Within DOD, the Office of the Under Secretary of Defense for Intelligence (OUSD ) is responsible for coordinating and implementing DOD-wide policies related to access to classified information. Within OUSD (I), the Defense Security Service (DSS) is responsible for conducting background investigations and administering the personnel security investigations program for DOD and 22 other federal agencies that allows industry personnel access to classified information. Two offices are responsible for adjudicating cases involving industry personnel. DSS’s Defense Industrial Security Clearance Office (DISCO) adjudicates cases that contain only favorable information or minor issues regarding security concerns (e.g., some overseas travel by the individual), and the Defense Office of Hearings and Appeals (DOHA) within the Defense Legal Services Agency adjudicates cases that contain major security issues (e.g., an individual’s unexplained affluence or criminal history). As with military members and federal workers, industry personnel must obtain a security clearance to gain access to classified information, which is categorized into three levels: top secret, secret, and confidential. The level of classification denotes the degree of protection required for information and the amount of damage that unauthorized disclosure could reasonably be expected to cause to national defense or foreign relations. For top secret information, the expected damage that unauthorized disclosure could reasonably be expected to cause is “exceptionally grave damage;” for secret information, it is “serious damage;” and for confidential information, it is “damage.” Individuals who need access to classified information over a long period are required to periodically renew their clearance (a reinvestigation). The time frames for reinvestigations are 5 years for top secret clearances, 10 years for secret clearances, and 15 years for confidential clearances. To ensure the trustworthiness, judgment, and reliability of industry personnel in positions with access to classified information, DOD relies on a three-stage personnel security clearance process. (See fig. 1.) This process, which is essentially the same for industry personnel as it is for military members and federal employees, entails (1) determining that the position requires a clearance and, if so, submitting a request for a clearance to DSS; (2) conducting an initial investigation or a reinvestigation; and (3) using the investigative report to determine eligibility for access to classified information—a procedure known as “adjudication.” In the preinvestigation stage, if a position requires a clearance, then the industrial contractor must request an investigation of the individual. The request could be the result of needing to fill a new position for a recent contract, replacing an employee in an existing position, renewing the clearance of an individual who is due for reinvestigation, or processing a request for a future employee (up to 180 days) in advance of the hiring date. Once the requirement for a security clearance is established, the industry employee completes a personnel security questionnaire, and the industrial contractor submits it to DSS. All industry requests for a DOD-issued clearance are submitted to DSS, while requests for military members and federal employees are submitted to either DSS or OPM. In the investigation stage, DSS, OPM, or one of their contractors conducts the actual investigation of the industry employee by using standards that were established governmentwide in 1997 and implemented by DOD in 1998. As table 1 shows, the type of information gathered in an investigation depends on the level of clearance needed and whether an initial investigation or a reinvestigation is being conducted. For either an initial investigation or a reinvestigation for a confidential or secret clearance, investigators gather much of the information electronically. For a top secret clearance, investigators gather additional information that requires much more time-consuming efforts, such as traveling, obtaining police and court records, and arranging and conducting interviews. DSS’s Personnel Investigations Center forwards the completed investigative report to DISCO. In the adjudicative stage, DISCO uses the information from the investigative report to determine whether an individual is eligible for a security clearance. If the report is determined to be a “clean” case—a case that contains no potential security issue or minor issues—then DISCO adjudicators determine eligibility for a clearance. However, if the case is determined to be an “issue” case—a case containing information that might disqualify an individual for a clearance (e.g., foreign connections or drug- or alcohol-related problems)—then DISCO forwards the case to DOHA adjudicators for the clearance-eligibility decision. Regardless of which office renders the adjudication, DISCO issues the clearance- eligibility decision and forwards this determination to the industrial contractor. All adjudications are based on 13 federal adjudicative guidelines established governmentwide in 1997 and implemented by DOD in 1998 (see app. II). DISCO and DOHA serve as central adjudication facilities for industry personnel, whereas DOD uses eight other central adjudication facilities to approve, deny, or revoke eligibility for a security clearance for military members and federal employees. DOD’s security clearance backlog for industry personnel was roughly 188,000 cases, and the time needed to conduct an investigation and determine eligibility for a clearance had increased by 56 days during the last 3 fiscal years. As of March 31, 2004, DSS identified more than 61,000 overdue but not submitted reinvestigations and about 127,000 investigations or adjudications that had been started but not completed within set time frames. From fiscal year 2001 through fiscal year 2003, the average time that it took to conduct an investigation and determine clearance eligibility for industry personnel increased from 319 days to 375 days. DOD’s delays in conducting an investigation and determining clearance eligibility can, among other things, increase national security risks and the costs to the federal government of contractor performance on defense contracts. As of March 31, 2004, the industry personnel backlog was roughly 188,000 cases. DOD identified more than 61,000 reinvestigations that were overdue but had not been submitted, over 101,000 backlogged investigations, and over 25,000 backlogged adjudications. For the 25,000 completed investigations awaiting adjudication, DSS found that over 19,000 of the cases were at DISCO and more than 6,300 of the cases were at DOHA. However, as of March 31, 2004, DOHA independently reported that it had eliminated its adjudication backlog. A complicating factor in determining the size of the industrial personnel backlog is that the backlog may be underestimated, since DSS had opened relatively few cases between October 1, 2003, and March 31, 2004, in anticipation of the authorized transfer of the investigative function from DSS to OPM. DSS had received, but not opened, almost 69,200 new industry personnel requests received in the first half of fiscal year 2004. Cases received in fiscal year 2004, which have already exceeded the set time frames for completing the investigation, are included in the 101,000 backlogged investigations identified above. To view the industry personnel backlog in its proper context, we compared this backlog to the DOD-wide clearance backlog as of September 30, 2003, the date of the most recent DOD-wide data. For the preinvestigation stage, DOD did not know the total number of personnel DOD-wide with overdue requests for reinvestigation that had not been submitted—even though their clearances exceeded the governmentwide time frames for submitting reinvestigations. (See fig. 2.) Any request for a reinvestigation that has not been submitted within a specified time frame is overdue and considered part of the backlog. As noted in our February 2004 report, DOD could not estimate the number of military members and federal employees who had not requested a reinvestigation. Similarly, in a prior report, we indicated that DOD estimated its backlog of overdue but not submitted reinvestigations at 300,000 cases in 1986 and 500,000 cases in 2000. Because DOD’s Case Control Management System has limited query capability, DOD was unable to identify the number of overdue but not submitted industrial personnel reinvestigations as of September 30, 2003. Although this system can identify overdue reinvestigations for industry personnel when queried at a specific point in time, it does not allow DOD to identify the number of military members and federal employees whose reinvestigations are overdue but not submitted at any time. The size of the total DSS-estimated backlog for industry personnel doubled during the 6-month period ending on March 31, 2004. Table 2 compares the sizes of the investigative and adjudicative backlogs at the end of fiscal year 2003 with the end of the first-half of fiscal year 2004. This comparison does not include the backlog of overdue reinvestigations that have not been submitted, because DSS was not able to estimate that backlog as of September 30, 2003. As of September 30, 2003, the estimated size of the investigative backlog for industry personnel amounted to roughly 44,600 cases, or 17 percent of the larger DOD-wide backlog of approximately 270,000 cases, which included military members, federal employees, and industry personnel. (See fig. 2.) DSS’s time frames for completing investigations range from 75 days to 180 days, depending on the investigative requirements. For instance, an initial secret investigation is required to be completed within 75 days, while a secret or top secret reinvestigation has to be completed within 180 days. Some requests for investigations receive priority over other requests. For example, requests for initial clearances receive priority over requests for reinvestigations, since individuals awaiting initial clearances cannot work whereas individuals who already have clearances that are due for reinvestigation can continue to work. As of September 30, 2003, the estimated size of the adjudicative backlog for industry personnel totaled roughly 17,300 cases. This number represented 19 percent of the roughly 93,000 cases in the DOD-wide adjudicative backlog on that date.