DOD Personnel Clearances: New Concerns Slow Processing of 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. Long-standing delays in completing hundreds of thousands of clearance requests and numerous impediments that hinder DOD's ability to accurately estimate and eliminate its clearance backlog led GAO to declare DOD's personnel security clearance program a high-risk area in January 2005. This testimony presents GAO's (1) preliminary observations from its ongoing review of the timeliness and completeness of clearances, (2) concerns about the upcoming expiration of an executive order that has resulted in high level commitment to improving the governmentwide clearance process, and (3) views on factors underlying DOD's decision to stop accepting clearance requests for industry personnel.
section_title: What GAO Found
paragraphs: GAO's ongoing review of the timeliness and completeness of security clearance processes for industry personnel has provided three preliminary observations. First, communication problems between DOD and the Office of Personnel Management (OPM) may be limiting governmentwide efforts to improve the personnel security clearance process. Second, OPM faces performance problems due to the inexperience of its domestic investigative workforce, and it is still in the process of developing a foreign presence to investigate leads overseas. Third, some DOD adjudication facilities have stopped accepting closed pending cases--that is, investigations formerly forwarded to DOD adjudicators from OPM--even though some required investigative information was not included. In addition, the expiration of Executive Order 13381 could slow improvements in the security clearance processes governmentwide, as well as for DOD in particular. The executive order, which among other things delegated responsibility for improving the clearance process to the Office of Management and Budget (OMB), is set to expire on July 1, 2006. GAO has been encouraged by the high level of commitment that OMB has demonstrated in the development of a plan to address clearance-related problems. Because there has been no indication that the executive order will be extended, GAO is concerned about whether the progress that has resulted from OMB's high-level management involvement will continue. Issues such as OPM's need to establish an overseas presence are discussed as potential reasons why OPM may not be in a position to assume an additional high-level commitment if OMB does not continue in its current role. Finally, inaccurate projections of clearance requests and funding constraints are delaying the processing of security clearance requests for industry personnel. DOD stopped processing new applications for clearance investigations for industry personnel on April 28, 2006. DOD attributed its actions, in part, to an overwhelming volume of requests for industry personnel security investigations. DOD's long-standing inability to accurately project its security clearance workload makes it difficult to determine clearance-related budgets and staffing requirements. The funding constraints that also underlie the stoppage are related to the transfer of DOD's personnel security investigations functions to OPM. DOD has questioned some of the costs being charged by OPM and has asked OMB to mediate the DOD-OPM dispute. Information from the two agencies indicates that OMB has directed the agencies to continue to work together to resolve the matter. According to officials in the DOD and OPM inspector general offices, they are investigating the billing dispute and expect to report on the results of their investigations this summer.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of Defense’s  (DOD) personnel security clearance program and problems related to  clearances for industry personnel. Since declaring DOD’s program a high- risk area in January 2005, we have testified before this Subcommittee  three times on security clearance-related issues. Before providing my  observations about the current problems in the security clearance process,  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: For over 2 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 September 2004 and June and  November 2005, we testified before this Subcommittee on clearance- related problems faced governmentwide, DOD-wide, and for industry  personnel in particular.
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 non cleared 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.
Long-standing 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 the Office of Personnel Management (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 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 the context that I have laid out for understanding the interplay  between DOD and OPM in DOD’s personnel security clearance processes,  I will address three issues. First, I will provide a status update and  preliminary observations from our ongoing audit on the timeliness and  completeness of the processes used to determine whether industry  personnel are eligible to hold a top secret clearance—an audit that this  Subcommittee requested. Second, I will discuss potential adverse effects  that might result from the July 1, 2006, expiration of Executive Order  13381. Finally, I will discuss DOD’s recent action to suspend the  processing of clearance requests for industry personnel.
With the exception of the update and preliminary observations on our  current audit, my comments today are based primarily on our completed  work and our institutional knowledge from our prior reviews of 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: Preliminary Observations from GAO’s Ongoing Audit Suggests Additional Problems
paragraphs: Mr. Chairman, at your and other congressional members request, we  continue to examine the timeliness and completeness of the processes  used to determine whether industry personnel are eligible to hold a top  secret clearance. Two key elements of the security clearance process are  investigation and adjudication. In the investigation portion of the security  clearance process, the investigator seeks to obtain information pertaining  to the security clearance applicant’s loyalty, character, reliability,  trustworthiness, honesty, and financial responsibility. For top secret  security clearances, the types or sources of information include an  interview with the subject of the investigation, national agency checks  (e.g., Federal Bureau of Investigations and immigration records), local  agency checks (e.g., municipal police and court records), financial checks,  birth date and place, citizenship, education, employment, public records  for information such as bankruptcy or divorce, and interviews with  references. In the adjudication portion of the security clearance process,  government employees in 10 DOD adjudication facilities—2 of which serve  industry—use the information gathered at the investigation stage to  approve, deny, or revoke eligibility to access classified information. Once  adjudicated, the security clearance is then issued up to the appropriate  eligibility level, or alternative actions are taken if eligibility is denied or  revoked. A major part of our audit is reviewing fully adjudicated industry  cases to determine the completeness of both the investigations and the  adjudications for top secret clearances. We will complete this audit and  issue a report to your Subcommittee and other congressional requesters  this fall.
I will briefly mention three of the preliminary observations that we have  been able to derive thus far from our audit.
Communication problems may be limiting governmentwide efforts to  improve the personnel security clearance process. The billing dispute that  I discuss later in this testimony is one example of a communication  breakdown. In addition, until recently, OPM had not officially shared its  investigator’s handbook with DOD adjudicators. Adjudicators raised  concerns that without knowing what was required for an investigation by  the investigator’s handbook, they could not fully understand how  investigations were conducted and the investigative reports that form the  basis for their adjudicative decisions. OPM indicates that it is revising the  investigator’s handbook and is obtaining comments from DOD and other  customers.
OPM acknowledges that despite its significant effort to develop a domestic  investigative workforce, performance problems remain because of the  workforce’s inexperience. OPM reports that they are making progress in  hiring and training new investigators, however, they have also noted that it  will take a couple of years for the investigative workforce to reach desired  performance levels. In addition, OPM is still in the process of developing a  foreign presence to investigate leads overseas. OPM also reports that it is  making progress in establishing an overseas presence, but that it will take  time to fully meet the demand for overseas investigative coverage.
Some DOD adjudication facilities have stopped accepting closed pending  cases—investigations forwarded to adjudicators even though some  required information is not included—from OPM. DOD adjudication  officials need all of the required investigative information in order to  determine clearance eligibility. Without complete investigative  information, DOD adjudication facilities must store the hard-copy closed  pending case files until the required additional information is provided by  OPM. According to DOD officials, this has created a significant  administrative burden.
section_title: Expiration of Executive Order Could Slow Improvements in Clearance Processes
paragraphs: The July 1, 2006, expiration of Executive Order 13381 could slow  improvements in personnel security clearance processes governmentwide  as well as for DOD in particular. Among other things, this new executive  order delegated responsibility for improving the clearance process to the  OMB Director from June 30, 2005, to July 1, 2006. We have been  encouraged by the high level of commitment that OMB demonstrated in  the development of a plan to improve the personnel security clearance  process governmentwide. 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 if OMB does not continue  in its current role. 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 is not an OPM responsibility; and (3) agencies’ disputes  with OPM—such as the current billing dispute with DOD—may need a  high-level, impartial third party to mediate a resolution.
section_title: Unexpected Volume of Clearance Requests and Funding Constraints Delay Security Clearances for Industry Personnel Further
paragraphs: DOD stopped processing applications for clearances for industry  personnel on April 28, 2006. DOD attributed its actions to an  overwhelming volume of requests for industry personnel security  investigations and funding constraints.
The unexpected volume of security clearance requests resulted in DOD  having to halt the processing of industry security clearances. We have  testified repeatedly that a major impediment to providing timely  clearances is DOD’s inaccurately projected number of requests for  security clearances DOD-wide and for industry personnel specifically.  DOD’s inability to accurately project clearance requirements makes it  difficult to determine clearance-related budgets and staffing. In fiscal year  2001, DOD received 18 percent fewer requests than it projected (about  150,000); and in fiscal years 2002 and 2003, it received 19 and 13 percent  (about 135,000 and 90,000), respectively, more requests than projected. 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 is developing a plan and computer software to have the  government’s contracting officers (1) authorize the number of industry  personnel clearance investigations required to perform the classified work  on a given contract and (2) link the clearance investigations to the  contract number.
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 DOD and OPM indicates that OMB subsequently directed the two  agencies to continue to work together to resolve the matter on their own.  According to representatives from DOD and OPM inspector general  offices, they 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 during the summer.
section_title: Concluding Observations
paragraphs: Mr. Chairman, I want to assure you that we will continue taking multiple  steps to assess and monitor DOD’s personnel security clearance program.  As I have discussed, we are currently reviewing the timeliness and  completeness of the processes used to determine whether industry  personnel are eligible to hold a top secret clearance. We will report that  information to your Subcommittee 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 GAO’s high-risk  list. Finally, we continuously monitor our recommendations to agencies  to determine whether active steps are being taken to overcome program  deficiencies.
Mr. Chairman and Members of the Subcommittee, this concludes my  prepared statement. I would be happy to answer any questions you may  have at this time.
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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Industrial Security: DOD Cannot Ensure Its Oversight of Contractors  under Foreign Influence Is Sufficient. GAO-05-681. Washington, D.C.:  July 15, 2005.
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