. Nor can I, sir. My agency conducts the background investigations. The adjudications for clearances are handled

by the clearance granting agency.

Mr. WAXMAN. Let me ask you this: Karl Rove came into the

White House with President Bush in January 2001. If he applied

for a security clearance at that time, he would have received an interim clearance while his background was being investigated. He

was then granted a final security clearance most likely at some

point in 2001. That means that this year, 2006, he should be scheduled for his 5-year reinvestigation. Is either of your offices conducting this reinvestigation?

Ms. HAITH. DSS is not conducting any investigation.

Mr. WAXMAN. Ms. Dillaman.

Ms. DILLAMAN. I have no idea, sir.

Mr. WAXMAN. OK. Can you tell us who conducts this periodic investigation for White House staff? Who is the official we need to

talk to about this issue?

Ms. DILLAMAN. Sir, I need to get back to you with an answer on

that. I believe those investigations are conducted by the FBI, but

I cannot confirm that now.

Mr. JOHNSON. Congressman.

Mr. WAXMAN. Anybody on the panel? Yes?

Mr. JOHNSON. You need to contact the White House. Counsel’s

Office is in charge of—they have a Security Office in the White

House, and they would be responsible for the 5-year reinvestigations. And I believe it is true that the FBI does the background

checks.

Mr. WAXMAN. They do the background check, but the——

Mr. JOHNSON. Adjudication is done by the Security Office and the

White House Counsel’s Office.

Mr. WAXMAN. OK. Well, I will just conclude by noting that right

now it looks like the White House is ignoring the President’s own

guidelines while they wait for the outcome of a criminal investigaVerDate 11-MAY-2000 12:14 Aug 24, 2006 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 D:\DOCS\28534.TXT HGOVREF1 PsN: HGOVREF1
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tion. But as these experts here today have testified, that is not the

case that is supposed to—that is not the way it is supposed to

work. The White House is supposed to halt access to classified information and investigate the breach. You lose your classification

status and then you see if there is anything wrong that has been

done criminally. It seems like it has been reverse with Karl Rove.

They refuse to stop his access to classified information while there

is a criminal investigation going on.

The White House is supposed to halt the access to classified information and investigate the breach. And, Mr. Chairman, I think

the committee should investigate how this process works at the

White House and who is in charge over there, and I would like to

ask if you would consider joining my request for a White House

briefing on these matters.

Chairman TOM DAVIS. Well, I think that is not a discussion I am

going to have out here with you, Mr. Waxman, but I will certainly

be happy to talk to you about this.

Mr. WAXMAN. Well, Mr. Chairman, as we look at this access to

classified information, I think we need to look at this matter very,

very carefully. Some of us have already reviewed the CIA’s concern

about what the disclosure of Valerie Plame meant to the CIA itself,

the operatives that work for it, and we could easily guess what the

impact has been on our classified information, whether people can

trust that classified information is going to be kept secret and not

jeopardize those about whom the classified information may be

about.

So I will close my questions with that point and will look forward

to further discussions.

Chairman TOM DAVIS. Thank you, Mr. Waxman.

I have a few more questions. I would like to hear from both OPM

and DOD how they go about projecting annual requests, how accurate these estimates have been in the past, and why DOD was so

off of its estimates for this year. I know there are lot of moving

parts in this, but let’s just see if you can help me on that.

Let me start with OPM. Ms. Dillaman.

Ms. DILLAMAN. Yes, sir. Each year, OPM does a data call for all

agencies asking for projections for the following fiscal year. We contrast those projections with our own records of what has been received in the past and work with agencies if there seems to be a

significant difference between what we actually received the prior

year and what is projected for the next year.

This year, early, before this fiscal year started, every agency provided those projections. We are in the mid-year point now, and we

are asking agencies to revalidate those projections to see if adjustments are needed.

Chairman TOM DAVIS. OK.

Mr. ROGALSKI. DOD has always had a challenge in making these

projections, and we certainly want to get our fidelity in making

these projections down much clearer.

There are two dynamics in the Department of Defense: one is the

projection we get from the military departments on their projections, and then the projections for industry. Let me address the

military departments first.

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What we are seeing in the Department of Defense is increased

access and expanded sharing of classified information to the

warfighter. So by getting more classified information to the

warfighter in the field, we have seen an increase across the board

to increase the number of security clearances. Although both the

Marine Corps and the Army are both looking to try to declassify

information as much as possible, but today we are getting more information to the warfighter; hence, that has increased the need for

security clearances.

Additionally, we have extended intelligence community networks

in the field. Those further require clearances. And we are seeing

a greater percentage of clearances for our top secret information as

well. So those dynamics have increased to the overall projections

from the military departments.

Annually, we go out to industry and ask them to project their

projected workload, and industry numbers are actually pretty accurate. For this year, we just did not adequately plan for the increased workload for those cases being resubmitted. We are working in the Department. Air Force has a good model. We are looking

at that as a way to be applied through DOD. We asked for the military departments and the rest of the Department last week—we

got their input last week to develop a strategy to better forecast

data. But we realize this is an area the Department must improve

upon to get better fidelity in our projections so we can provide

OPM the data they need to manage workload.

Chairman TOM DAVIS. There are a lot of moving parts in the personnel security process. You have DOD adjudicators. You have

OPM investigators, both Federal and under contract, and private

sector requesters. What I am getting at is it would seem a necessity that the guidelines for this process be up-to-date and accessible

to everybody. But my reading is that the DOD—and the DOD IG

has reported that the key DOD guidance, which is Regulation

5200.2-R, hasn’t been updated for almost a decade, even though

recommendations from the IG are that it be reviewed. Similarly,

the OPM investigator’s manual has been in draft for some years

now.

What is DOD doing to update the necessary guidance? And when

will that be complete? And what are OPM’s plans for finalizing the

investigator’s manual? And has this manual been made accessible

to all those in the process, such as DOD adjudicators who need it?

I will start with DOD.

Mr. ROGALSKI. Mr. Chairman, the base document, that is correct,

is dated 1987. DOD has issued three changes to the base document, with the latest being February 1996, and additionally we

have issued an interim policy guidance memorandum since then.

So even the absence of that base policy, we meet regularly with the

DOD security community. Our Acting Director of Security chairs

the DOD’s Security Directors Group, with the Security Directors

from the military departments, defense agencies, combat and commands. We put out guidance with that forum. People can access in

the community the Defense Security Service Web site.

So we do keep the DOD security community advised of policy

changes. We are going to get out a draft coordination of the 5200.2-

R, the DOD personnel security regulation in draft, by July 2006.

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Chairman TOM DAVIS. Do you want me to ask my question

again?

Ms. DILLAMAN. No. I am fine, sir.

Chairman TOM DAVIS. OK.

Ms. DILLAMAN. OPM’s investigator handbook has been shared

with the adjudication community consistently. In 2004, a year before the merger of DSS and OPM, we shared the investigator’s

handbook with all of DOD because they began processing their investigations using our handbook. We then started working closely

with DOD to come to some agreement on some common investigative interpretations of standards and come up with one community

handbook.

In 2005, a second draft was published. It was shared with DOD,

and we have been working since then with educational text writers

to improve the format of it.

Recently, the final draft went to all of the community stakeholders for review, and we do anticipate a final handbook to be issued

later this year.

You should keep in mind, however, that things do constantly

change and amendments need to be added. As new laws are passed

or new investigative practices are incorporated, we need to keep

amending that handbook to keep it up-to-date.

Chairman TOM DAVIS. So is it going to be perpetually in draft,

or are you going to——

Ms. DILLAMAN. No, sir. There will be a final, but immediately

after the final, we will start on improving.

Chairman TOM DAVIS. I got you.

Let me ask you, Mr. Gimble, what role does the Joint Personnel

Adjudication System [JPAS], play in the single data base requirement? What is being done to eliminate the IT stovepipes instead

of a truly unified clearance data base?

Mr. GIMBLE. Within the Department, it is the central repository,

replacing what was known as the DCII. As I understand it—and

I do not have any current work on this, but as I understand it, it

will be the central data base within the Department of Defense.

The challenge is to make it interface with the OPM system to

where you can have a true back-and-forth download and upload

and avoid the manual——

Chairman TOM DAVIS. How close are we to making that happen?

Mr. GIMBLE. That I would have to defer and get back to you on

that. I think it is a challenge that is going to take a lot of work

to get there. I do not have a timeframe as to when you would expect it to be there.

Chairman TOM DAVIS. OK. Ms. Dillaman, you testified that

OPM’s inventory of so-called closed pending cases has been increasing because of the difficulty OPM faces in obtaining third-party information necessary to complete investigations.

Ms. DILLAMAN. Yes, sir.

Chairman TOM DAVIS. But it seems that OPM is simply providing agencies with incomplete investigations after charging for the

full cost of a completed product.

Ms. DILLAMAN. First of all, sir, if I advance information to an

agency, that file is open with me until the final pieces are completed. Today, I have 70,000 investigations pending at OPM that

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are waiting for third-party information from the FBI and the Department of Defense only. That is 70,000 investigations that could

be reviewed and the decision made on whether a clearance could

be granted.

Chairman TOM DAVIS. So agencies could actually use incomplete

investigations to award clearances?

Ms. DILLAMAN. It is a judgment call on the agency’s part whether

or not the final pieces pose a risk in making that decision. Some

agencies lack sufficient staff to handle the file twice, even though

the timeliness for granting clearance or an interim clearance could

be improved.

Chairman TOM DAVIS. OK. In a November 2003 report, GAO reported that the Transportation Security Agency paid about $3,195

per investigation with the understanding that they would be expedited and completed within 75 days rather than paying $2,700 and

having the investigation completed in 120 days. So they paid about

a $500 premium.

However, when the investigations were not completed in over a

year, TSA requested a refund and they were refused.

Ms. DILLAMAN. Yes, sir.

Chairman TOM DAVIS. OK. Why shouldn’t a customer receive a

refund if OPM is unable to provide the level of service that was

paid for?

Ms. DILLAMAN. First of all, sir, the premium relates directly to

what the contractors charge OPM to conduct the investigations,

and we advertise——

Chairman TOM DAVIS. But they paid more than they ordinarily

would so that they would get it back on an expedited basis.

Ms. DILLAMAN. And historically the processing time for priority

investigations is faster, significantly faster, than standard service

investigations. And in this case, for TSA and for DOD, priority investigations where a premium is paid are turned around much

faster. Today, for top secret investigations, priority service investigations are processed in an average of 50-odd days. Standard

service investigations are averaging about 170 days. So they are

getting their investigations in about a third of the time by paying

the premium.

Chairman TOM DAVIS. So basically just everything has gotten

less efficient in terms of the time period?

Ms. DILLAMAN. No, sir. The premium on the case—the priority

cases require our contractors to invest sometimes significant additional overhead in managing a smaller inventory. They may send

an agent to travel specifically for one case rather than efficiently

letting them queue and sending an agent to travel for multiple

cases in order to meet a priority deadline.

Chairman TOM DAVIS. I am just trying to understand then. The

extra $495 that was paid, my understanding is they were moving

it from 120 days to 75 days, while you are saying, well, the 120

was really 180 and the 75 days was really something else. Is

that——

Ms. DILLAMAN. Sir, we don’t advertise a timeliness by days. We

advertise two levels of service: priority and standard, with our contractors bidding a premium to do priority work faster than standard service.

74

Chairman TOM DAVIS. It sounds like two levels of service, slow

and slower, is what it looks like.

Ms. DILLAMAN. Yes, sir.

Chairman TOM DAVIS. OK. Mr. Gimble, what has the impact of

understaffing been in the current situation? And can you suggest

a more realistic staffing level at USDI that will ensure adequate

oversight of the security clearance function at DOD?

Mr. GIMBLE. I think first, Mr. Chairman, you have to kind of put

it in perspective. The staffing of the oversight at USDI, we believe

it is very significantly understaffed simply because they do the policy updates, write the manuals, and I think that is part of the reason that four times in the last 7 years they have said they were

going to issue an updated manual and they have not been able to

do that.

The magic number I think would have to be done, there needs

to be an adequate staffing study, a delineation of exactly what—

where they want the policy procedures to be handled, either at

USDI, DSS, or down in the military departments. So I do not have

a definitive answer for you today.

Chairman TOM DAVIS. You testified in June 2005 that DSS established a seven-person clearance liaison office to assist the Office

of the Under Secretary of Defense for Intelligence with oversight,

planning, communication, the transition to OPM, and coordination

for overseas interviews. But it appears that DSS has done a poor

job of advertising this office because very few security managers

the IG interviewed were aware of its existence. Is that——

Mr. GIMBLE. That is correct. We went to 26 DOD locations out

in the field on the audit that we were looking at. When you put

in the initial request, did they know—were they aware of the office

and its functions to answer questions and provide oversight? And

basically it was a very low awareness at the field level.

Chairman TOM DAVIS. All right. Thank you. My last question,

Clay, goes to you. And, again, I thank you for being here, and I

know you have put a lot of your effort into this thing. I am glad

to hear you were as disappointed as we were when this announcement came out, and you are back supervising this. But in 2004,

GAO requested that the proportion of requests for private sector

top secret clearances increased from 17 percent to 24 percent from

fiscal year 1996 to fiscal year 2003, and that the 10-year cost to

the Government is 13 times higher for a person with a top secret

clearance relative to a person with a secret clearance. That was a

GAO report.

But if the bar is rising for clearance level requirements, the cost

to the Government will continue to rise with it. I am just asking,

do you have any thoughts on how to ensure that the growth in demand for top level clearances is both necessary and manageable?

Mr. JOHNSON. I don’t have the answer to that. We have talked

recently about certain levels of people that OPM is considering

sending to the FBI to help with some file recovery work, and they

are required to have a top secret clearance, and some people have

asked why do they need a top secret clearance? Some of the files

require it; some don’t. There is no easy answer to that.

So I don’t know how to control or how to manage or how to make

proper the demand for the different levels of clearance. I know that

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longer term—not in the next year or 18 months—say 4 or 5 years

out, we will be doing clearances—we all can envision doing clearances very differently than we do them now, and a lot more data

mining and a lot less interviewing next-door neighbors, which is

the same way we have been doing it since the 1950’s. That will be

almost certainly more efficient, less expensive to do.

So I would suspect that the cost to do a certain type of clearance

will tend to come down over time, but we have not built any of

those assumptions into our attack on improving the process here

in the short term in the next 2 years.

Chairman TOM DAVIS. But I guess the agencies, to the extent

that someone is overclassified, are you asking—there is a cost to

that as well. We just need to understand that as we walk through

it.

I think those are the questions that I wanted to get out today.

I am just glad that we are at least back on track, but we still have

a long-term issue, and I would just say, Mr. Johnson, we are going

to need your continued efforts to try to bring this backlog back.

Anyone else want to add anything before we go to the next

panel? Mr. Rogalski.

Mr. ROGALSKI. I would like to add one thing very quickly. Thank

you. We have had many discussions with Mr. Johnson about how

to improve the process, so we have the one issue of the immediate

funding shortfall, which we need to address, but I do think—and

DOD is certainly looking at what are those changes to national policy. I do believe it is time—we are overdue—to look at the need for

the efficacy of the 5-year, 10-year, 15-year updates. So DOD is certainly looking at these initiatives. How can we get better investment for our dollar, again, to really determine what is the right criteria to have to determine that someone is suitable, trustworthy to

have access to classified information. So we are certainly looking

at those types of things in a strategic concept.

Thank you.

Chairman TOM DAVIS. And I would just say, we are looking at

a way to see if GAO can measure what the cost is to the taxpayer

by having this backlog, by either work not getting done or overpaying, because there is a huge cost to that. I see it out in my district

all the time because a lot of our companies do this kind of work

and are seeing the problems. You know what the House did in the

appropriations—excuse me, in the authorization bill last week in

terms of we are not going to allow clearances to expire at this

point. There is always, I guess, some risk in that, but given the

backlog, we do not need to create more backlog. The problem with

that is when that legislation expires, the backlog or queue will get

much longer much faster.

Yes, sir, Mr. Andrews?

Mr. ANDREWS. Mr. Chairman, let me close by saying that whenever there is a crisis in Government, there is always an initial response to let’s reorganize. I think we see this problem not as an

organizational problem but as a leadership problem at its very

core, and we are going to take care of it.

Chairman TOM DAVIS. Well, you know, I was an Army officer,

and when you take over a post—you are former officers. You know

the story. It leaves you three envelopes if things go bad. In the first

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envelope, when you open it up, if things are not going well the first

few weeks, it says, ‘‘Blame it on your predecessor.’’ If in a couple

months things still are not going well, you get to the second envelope, and I guess that is where we are here. It says, ‘‘Reorganize.’’

If a few months later things are still going bad, you open up the

third envelope, and it says, ‘‘Prepare three envelopes.’’

So I think we are at the reorganize stage here. I know you have

to get over to the Senate.

Mr. Ruppersberger, do you want to ask anything?

Mr. RUPPERSBERGER. I am sorry we have all these different hearings, but I am on the Intelligence Committee, and we have dealt

a lot in the clearance arena, and I am not sure what you just testified to, but my staff was here so I will find out.

I want to ask a question about—we have a program at NSA that

I believe is working pretty well from a clearance perspective. I

know when I first started working with General Hayden on the

issue, I think it was a year. I think it is down to 3 or 4 months,

and sometimes when it is a priority, it goes a lot quicker. And from

my analysis, looking at where we are, it seems to me that things

are getting clogged at OMB. And I wonder, when we have a good

program and it is working, why don’t we see why it is working.

Another issue, too, I represent the NSA Fort Meade area, also,

and I know we are having a division under the BRAC process coming into Fort Meade. And I am concerned that what is coming into

Fort Meade on the clearance issue might interfere with what NSA

is doing now because it works.

The bottom line is where it works. And I would like you to answer the question about, the first thing, why is it necessary to go

through OMB if that is where it seems the back-up is there. If an

NSA program—and there are other Defense areas that are working

from a clearance perspective, they seem to have it more under control, and also as it relates to the contractors, because the contractors that are working with our NSA, CIA, whatever it is, you know,

if they don’t get their clearances, they might not be able to do the

jobs, and it slows everything down. And we know al Qaeda is not

going to wait for us, that is for sure.

So who could answer that question about why we don’t take a

program that is working, why it seems we have to go through

OMB? OMB in the beginning was kind of good because they got it

going and organized it, but now it seems to be slowing up again

and the bureaucracy seems to be coming in. And could you identify

who you are with?

Mr. JOHNSON. I am Clay Johnson. I am the Deputy Director for

Management at OMB and I am the person that is in charge of this

oversight process and reform process—oversight of the reform process.

Mr. RUPPERSBERGER. OK.

Mr. JOHNSON. I am not familiar with the NSA program. I know

that the security clearance process and results within the intelligence community is considered satisfactory. They do it on a very

timely basis, high quality and so forth. So there is not a turnaround time problem we are trying to address. So what we are——

Mr. RUPPERSBERGER. Wait. I don’t get you there. What do you

mean there is not a turnaround problem? In the intelligence comVerDate 11-MAY-2000 12:14 Aug 24, 2006 Jkt 000000 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 D:\DOCS\28534.TXT HGOVREF1 PsN: HGOVREF1
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munity, in some agencies there are. I just used NSA as an example

of one that is working. Why don’t we see what they are doing and

follow what they are doing? And then the second issue is OMB.

Why do we need to get involved and go with OMB? Why is it slowing down at OMB? That is my question.

Mr. JOHNSON. I am not aware of what NSA is having to do with

OMB, but I would be glad to look into it and——

Mr. RUPPERSBERGER. Did I say OMB? I meant OPM. I am sorry.

Mr. JOHNSON. Oh, OK.

Mr. RUPPERSBERGER. All these acronyms are——

Mr. JOHNSON. Then I don’t care as much. [Laughter.]

Ms. DILLAMAN. I care a lot because I am OPM.

Mr. RUPPERSBERGER. OK. Let’s go.

Ms. DILLAMAN. Sir, I am not aware of any——

Mr. RUPPERSBERGER. You are off the hook. That is good.

Ms. DILLAMAN. OPM provides some of the background investigations for NSA, and NSA has a contract to do some of the investigations themselves. We work very closely with them, and I know of

no inordinate delays in that process.

Mr. RUPPERSBERGER. Well, why are we here today then? I am

looking at Mr. Chairman. We are here because of the concern and

the slowdown with contractors as far as clearances. That is why we

are here today.

Chairman TOM DAVIS. Well, right on the eve of this yesterday,

they announced they were resuming it right before the hearing.

But we still felt it was important to get them up here to understand what happened, and I guess once again reiterate how important this is.

I had promised this panel they could leave. They have to be over

at the Senate at 2:30.

Mr. RUPPERSBERGER. All right. I tell you what. Then could you—

what was your name?

Mr. ROGALSKI. I am Robert Rogalski from the Department of Defense, USDI. I will take that as a question for the record. I have

met with the Director of Security at NSA. I have looked at their

process, and we will provide you a detailed explanation.

Just for clarification, NSA has been granted authority by the Department as well as the Defense Intelligence Agency to conduct initial background investigations. OPM conducts their periodic reinvestigations. I will tell you that from the NSA perspective—and

I have looked at their program. They have an excellent program.

But the Department has a scalability issue if we were to adopt the

NSA program. But I will provide you a detailed——

Mr. RUPPERSBERGER. This is Walter Gonzalez. I am going to

have him get with you all to follow through on this.

Mr. ROGALSKI. Absolutely.

Mr. RUPPERSBERGER. Fine. Thank you.

Mr. ROGALSKI. We would be glad to do that.

Chairman TOM DAVIS. All right. We are going to take a 5-minute

break—or about a 3-minute break as we move to our next panel.

I want to thank this panel for coming.

[Recess.]

Chairman TOM DAVIS. The hearing will come back to order.

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I recognize our second panel: Mr. Doug Wagoner, the chairman

of the Intelligence Subcommittee of the Information Technology Association of America, on behalf of the Security Clearance Coalition;

Mr. William L. Gunst, the vice president for business operations,

from Anteon International Corp.; and Mr. Nicholas Karangelen, the

president of Trident Systems, Inc. It is good to see you all here.

You know, we swear you in before you testify. It is our policy.

If you would just rise with me and raise your right hands.

[Witnesses sworn.]

Chairman TOM DAVIS. Just a second, do you want to get a photo

op here? You can let her get a photo op here while you are there.

I hope that will look good in the newsletter.

Have a seat.

Well, you have heard the previous panel. I do not want to say

we are back on track, but at least one hiccup is resolved for the

immediate future. All of you are no strangers to this issue. We just

really appreciate your being here. Mr. Wagoner, we will start with

you and then go down the line.

STATEMENTS OF DOUG WAGONER, CHAIRMAN, INTELLIGENCE

SUBCOMMITTEE, INFORMATION TECHNOLOGY ASSOCIATION OF AMERICA, ON BEHALF OF THE SECURITY CLEARANCE COALITION; WILLIAM L. GUNST, VICE PRESIDENT FOR

BUSINESS OPERATIONS, ANTEON INTERNATIONAL CORP.;

AND NICHOLAS KARANGELEN, PRESIDENT, TRIDENT SYSTEMS, INC.

STATEMENT OF DOUG WAGONER

Mr. WAGONER. Mr. Chairman and members of the committee,

thank you for inviting ITAA and its industry partners to testify

today on the continuing challenges industry faces in obtaining Federal security clearances. My name is Doug Wagoner and I serve as

chairman of the ITAA Intelligence Committee. I also bring the perspective of a small business executive from Fairfax struggling with

this issue each day.

I’ve included more detail on our proposed solution to this problem in a detailed white paper, and I would like to submit that for

the record.

Mr. Chairman, I was before you and this committee almost exactly 2 years ago to discuss this problem. DSS leadership testified

that day that, as a result of changes under way at DSS and OPM,

95 percent of Top Secret clearances by fiscal year 2005 would be

completed in 120 days and no case would take over a year. Since

then, with the leadership of your committee, we thought we had

made strides to significantly change the security clearance process.

Here we are 2 years later, and DSS is nowhere near fulfilling

promises made to this committee.

In light of the past promises and attempted reforms, industry

was greatly alarmed by the April 26th action to suspend acceptance

of contractor requests for clearances. We appreciate this committee’s quick action to hold this hearing, and look forward to

Congress’s support in solving this problem both in the near and

long term.

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DSS may decide to suspend its activity, but our enemies are not

suspending theirs. Nor are others in the defense and intelligence

community suspending their vigilance to defeat those enemies, and

the demand and support from private industry is greater than ever.

Increasingly, defense and intelligence agencies are turning to the

private sector for products and services they need to do their jobs.

We cannot provide that without access to classified facilities and

information. In other words, we cannot provide support without security clearances.

There’s much to tell about the impact of DSS’s decision, but none

as important as the possibility that national security missions may

not be accomplished unless this issue is addressed. This problem

is also keeping qualified people from working, is causing salary

premiums as high as 25 percent, premiums that raise the costs to

industry, Government, and ultimately the taxpayer, as you brought

out earlier. And it is leaving companies unable to meet contract requirements.

Industry has three requests that it would like to detail today.

One, immediate funding to reinstate acceptance and processing of

all contractor security clearances. Two, an audit on how DSS and

OPM could have created such a drastic shortfall so early in the fiscal year and how that shortfall led to an absolute moratorium. And

three, a legislative overhaul of the security clearance process, programs, and related bureaucracy, with an immediate infusion of

technology.

We must require DOD to reinstate the processing contractor

clearances immediately. If full funding cannot be found, industry

can work with DSS to prioritize cases for the rest of this fiscal

year, given full funding is made for fiscal year 2007.

It has been suggested that industry should pay for their clear- ances, which cost about $3,700 for a Top Secret. Industry rejects

this suggestion for several reasons. First, it would create haves and

have-nots between large and small firms. Additionally, the costs

would be forwarded to Government, along with any overhead

charges, just as with any other allowable cost, and this means the

increased costs would come out the expense of congressionally approved program funds. And last, and probably the most profound

reason, is that industry is not in the business to support failed

processes in Government.

It appears the decision to stop processing contractor clearance requests was made in a vacuum and the funding shortfall came as

a complete surprise to DOD. We know of no oversight body, including this one, that was alerted. We heard that $145 million was

budgeted and burned in 7 months, and today they announced that

they need an additional $91 billion for the balance of fiscal year

2006. For DSS not to detect that something was going wrong a

month ago, 3 months ago, and sound the alarm—or did OPM to deliver a surprise bill to DSS? Industry believes there are accounting

issues between OPM and DSS on how cases are charged, and there

may even be double billing caused by how OPM rejects incomplete

files.

It is for these reasons that a complete audit investigation is

needed for this monumental shortfall and how it came as a surprise to almost everyone.

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For the long term, our Nation needs a complete overhaul of the

security clearance bureaucracy. This overhaul must include an immediate infusion of technology and data collection and analysis.

While OPM struggles to find enough investigators armed with pen

and paper to collect the data, much of this data can be verified

through commercial data bases. These sources can verify identity,

credit, and other transactional information; in fact, our Nation’s financial insurance industry takes billions of dollars of informed risk

each year based upon the reliability of the exact same data.

In closing, Mr. Chairman, industry is very concerned by the arbitrary decision to no longer accept our requests for clearances.

These requests are solely generated by mission need. We stand

side-by-side with our Government partners to keep our Nation safe

and are truly worried about the impact of this decision on the

many missions we support.

Mr. Chairman, you may recall that 2 years ago you held up a

1982 GAO report on security clearance problems and commented

that, since that time, you raised your son, put him through college

and law school, while little had been done to shorten the clearance

timeframes. Let’s not wait for our grandchildren to complete law

school before we embark on a total overhaul of the program’s process and bureaucracies related to security clearances.

Thank you again, and I look forward to your questions.

[The prepared statement of Mr. Wagoner follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Gunst.

STATEMENT OF WILLIAM GUNST

Mr. GUNST. Chairman Davis, Ranking Member Waxman, and

members of the Committee on Government Reform, thank you for

inviting Anteon International Corp. to testify today on an issue

that is very troubling to my company and the government-contracting community.

Anteon, headquartered in Fairfax, VA, is a leading information

technology company serving the U.S. Federal Government. We design, integrate, maintain, and upgrade state-of-the-art systems for

national defense, intelligence, homeland security, and other highpriority missions. Anteon was founded in 1976 and currently has

almost 10,000 employees in more than 100 locations worldwide. In

short, we have been deeply involved in this process for a long time.

We perform a significant volume of classified work under contract with the Federal Government. Consequently, over 70 percent

of our employees hold Government security clearances today. Since

1999, the backlog for security clearance investigations has increased significantly. As you might expect, with this increased demand, the time to obtain a clearance has lengthened from what it

was. In the post-September 11th period, our experience, at its

worst, has shown that the time to process a Top Secret clearance

has doubled to between 18 to 24 months.

Our need for clearances is very simple. We are subject to the

Federal Government’s—our customer’s—requirements. If you cannot fill the need, you lose out on the most fundamental task of bidding on an opportunity and then supporting the customer. No

clearances, no contracts.

At the time DSS imposed the freeze, Anteon had approximately

1,100 actions pending, which grow at a rate of 150 to 200 actions

monthly, covering new clearances, upgrades, and reinvestigations.

On a day-to-day basis we are facing three fundamental problems,

which will get worse with any interruption to this process.

First, obtaining qualified staffing will be impacted. We will be

forced to change our hiring practices, to restrict our hiring to only

those people who already have clearances.

Second, affordability will become an issue. We will need to closely balance being able to afford the limited and shrinking universe

of people with security clearances within the constraints of our

fixed labor-rate environments.

And third, retention could become a growing problem. Competition for dwindling qualified staff will intensify as those individuals

with security clearances hop-scotch their way to higher salaries. On

the almost 40 percent of our contracts that are cost reimbursable,

these higher salaries will be passed on to our Federal customers.

Let me speak to the misunderstood belief that large contractors

can deal with this current situation, since they maintain a bench

of cleared employees. Individuals sitting in a company waiting for

assignment to a contract will not be there long. Federal contractors

who strive to provide qualified staff at a fair price cannot afford to

park individuals with valuable security clearances and indirect accounts.

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We succeed in this marketplace by providing outstanding and

qualified service to our customers at a reasonable price with lean

indirect expenses. When we fail to consistently meet any of these

criteria, everyone involved in this system fails, including our customers. It destroys our competitive position in the marketplace for

bidding, and it is a dollar-for-dollar reduction against the reasonable expectation of our shareholders. This condition is especially

relevant for the small business community, where limited staffs

often wear multiple hats to satisfy the customer.

This current interruption is all the more baffling after the recent

successful work to make the system more responsible to serve those

involved. Mr. Chairman, in October I joined you, your staff, and

others from the contracting community in a meeting with the Hon.

Clay Johnson in the Old Executive Office Building to discuss the

status of clearance processing at OPM. Real progress was being

made and hard targets were being established and met. Last October, most of us left that meeting with the firm belief that we were

turning the corner and would see continued improvement in the security clearance process.

I believe the infrastructure and outsourcing tools to ensure continued improvements in the system are in place and must be given

a reasonable chance to succeed. However, we cannot afford to take

our eye off any piece of this very fragile puzzle. Any interruption

like this causes us to lose progress and creates an untenable backlog.

Mr. Chairman, thank you for giving me the opportunity to testify

today, and I’m available to respond to your questions.

[The prepared statement of Mr. Gunst follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Karangelen.

STATEMENT OF NICHOLAS KARANGELEN

Mr. KARANGELEN. Chairman Davis, thank you very much for inviting me to testify today. It’s an honor to have an opportunity to

appear before you and discuss what we believe in small business

is a timely and significant challenge.

I also am a board member of the Small Business Technology Coalition, and I’d like to—I think we’ve talked a lot about the potential

impact this has on companies. My written statement also speaks

to that. But I’d like to say retrospectively that when OPM took over

this DSS in reorganization, and I guess it sort of ended in February, we actually saw an improvement. I haven’t been as deeply

involved as the gentlemen here with me on the panel, but we did

see interim clearances go from weeks and maybe even months to

a couple of days.

And frankly, that was fabulous, because in a lot of cases our customers will accept an interim clearance while you wait for your

final, although there are some customers that won’t. And today,

just at Trident Systems, which is a small technology company, we

do a lot of work for many of the agencies of the Government, we

have 108 cleared personnel. Thirty-eight of them have interim

clearances. That’s over 30 percent of my work force.

Now, and with all due respect to the large-company problem,

small companies, especially mine, that have—sometimes our

growth is sporadic, you know, we’ll grow 30 percent 1 year and be

flat for another, our companies, we have this—this problem really

exacerbates our ability to juggle. And I think we’ve been doing a

pretty good job of juggling the delay, which is between 8—sometimes it’s longer—months between an interim and a final. But the

notion that this could stop and we’d stop processing clearances

really puts the whole thing into a tailspin.

I was really delighted to hear today that it looks like we’re good

to go through June. I think that’s what I understood from the earlier panel. But it’s a very ominous notion that we would stop processing clearances from private-sector requests. I spoke to some of

the members of the Small Business Technology Coalition yesterday

and the day before on this issue and there’s literally panic. There

are companies that are not going to be able to fulfill contractual requirements if these delays are extended.

So I’d like to sort of wrap up just by saying that, you know, I

deeply appreciate, and we all do, what you do here on Government

Reform. The committee is really focused on the bureaucracy and

how to make it work better. We have a couple of suggestions.

Clearly, in the short term, I would agree that we’ve got to give

these guys some more money. There’s no way we can avoid—we

can stop processing clearances. I think that’s completely untenable

from a small business perspective.

From a longer-term view, though, the automation that exists in

JPAS and the potential for automation really offers what we believe is not just a process improvement, because there’s probably

lots of process improvement that could be had in reorganization

and in looking at the process, but a technology advantage, to give

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investigators quicker, easier access to information, to allow the

timeframe for clearances to come down to months.

And I want to finish by saying I’m sure there are a lot of small

businesses who would welcome the opportunity to offer an innovative and affordable solution to fixing this problem.

So with that, I’d like to thank you again for all the work the committee does, not just in Government Reform but in supporting our

troops as they wage the war on terror across the globe, and for the

opportunity to speak on this important issue.

[The prepared statement of Mr. Karangelen follows:]

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Chairman TOM DAVIS. Thank you very much.

Let me just start the questioning. Bearing in mind that Top Secret clearances cost the Government so much more, is the contractor community seeing the requirement for Top Secret clearances

over lesser levels of clearances increase over the last few years?

And is it warranted if it has? Any thoughts on that? We had this

discussion how much more expensive it is to clear someone with a

Top Secret. Are we overclassifying people—there would be an expense to that. Do you have any reaction to that?

Mr. WAGONER. Well, I have some hard facts. ITAA is embarking

upon a new survey of our members. We have about 400 respondents in so far. We’re going to wrap this up here in about a week.

So far, 88 percent of the companies that responded have said that

they have seen a dramatic increase for the requirement of cleared

personnel in the last 5 years. So that’s a hard fact based on 356

respondents.

The second part of your question, I believe, was do we believe

that these are all required. Sir, is that the question?

Chairman TOM DAVIS. Mm-hm. Or are we overclassifying? Probably the Government overclassifies to begin with, but in looking at

these clearances, could someone with a Secret clearance do stuff

that we’re requiring Top Secret for? Because there is a cost for

that.

Mr. WAGONER. We would sure like to say yes, but I think I have

to agree with the first panel, that stated that a lot of the requirements upon industry is because of the greater need to push data

down to the war fighter, the new systems that have been put in

place. And then we are building those systems. We have hands-on

in those systems. I wish I could say that we could declassify some

of that, but I believe that we should keep that as a Top Secret.

Chairman TOM DAVIS. Anybody else have a reaction to that?

Mr. KARANGELEN. I think it’s interesting to note that radio operators in the Army and the Marine Corps who are carrying radios,

SINCGARS radios with crypto that are, you know, top-secret pieces

of gear, many of them don’t have any security clearances at all.

It’s very difficult for us, from where we sit, to make a judgment

about whether or not somebody needs a Top Secret clearance or

whether or not somebody should be Top Secret, but clearly, if there

was a little more—it seems to be that there should be a little more

oversight about what’s top-secret and what’s not.

Chairman TOM DAVIS. Let me ask you this. When it comes to

pricing—and Mr. Gunst, I’ll start with you—when you’re pricing

something and there are security clearances, how do you price that

into your total cost at this point?

Mr. GUNST. Well, presently, given the size we are, we have the

advantage of having a little history and we have a pretty broad

range of employees with clearances. So we know when we go into

the marketplace what we’re going to see there with respect to salaries. So we have that advantage working for us. We don’t really

find ourselves pricing people and then pricing clearances. We use

salaries, and the basis we use is the near-term experience we have

in the particular marketplace that we are attempting to price an

opportunity in.

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Mr. WAGONER. I think also, if I could add something to that, I

think what’s happened in the last 5 years is I may have signed a

contract 3 or 4 years ago with established hourly rates for that person, and the problem is their qualifications haven’t changed, so I

can’t charge a higher rate for them. The only thing that’s changed

is the demand for their clearance. So we are seeing—it is impacting

our margin significantly because we’re locked into a contract that

we agreed to 3 or 4 years ago not realizing that this problem was

going to continue and that we’re going to have to keep paying premiums for these folks.

Chairman TOM DAVIS. But the little guys really get hurt in a

case like that, don’t they?

Mr. WAGONER. Yes, sir.

Chairman TOM DAVIS. Everybody gets hurt, but——

Mr. WAGONER. I am a little guy, sir. Yes. I’m a big little guy.

[Laughter.]

Chairman TOM DAVIS. As the Government security clearance customers, what is your assessment of the efforts undertaken thus far

to fulfill the requirement? Give them a grade.

Mr. WAGONER. Since the April decision? Well, let’s be clear——

Chairman TOM DAVIS. Well, not since the April decision. Let’s go

back to after the September 11th response by Congress.

Mr. WAGONER. The respondents in the survey indicate that in

the last year and a half, 60 percent are saying it’s gotten worse or

not better.

Chairman TOM DAVIS. OK.

Mr. WAGONER. So they’re not seeing a significant improvement

in the last year, I think is how the question was phrased. And we’ll

get this survey to your staff, sir, as soon as it’s done.

Mr. GUNST. My personal experience has been they get close to an

F until 2005. And frankly, I was very encouraged by what I heard

in the fall of 2005. They were meeting some very tough thresholds.

And when I first heard of this freeze in late April, I frankly

thought it was a joke. I could not believe that an agency, without

warning, would take such a step that would affect so many different people. So I would say since April they get an F.

Mr. KARANGELEN. The real issue I have is that on April 28th, I

think it was, we got the first indication that there might be a problem. And what we heard was there was a technical problem with

JPAS. It wasn’t until early in May when we heard from a third

party that they’d stopped processing clearances. And that really—

that’s the hardest thing to take. Because we feel like we’ve been

juggling the system, we’ve been working as hard as we can to work

within the system; 6, 8 months, if that’s what it is, that’s what it

is. If you’re going to stop processing clearances and not even tell

me you’re going to stop processing them, that really—that seems

very disingenuous. I would have preferred to at least have had

somebody say, hey, we’ve got a problem. Give us a heads up, even,

just like you should have been given one.

Chairman TOM DAVIS. You heard the previous panel and you

heard Clay Johnson talk about how things are getting better and

maybe we haven’t seen it yet. I mean, what is your confidence level

in the future at this point? Give it on assurances and legislation.

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And in addition to that, if you can think of one or two things

maybe that we are not doing that we ought to be doing that can

add to this.

And I guess I would add a third thing, is reciprocity working? We

kind of mandated it, but mandating it and getting everybody to buy

into it is a different issue.

I will start with you, Mr. Wagoner.

Mr. WAGONER. I think the most encouraging comment was from

Mr. Johnson right there toward the end, when he raised the possibility of actually reengineering this process and taking feet off the

street and getting away from the Eisenhower-era processes and

looking at automating a lot of these functions, looking at a lot of

the data. I think that is the only way we’re going to be encouraged

that anything is ever going to change, and that is if they start

changing the process. Throw it out, start with a clean sheet of

paper, and really look at use of technology and data to get this

done.

As far as reciprocity, we are starting to see some reciprocity. I

think the best that I personally have seen in talking to other colleagues is between CIA and NSA. They seem to have gotten the

message. In our survey, about a third are saying that they still do

not see reciprocity across Government.

Mr. GUNST. I think the primary concern I have is that I get worried whenever I look at a process that a single person doesn’t own.

It fails in industry, and I think it fails in Government. And I know

there are a lot of well-intentioned people trying to work very hard

to fix this situation. But as I sat listening to the testimony of the

first panel, I was struck by the notion that no one has control of

this process. There are certain people that ask for the clearances,

certain people that fund them, certain people that perform them,

and then the remaining group adjudicate them.

It’s difficult for me, on industry’s side, to understand why it

takes 18 to 24 months for a Top Secret clearance, but when no one

owns the process, it is by definition very fragile and no one can

bring all the resources to bear to fix it, because no single group

owns it. That would be my primary concern.

Chairman TOM DAVIS. What is the difference between large and

small companies? I think, Mr. Gunst, you would argue you don’t

keep a bench of people, that everybody gets hurt in the process. Is

that fair to say? When security clearances aren’t out there, everybody gets hurt. Mr. Karangelen, as a smaller company, isn’t it

harder on you?

Mr. KARANGELEN. Having a security clearance can’t be a discriminator. I mean, it’s just—I mean think about it. We’re trying

to buy technology, goods, and services. I want to compete with the

big guys and my peers. If it comes down to I just can’t get a security clearance, or a good competitor of mine can’t get a security

clearance, that seems like a terrible way to decide who’s going to

win an important technology procurement.

So I think it hurts everyone. I think it hurts small business more

because we’re just not organized to deal with it. You know, it’s like

creating another bureaucracy inside your company in order to manage what is really artificial, is a delay, an artificial delay. And

again, if you’re a big company, you add it to the bureaucratic nightVerDate 11-MAY-2000 12:14 Aug 24, 2006 Jkt 000000 PO 00000 Frm 00105 Fmt 6633 Sfmt 6633 D:\DOCS\28534.TXT HGOVREF1 PsN: HGOVREF1
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mare that you have. But when you’re a small guy, it means that

the president or chief operating officer or HR person has got—you

know, who’s already juggling a lot to do, has to do it.

Chairman TOM DAVIS. Anybody else want to add anything?

Mr. GUNST. Well, one of the obvious principal advantages any

large company has is they have some dedicated staff they can post

to a particular situation. I think the recent comment here is that

I—you know, small businesses have a person that does HR, they

do contracts, they do security, they’ll open the building in the

morning, they’ll take care of the light bulbs that are out. That’s one

person. I have the luxury of having 15 to 20 people that handle security. So when there’s an issue, I can dedicate some resources to

it and try to resolve it. I think that is a principle difference.

Chairman TOM DAVIS. OK, good. Anything else anybody wants to

add?

I just appreciate your being here trying to clarify this issue. And

once again, I think were it not for this hearing, we would not have

gotten the action out of the DOD. And I think your participation

and continued vigilance on this is going to be needed if we’re going

to really make a serious dent in this problem.

Thank you all very much. The hearing is adjourned.

[Whereupon, at 2:42 p.m., the committee was adjourned.]

[The prepared statement of Hon. Elijah E. Cummings and additional information submitted for the hearing record follow:]

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