DOD Personnel Clearances: Funding Challenges and Other Impediments Slow Clearances for Industry Personnel
Published: 2006-05-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Defense (DOD) is responsible for about 2 million active personnel security clearances. About one-third of the clearances are for industry personnel working on contracts for DOD and more than 20 other executive agencies. Delays in determining eligibility for a clearance can heighten the risk that classified information will be disclosed to unauthorized sources and increase contract costs and problems attracting and retaining qualified personnel. On April 28, 2006, DOD announced it had stopped processing security clearance applications for industry personnel because of an overwhelming volume of requests and funding constraints. GAO has reported problems with DOD's security clearance processes since 1981. In January 2005, GAO designated DOD's program a high-risk area because of longstanding delays in completing clearance requests and an inability to accurately estimate and eliminate its clearance backlog. For this statement GAO addresses: (1) key points in the billing dispute between DOD and OPM and (2) some of the major impediments affecting clearances for industry personnel.
section_title: What GAO Found
paragraphs: The costs underlying a billing dispute between DOD and OPM are contributing to further delays in the processing of new security clearance requests for industry personnel. The dispute stems from the February 2005 transfer of DOD's personnel security investigations function to OPM and associated costs for which DOD agreed to reimburse OPM. Among other things, the two agencies' memorandum of agreement for the transfer allows OPM to charge DOD annual price adjustments plus a 25 percent premium, in addition to the rates OPM charges to other federal government agencies. A January 20, 2006, memorandum from the Under Secretary of Defense for Intelligence to the Office of Management and Budget (OMB) questioned the continued need for the premiums and requested mediation from OMB. According to DOD and OPM, OMB has directed the two agencies to continue to work together to resolve the matter. The inspectors general for both DOD and OPM are expected to report on the results of their investigations into the dispute this summer. Other impediments, if not effectively addressed, could negatively affect the timeliness of clearance-eligibility determinations for one or more of the following employee groups: industry personnel, servicemembers, and civilian government employees. All three groups are affected by DOD's longstanding inability to accurately estimate the size of its security clearance workload. Inaccurate estimates of the volume of clearances needed make it difficult to determine clearance-related budgets and staffing requirements. Similarly, the July 1, 2006, expiration of Executive Order 13381, which delegated responsibility for improving the clearance process to OMB, could potentially slow improvements in personnel security clearance processes DOD-wide as well as governmentwide. GAO has been encouraged by OMB's high level of commitment to activities such as the development of a government plan to improve personnel security clearance processes governmentwide but is concerned about whether such progress will continue after the executive order expires. In contrast, demand for top secret clearances for industry personnel and the lack of reciprocity (the acceptance of a clearance and access granted by another department, agency, or military service) are impediments that mainly affect industry personnel. A previously identified increase in the demand for top secret clearances for industry personnel has workload and budgetary implications for DOD and OPM if such requests continue to occur. Finally, the lack of reciprocity has a negative effect on employees and employers, and increases the workload for already overburdened investigative and adjudicative staff. Reciprocity problems have occurred despite the issuance of governmentwide investigative standards and adjudicative guidelines in 1997.

section_title: Letter
paragraphs: Thank you for the opportunity to provide this statement for your hearing  on the challenges facing the Department of Defense (DOD) and the Office  of Personnel Management (OPM) in processing requests for personnel  security clearances in a timely manner. Two years ago, we testified before  this committee on similar challenges. Before providing our observations  about the challenges, I would like to provide some background to (1) give  a general context for understanding clearances and describe the  importance of industry personnel to our national security, (2) discuss how  clearance problems can negatively affect national security, and (3) provide  information about several recent events affecting the overall status of  DOD’s personnel security clearance program.
subsections: section_title: Background
paragraphs: As you know, Mr. Chairman, for over two decades, we have reported on  problems with DOD’s personnel security clearance program as well as the  financial costs and risks to national security resulting from these problems  (see Related GAO Reports at the end of this statement). For example, at  the turn of the century, we documented problems such as incomplete  investigations, inconsistency in determining eligibility for clearances, and  a backlog of overdue clearance reinvestigations that exceeded 500,000  cases. More recently in 2004, we identified continuing and new  impediments hampering DOD’s clearance program and made  recommendations for increasing the effectiveness and efficiency of the  program. Also in 2004, we testified before this committee on clearance- related problems faced by industry personnel.
A critical step in the federal government’s efforts to protect national  security is to determine whether an individual is eligible for a personnel  security clearance. Specifically, an individual whose job requires access to  classified information must undergo a background investigation and  adjudication (determination of eligibility) in order to obtain a clearance.  As with federal government workers, the demand for personnel security  clearances for industry personnel has increased during recent years.  Additional awareness of threats to our national security since September  11, 2001, and efforts to privatize federal jobs during the last decade are but  two of the reasons for the greater number of industry personnel needing  clearances today. As of September 30, 2003, industry personnel held about  one-third of the approximately 2 million DOD-issued clearances. DOD’s  Office of the Under Secretary of Defense for Intelligence has overall  responsibility for DOD clearances, and its responsibilities also extend  beyond DOD. Specifically, that office’s responsibilities include obtaining  background investigations and adjudicating clearance eligibility for  industry personnel in more than 20 other federal agencies, as well as the  clearances of staff in the federal government’s legislative branch.
Problems in the clearance program can negatively affect national security.  For example, delays reviewing security clearances for personnel who are  already doing classified work can lead to a heightened risk of disclosure of  classified information. In contrast, delays in providing initial security  clearances for previously noncleared personnel can result in other  negative consequences, such as additional costs and delays in completing  national security-related contracts, lost-opportunity costs, and problems  retaining the best qualified personnel.
Longstanding delays in completing hundreds of thousands of clearance  requests for servicemembers, federal employees, and industry personnel  as well as numerous impediments that hinder DOD’s ability to accurately  estimate and eliminate its clearance backlog led us to declare the program  a high-risk area in January 2005. The 25 areas on our high-risk list at that  time received their designation because they are major programs and  operations that need urgent attention and transformation in order to  ensure that our national government functions in the most economical,  efficient, and effective manner possible.
Shortly after we placed DOD’s clearance program on our high-risk list, a  major change in DOD’s program occurred. In February 2005, DOD  transferred its personnel security investigations functions and about 1,800  investigative positions to OPM. Now DOD obtains nearly all of its  clearance investigations from OPM, which is currently responsible for 90  percent of the personnel security clearance investigations in the federal  government. DOD retained responsibility for adjudication of military  personnel, DOD civilians, and industry personnel.
Other recent significant events affecting DOD’s clearance program have  been the passage of the Intelligence Reform and Terrorism Prevention Act  of 2004 and the issuance of the June 2005 Executive Order No. 13381,  Strengthening Processes Relating to Determining Eligibility for Access to  Classified National Security Information. The act included milestones for  reducing the time to complete clearances, general specifications for a  database on security clearances, and requirements for greater reciprocity  of clearances (the acceptance of a clearance and access granted by  another department, agency, or military service). Among other things, the  executive order resulted in the Office of Management and Budget (OMB)  taking a lead role in preparing a strategic plan to improve personnel  security clearance processes governmentwide.
Using this context for understanding the interplay between DOD and OPM  in DOD’s personnel security clearance processes, my statement addresses  two objectives in this statement: (1) key points of a billing dispute  between DOD and OPM and (2) some of the major impediments affecting  clearances for industry personnel.
As requested by this committee, we have an ongoing examination of the  timeliness and completeness of the processes used to determine the  eligibility of industry personnel to receive top secret clearances. We  expect to present the results of this work in the fall. My statement today,  however, is based primarily on our completed work and our institutional  knowledge from our prior reviews of the steps in the clearance processes  used by DOD and, to a lesser extent, other agencies. In addition, we used  information from the Intelligence Reform and Terrorism Prevention Act of  2004; executive orders; and other documents, such as a memorandum of  agreement between DOD and OPM. We conducted our work in accordance  with generally accepted government auditing standards in May 2006.
section_title: Unexpected Volume of Clearance Requests and Funding Constraints Delay Security Clearances for Industry Personnel Further
paragraphs: DOD stopped processing applications for clearance investigations for  industry personnel on April 28, 2006, despite an already sizeable backlog.  DOD attributed its actions to an overwhelming volume of requests for  industry personnel security investigations and funding constraints. We will  address the issue of workload projections later when we discuss  impediments that affect industry personnel as well as servicemembers and  federal employees, but first we would like to talk about the issue of  funding.
An important consideration in understanding the funding constraints that  contributed to the stoppage is a DOD-OPM billing dispute, which has  resulted in the Under Secretary of Defense for Intelligence requesting  OMB mediation. The dispute stems from the February 2005 transfer of  DOD’s personnel security investigations function to OPM.
The memorandum of agreement signed by the OPM Director and the DOD  Deputy Secretary prior to the transfer lists many types of costs that DOD  may incur for up to 3 years after the transfer of the investigations function  to OPM. One cost, an adjustment to the rates charged to agencies for  clearance investigations, provides that “OPM may charge DOD for  investigations at DOD’s current rates plus annual price adjustments plus a  25 percent premium to offset potential operating losses. OPM will be able  to adjust, at any point of time during the first three year period after the  start of transfer, the premium as necessary to cover estimated future costs  or operating losses, if any, or offset gains, if any.”
The Under Secretary’s memorandum says that OPM has collected  approximately $50 million in premiums in addition to approximately $144  million for other costs associated with the transfer. The OPM Associate  Director subsequently listed costs that OPM has incurred. To help resolve  this billing matter, DOD requested mediation from OMB, in accordance  with the memorandum of agreement between DOD and OPM. Information  from the two agencies indicates that in response to DOD’s request, OMB  has directed them to continue to work together to resolve the matter. The  DOD and OPM offices of inspector general are currently investigating all  of the issues raised in the Under Secretary’s and Associate Director’s  correspondences and have indicated that they intend to issue reports on  their reviews this summer.
section_title: If Not Effectively Addressed, Impediments Could Continue to Hinder Efforts to Provide Timely Clearances
paragraphs: Some impediments, if not effectively addressed, could hinder the timely  determination of clearance eligibility for servicemembers, civilian  government employees, and industry personnel; whereas other  impediments would mainly affect industry personnel. The inability to  accurately estimate the number of future clearance requests and the  expiration of the previously mentioned executive order that resulted in  high-level involvement by OMB could adversely affect the timeliness of  eligibility determinations for all types of employee groups. In contrast, an  increased demand for top secret clearances for industry personnel and the  lack of reciprocity would primarily affect industry personnel.
subsections: section_title: An Existing and a Potential New Impediment Could Lead to Continuing Problems for All Types of Employees Seeking Clearances
paragraphs: A major impediment to providing timely clearances is the inaccurate  projections of the number of requests for security clearances DOD-wide  and for industry personnel specifically. As we noted in our May 2004  testimony before this committee, DOD’s longstanding inability to  accurately project its security clearance workload makes it difficult to  determine clearance-related budgets and staffing requirements. In fiscal  year 2001, DOD received 18 percent (about 150,000) fewer requests than it  expected, and in fiscal years 2002 and 2003, it received 19 and 13 percent  (about 135,000 and 90,000) more requests than projected, respectively. In  2005, DOD was again uncertain about the number and level of clearances  that it required, but the department reported plans and efforts to identify  clearance requirements for servicemembers, civilian employees, and  contractors. For example, in response to our May 2004 recommendation to  improve the projection of clearance requests for industry personnel, DOD  indicated that it was developing a plan and computer software that would  enable the government’s contracting officers to (1) authorize a certain  number of industry personnel clearance investigations for any given  contract, depending on the number of clearances required to perform the  classified work on that contract, and (2) link the clearance investigations  to the contract number.
Another potential impediment that could slow improvements in personnel  security clearance processes in DOD—as well as governmentwide—is the  July 1, 2006, expiration of Executive Order No. 13381. Among other things,  this executive order delegated responsibility for improving the clearance  process to the Director of OMB for about 1 year. We have been  encouraged by the high level of commitment that OMB has demonstrated  in the development of a governmentwide plan to address clearance-related  problems. Also, the OMB Deputy Director met with GAO officials to  discuss OMB’s general strategy for addressing the problems that led to our  high-risk designation for DOD’s clearance program. Demonstrating strong  management commitment and top leadership support to address a known  risk is one of the requirements for removing DOD’s clearance program  from GAO’s high-risk list. Because there has been no indication that the  executive order will be extended, we are concerned about whether such  progress will continue without OMB’s high-level management  involvement. While OPM has provided some leadership in assisting OMB  with the development of the governmentwide plan, OPM may not be in a  position to assume additional high-level commitment for a variety of  reasons. These reasons include (1) the governmentwide plan lists many  management challenges facing OPM and the Associate Director of its  investigations unit, such as establishing a presence to conduct overseas  investigations and adjusting its investigative workforce to the increasing  demand for clearances; (2) adjudication of personnel security clearances  and determination of which organizational positions require such  clearances are outside the current emphases for OPM; and (3) agencies’  disputes with OPM—such as the current one regarding billing—may  require a high-level third party to mediate a resolution that is perceived to  be impartial.
section_title: Increased Demand for High-level Clearances and the Lack of Reciprocity Are Previously Identified Problems for Industry Personnel
paragraphs: As we have previously identified, an increase in the demand for top secret  clearances could have workload and budgetary implications for DOD and  OPM if such requests continue to occur. In our 2004 report, we noted that  the proportion of requests for top secret clearances for industry personnel  increased from 17 to 27 percent from fiscal years 1995 through 2003. This  increase has workload implications because top secret clearances (1)  must be renewed every 5 years, compared to every 10 years for secret  clearances, and (2) require more information about the applicant than  secret clearances do. Our 2004 analyses further showed that the 10-year  cost to the government was 13 times higher for a person with a top secret  clearance ($4,231) relative to a person with a secret clearance ($328).  Thus, if clearance requirements for organizational positions are set higher  than needed, the government’s capacity to decrease the clearance backlog  is reduced while the cost of the clearance program is increased.
When the reciprocity of clearances or access is not fully utilized, industry  personnel are prevented from working. In addition to having a negative  effect on the employee and the employer, the lack of reciprocity has  adverse effects for the government, including an increased workload for  the already overburdened staff who investigate and adjudicate security  clearances. Problems with reciprocity of clearances or access, particularly  for industry personnel, have continued to occur despite the establishment  in 1997 of governmentwide investigative standards and adjudicative  guidelines. The Reciprocity Working Group, which helped to prepare  information for the governmentwide plan to improve the security  clearance process, noted that “a lack of reciprocity often arises due to  reluctance of the gaining activity to inherit accountability for what may be  an unacceptable risk due to poor quality investigations and/or  adjudications.” Congress enacted reciprocity requirements in the  Intelligence Reform and Terrorism Prevention Act of December 2004, and  OMB promulgated criteria in December 2005 for federal agencies to follow  in determining whether to accept security clearances from other  government agencies. Because of how recently these changes were made,  their impact is unknown.
section_title: Concluding Observations
paragraphs: We will continue to assess and monitor DOD’s personnel security  clearance program at your request. We are conducting work on the  timeliness and completeness of investigations and adjudications for top  secret clearances for industry personnel and we will report that  information to this committee this fall. Also, our standard steps of  monitoring programs on our high-risk list require that we evaluate the  progress that agencies make toward being removed from the list. Lastly,  we monitor our recommendations to agencies to determine whether steps  are being taken to overcome program deficiencies.
section_title: Staff Contact and Acknowledgments
paragraphs: For further information regarding this testimony, please contact me at  (202)512-5559 or stewartd@gao.gov. Individuals making key contributions  to this testimony include Jack E. Edwards, Assistant Director; Jerome  Brown; Kurt A. Burgeson; Susan C. Ditto; David Epstein; Sara Hackley;  James Klein; and Kenneth E. Patton.
section_title: Related GAO Products
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Managing Sensitive Information: DOE and DOD Could Improve Their  Policies and Oversight. GAO-06-531T. Washington, D.C.: March 14, 2006.
GAO’s High-Risk Program. GAO-06-497T. Washington, D.C.: March 15,  2006.
Questions for the Record Related to DOD’s Personnel Security Clearance  Program and the Government Plan for Improving the Clearance Process.  GAO-06-323R. Washington, D.C.: January 17, 2006.
DOD Personnel Clearances: Government Plan Addresses Some Long- standing Problems with DOD’s Program, But Concerns Remain. GAO-06- 233T. Washington, D.C.: November 9, 2005.
Defense Management: Better Review Needed of Program Protection  Issues Associated with Manufacturing Presidential Helicopters. GAO-06- 71SU. Washington, D.C.: November 4, 2005.
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