[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]




                   DEFENSE SECURITY SERVICE OVERSIGHT

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  VETERANS AFFAIRS, AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 16, 2000

                               __________

                           Serial No. 106-152

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
66-789 CC                    WASHINGTON : 2000





                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                    Lisa Smith Arafune, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

Subcommittee on National Security, Veterans Affairs, and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
ILEANA ROS-LEHTINEN, Florida         TOM LANTOS, California
JOHN M. McHUGH, New York             ROBERT E. WISE, Jr., West Virginia
JOHN L. MICA, Florida                JOHN F. TIERNEY, Massachusetts
DAVID M. McINTOSH, Indiana           THOMAS H. ALLEN, Maine
MARSHALL ``MARK'' SANFORD, South     EDOLPHUS TOWNS, New York
    Carolina                         BERNARD SANDERS, Vermont 
LEE TERRY, Nebraska                      (Independent)
JUDY BIGGERT, Illinois               JANICE D. SCHAKOWSKY, Illinois
HELEN CHENOWETH-HAGE, Idaho

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                  J. Vincent Chase, Chief Investigator
                           Jason Chung, Clerk
                    David Rapallo, Minority Counsel




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on Febaruy 16, 2000.................................     1
Statement of:
    Cunningham, General Charles, Director, Defense Security 
      Service; and General Larry D. Welch, chairman, Joint 
      Security Commission........................................    36
    Schuster, Carol R., Associate Director, National Security 
      International Affairs Division, U.S. General Accounting 
      Office; Christine A. Fossett, Assistant Director, National 
      Security International Affairs Division, U.S. General 
      Accounting Office; and Rodney E. Ragan, Senior Evaluator, 
      National Security International Affairs Division, U.S. 
      General Accounting Office..................................     2
Letters, statements, et cetera, submitted for the record by:
    Chenoweth-Hage, Hon. Helen, a Representative in Congress from 
      the State of Idaho, prepared statement of..................   118
    Cunningham, General Charles, Director, Defense Security 
      Service, prepared statement of.............................    39
    Schuster, Carol R., Associate Director, National Security 
      International Affairs Division, U.S. General Accounting 
      Office:
        Budget for investigations and other missions of the DSS..    27
        Contract costs for Personnel Security....................    29
        DSS cost breakdown.......................................    31
        Personnel Security Investigation workload................    25
        Prepared statement of....................................     5
    Welch, General Larry D., chairman, Joint Security Commission, 
      prepared statement of......................................    66

 
                   DEFENSE SECURITY SERVICE OVERSIGHT

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2000

                  House of Representatives,
       Subcommittee on National Security, Veterans 
              Affairs, and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2247, Rayburn House Office Building, Christopher Shays 
(chairman of the subcommittee) presiding.
    Present: Representatives Terry and Mica.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; J. Vincent Chase, chief investigator; David Rapallo, 
minority counsel; and Earley Green, minority staff assistant.
    Mr. Shays. I call this hearing to order.
    The Department of Defense [DOD], relies on personnel 
security investigations to determine whether individuals should 
have access to classified information. It is a process critical 
to safeguarding the national security. Currently, more than 2 
million military, civilian, and Defense contractor/employees 
hold confidential, secret, and top secret security clearances; 
all of which require periodic re-investigation.
    The agency responsible for policing access to national 
secrets, DOD's Defense Security Service, referred to as DSS, 
has encountered very serious, very persistent problems. In 
October, the General Accounting Office [GAO], reported that, 
``DOD personnel security investigations are incomplete and not 
conducted in a timely manner. As a result, they pose a risk to 
national security by making DOD vulnerable to espionage.''
    GAO reported a backlog of more than 600,000 re- 
investigations and deviations from investigative standards in 
the vast majority of completed cases. How did so vital an 
element of the national security apparatus fall into such 
disrepair? Based on a widely publicized case of espionage in 
1997 by a DOD employee holding a clearance, our colleague, 
Representative Ike Skelton from Missouri, ranking member of the 
House Armed Services Committee, asked GAO to reassess the rigor 
and consistency of DOD's personnel security investigations.
    Their findings portray an agency mismanaged and reinvented 
to the point of corrupting its core mission to provide timely 
thorough background investigations upon which clearance 
granting agencies could confidently rely. New leadership at DSS 
has a plan to address the backlog: increase the quantity and 
quality of personnel security investigations, and maintain 
investigative standards.
    Today, we will examine the particulars of that plan, ask 
how realistic DSS projections are, what it will cost to 
implement them, and when we can expect to see real progress. 
Despite the end of the cold war, threats to our national 
security remain, more diffused, but no less determined to do us 
harm, our foes will seek to exploit any lapse in vigilance and 
any lack of caution.
    The DSS stands guard at a critical post in the New World 
Order. It must be able to perform the mission. I would like to 
welcome all of our witnesses and guests today. In the months 
ahead, we will convene again to measure DSS progress against 
the goals and benchmarks that I think will be discussed today.
    At this time, I would call our first panel and invite them 
to stand and be sworn in. Carol R. Schuster, Associate 
Director, National Security International Affairs Division, 
GAO; Christine A. Fossett, Assistant Director, same division; 
Rod E Ragan, Senior Evaluator, at the same division, if all 
three, thank you.
    [Witnesses sworn.]
    Mr. Shays. Thank you very much. I note for the record that 
all witnesses responded in the affirmative to that question. 
Ms. Schuster, we welcome your testimony. Thank you. The bottom 
line is we have 5 minutes. Then we will roll over another 5, 
and we will roll over again if we need to. So, you take what 
you need to. Our other witnesses will have that same privilege.

 STATEMENTS OF CAROL R. SCHUSTER, ASSOCIATE DIRECTOR, NATIONAL 
     SECURITY INTERNATIONAL AFFAIRS DIVISION, U.S. GENERAL 
 ACCOUNTING OFFICE; CHRISTINE A. FOSSETT, ASSISTANT DIRECTOR, 
NATIONAL SECURITY INTERNATIONAL AFFAIRS DIVISION, U.S. GENERAL 
   ACCOUNTING OFFICE; AND RODNEY E. RAGAN, SENIOR EVALUATOR, 
NATIONAL SECURITY INTERNATIONAL AFFAIRS DIVISION, U.S. GENERAL 
                       ACCOUNTING OFFICE

    Ms. Schuster. Mr. Chairman, we are pleased to be here today 
to present our findings related to background investigations 
conducted on DOD employees by the Defense Security Service. 
With your permission, I would like to briefly summarize my 
statement.
    Mr. Shays. I am very sorry. I am very sorry. We have a 
vote. I think rather than interrupting you, so you all have 
about 10 or 15 minutes if you want to go get a coffee or 
something, I will be back.
    [Recess.]
    Mr. Terry [presiding]. We will come to order again. As I 
understand, we were just beginning testimony. We might have 
been a few sentences into it. Ms. Schuster, pickup where you 
left off, or start at the beginning, whatever you feel 
comfortable with.
    Ms. Schuster. All right. We appreciate this opportunity to 
present our findings on our background investigations conducted 
on Department of Defense employees by the Defense Security 
Service. With your permission, I would like to briefly 
summarize my statement and ask that the entire statement be 
submitted for the record.
    Mr. Shays. Yes, please, without objection.
    Ms. Schuster. First, let me underscore that safeguarding 
sensitive national security information is one of the most 
important responsibilities entrusted to public servants. It is 
therefore critical that only those individuals who have passed 
the scrutiny of rigorous background investigations be granted 
security clearances.
    While it now appears that DSS is making positive steps to 
improve the thoroughness and timeliness of its investigations, 
our review conducted last year found serious lapses in both the 
thoroughness and timeliness of these investigations. This 
raises questions about the risks such lapses pose to national 
security. First, let me briefly summarize the findings with 
respect to the completeness of DSS investigations.
    A complete investigation should cover all of the 
investigative areas required by Federal standards. Following 
these standards is important to ensure uniformity among the 
many entities involved in investigations and to provide 
reciprocity among agencies that grant clearances.
    Yet, we found from our detailed analysis of 530 personnel 
security investigations, that the vast majority did not comply 
with Federal standards, such as verifying residency, 
citizenship, and employment. For example, 92 percent were 
deficient in at least one of the required areas. Seventy-seven 
percent did not meet the standards in two or more areas and 16 
percent contained derogatory information that was not pursued, 
such things as past criminal history, alcohol and drug abuse, 
and financial difficulties.
    All 530 individuals were granted top secret security 
clearances. The primary areas where we identified lapses were 
in confirming residency, corroborating birth or citizenship of 
foreign-born subjects and their spouses, verification of 
employment, interviews with character references, and criminal 
record checks at the local level.
    Of particular concern to us were the cases where leads were 
not pursued. For example, one individual working in the Joint 
Staff had a credit report that showed that his mortgage was 
$10,000 past due and foreclosure proceedings had begun. Because 
this subject denied knowledge of this matter, it was not 
pursued. In another case, the subject's credit report revealed 
a bankruptcy, yet there was no followup.
    In still another case, the subject claimed to be a citizen 
of another country and a member of a foreign military service. 
Character references alleged that he had been involved in a 
shooting. None of these matters were pursued. With respect to 
timeliness, we found that DSS investigations simply take too 
long. Defense agencies and contractors want investigations done 
within 90 days to avoid costly delays.
    We have found that over half of the 530 investigations we 
examined, took over 204 days to complete. Less than 1 percent 
took less than 90 days, and 11 percent took more than a year. 
There are several problems with this. First, contractors have 
to wait too long to begin their work. This jeopardizes meeting 
performance, cost schedules, and drives up costs.
    Second, individuals having their clearances updated 
continue to work with classified materials, even though their 
personal circumstances may have changed, rendering them unfit 
to retain their clearances. Third, central adjudication 
facilities, who evaluate the collective information to decide 
whether a clearance should be granted or denied sometimes rule 
favorably, even though information is incomplete, because it 
could take another 6 months if the case was sent back for 
further investigation.
    Finally, the backlog of cases awaiting periodic 
reinvestigation, as you pointed out, Mr. Chairman, has grown to 
at least 500,000. At the time of our review, it was 600,000. To 
put this into perspective, the total number of Defense 
employees who have clearances is about 2.4 million. We found 
several weaknesses that we believe contributed to the 
incomplete investigations that we found.
    For example, we found that DSS relaxed its investigative 
requirements to give investigators greater discretion in how 
they might meet Federal standards. Because this guidance was 
not always consistent with Federal standards, investigators 
became confused as to what constituted a thorough 
investigation. DSS also eliminated two important quality 
control mechanisms: supervisory review of completed 
investigations and its Quality Assurance Branch.
    DSS also provided almost no formal training on the new 
Federal standards to its investigators between 1996 and early 
1999. DSS spent $100 million to implement an automated case 
management system that simply did not work. The problems that 
ensued added to the already large backlog of cases waiting to 
be investigated.
    Another $100 million to $300 million may be needed to 
correct the problems. Importantly, because DSS had been named a 
re-invention laboratory under the administration's Reinventing 
Government Initiative, DSS was allowed to operate with much 
latitude and without the normal degree of oversight that would 
normally be expected.
    Our October 1999 report makes several recommendations to 
the Secretary of Defense to fix these problems. For example, we 
recommended that the Secretary increase oversight of DSS 
operations, provide the necessary funding and priority to deal 
with the case backlog, bring policy guidance on DSS 
investigations in line with Federal standards, establish 
effective quality control and training mechanisms, take 
corrective action on the case automation problems, and direct 
adjudication facilities to grant clearances only when 
investigative work is complete.
    We also recommended that the Secretary report the DSS 
Investigative Program as containing material internal control 
weaknesses under the Federal Managers Financial Integrity Act, 
and that a strategic plan, with measurable goals and 
performance measures be developed.
    I am pleased to say that General Cunningham began taking 
corrective actions on these matters the very moment he assumed 
leadership of DSS in June 1999. I will leave it up to General 
Cunningham to outline the specific actions his agency is taking 
to correct these problems and ensure the integrity of the 
investigative process.
    This concludes my statement. I would be pleased to respond 
to any questions that you might have.
    [The prepared statement of Ms. Schuster follows:]
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    Mr. Terry. Thank you very much.
    Mr. Shays is the real chairman of this subcommittee. Would 
you please start?
    Mr. Shays [presiding]. I will be happy to start. I ask 
unanimous consent that all members of this subcommittee be 
permitted to place any opening statement in the record, and 
that the record remain open for 3 days for that purpose. 
Without objection, so ordered.
    I further ask unanimous consent that all witnesses be 
permitted to include their written statements in the record, 
and without objection, so ordered.
    I have a number of questions that the staff has written out 
that I want to go through because I really want to cover those 
in some sequence. First, let me ask you, re- investigations 
occur how often?
    Ms. Schuster. It depends on the level of the clearance. For 
a top secret clearance, which was the focus of our 
investigation, it is every 5 years. For a secret clearance, 
which is the next level down, that is currently now 10 years. 
For a confidential clearance, which is one step below that, it 
is every 15 years.
    Mr. Shays. The number was approximately 2 million people 
with any of these three, the top, the secret, and the 
confidential. What would be the breakdown of the top secret? Do 
you know that? I could ask the next panel if you do not have 
that.
    Ms. Schuster. Yes. We have 500,000 top secret, 1.8 million 
secret, and 100,000 confidential. That is a total of 2.4 
million. These are rough numbers.
    Mr. Shays. I understand. Did you evaluate the logic of 
every 5 years? Did you look at that and say, could it be 6? 
Could it be 7?
    Ms. Schuster. No. We did not include that in our review. 
The only things that were in our review were top secret 
clearances. So, that is what we focused on. Those are the 
people who handle the most sensitive information. So, we 
focused our efforts on just the top secret ones.
    Mr. Shays. Has it always been 5 years? Has that just been 
kind of what we do?
    Ms. Schuster. Top secret has been every 5 years for a long 
time. The new time limits on confidential and secret are 
relatively new. I think that was 1997. Those requirements are 
in the force now. DOD had been doing the secret clearances 
every 15 years. Now, they will be doing them every 10 years. 
They had not been doing the re- investigations on the 
confidential clearances until the new requirement came into 
being.
    Mr. Shays. In the 530 cases that you reviewed for top 
secret clearance, you basically said 92 percent of the 530 
investigation cases were deficient and that they did not 
contain information in at least one of the nine required 
investigative areas. Then you said 77 percent of the 
investigations were sufficient in meeting Federal standards in 
two or more areas.
    Was there any one of those nine areas that was mostly 
ignored?
    Ms. Schuster. Yes. There were some that were more prominent 
than others. The one that was most frequently omitted was 
establishing residency, going out to the neighborhoods and 
making sure that the person really lived at the address that he 
did, verifying birth and citizenship, checking birth records.
    Mr. Shays. I do not understand. If I would logically make 
an assumption, I will be the devil's advocate here, that if 
they had been investigated once, that was determined. It is 
like if they were born in the United States, what is the point 
of checking 5 years later that they were born in the United 
States.
    Ms. Schuster. Right. You are making a distinction between 
the initial investigation and the periodic re- investigations. 
For the periodic investigations, they do not have to go back 
and verify certain things that were already verified the first 
time. They just have to cover the period since the initial one.
    Mr. Shays. There is logic to it that way.
    Ms. Schuster. Absolutely.
    Mr. Shays. You also said 16 percent not pursued when 
something like a drinking problem or a financial problem. I 
basically thought the whole point of doing these re- 
evaluations was to identify a problem area. I mean, to me that 
is the most shocking thing that you have told me today.
    Ms. Schuster. I would agree with that, yes. I believe that 
there is really not too much of an excuse for not following up 
when you come up with derogatory information. The guidelines do 
call for going beyond just getting the basic information. When 
there is derogatory information that seems significant, it 
should be pursued under the guidelines.
    Mr. Shays. It reminds me of a cartoon I saw in a newspaper 
years ago and it showed an investigator and he was looking for 
a bank thief. He got into this house, and he opened the closet, 
and all of this money came cascading down on top of him. He 
said, nothing here but money, and then went on to the next 
thing. So, that you would clearly identify.
    How has the mismanagement of the agency contributed to the 
weakness found in your review of the Personnel Security 
Investigation Program?
    Ms. Schuster. I think the management problems that have 
come to light have been very well-documented, including 
testimonies as recent as last week, I believe, when the 
Secretary of Defense acknowledged that there were a lot of 
problems there. We found the weaknesses in several areas. The 
first area was relaxing the standards below the Federal 
standards, and also allowing perhaps too much latitude with 
their investigators as to how far and how deeply they went into 
the investigative areas.
    The second area was doing away with some of the quality 
control mechanisms they had on those investigations. They did 
away with the Quality Assurance Branch, and supervisory review, 
for instance. In the training area, they just really were not 
giving very much training to the investigators.
    Because there were new investigative standards, there was a 
need for such training. They also did away with the Security 
Institute, which was training not only DSS investigators, but 
investigators throughout the Government.
    Mr. Shays. Did this happen during the Clinton 
administration or did this happen before the Clinton 
administration?
    Ms. Schuster. This occurred primarily between March 1996 
and very early 1999, but primarily between 1996 and 1998.
    Mr. Shays. Frankly, I find this pretty astounding. I was 
thinking if I was asked to come in, as General Cunningham has 
come in, to remedy this, I mean, to think that you would 
eliminate the training of your employees who go out, as one 
example of what you mentioned, to me just frankly boggles the 
mind.
    What would attribute to that? Did we in Congress just give 
lots less money? I mean, what ultimately happened that made 
that occur?
    Ms. Schuster. What appears to have occurred is that leading 
up to 1996, there were several groups that were bringing up 
problems with the Personnel Security Program across the board. 
They were saying it was taking too long to do the 
investigations, and that the whole process was fragmented and 
needed to be streamlined. So, the Joint Security Commission, 
and the Defense Reform Initiative, the Quadrennial Defense 
Review, all of those bodies were saying that something needed 
to be streamlined and done to try to improve that whole 
personnel security process.
    So, at that particular time, the Director decided to take 
up the mantle and try to do something to streamline the 
procedures, and got approval to become a re-invention 
laboratory and streamlined some of the procedures.
    Mr. Shays. In the beginning of this, I was trying to think. 
Well, you know, once you have gone through a clearance, I think 
of myself. I am not really going to change that much. So, I 
think once they have done a clearance, why would we keep doing 
it every 5 years? That is why we have these hearings. The 
answer is quite evident here.
    What I had realized is that the value of the re- 
investigation is that as people are in the system, they gain 
more authority. They have really an opportunity to see things 
that are far more precious, and important, and sensitive. So, 
the logic, it seems to me, is that the re- investigation is two 
things. Then I want you to comment. It is really your 
statement. So, thank you for it. It is an excellent statement.
    You have a more important job and you are seeing more 
sensitive information. Also, you can fall on hard times. You 
can have a financial problem. You can start to have a drinking 
problem, both of which would, potentially, to tremendous 
compromise. So, I am pretty comfortable with why we want to re-
investigate.
    Ms. Schuster. I am in full agreement with what you have 
said, yes. As a matter of fact, many of the people who are 
experts in this arena have emphasized that periodic re-
investigations are probably more important than even the 
initial investigations. So, you are absolutely right.
    Mr. Shays. I think I will just yield back my time, and if 
other Members want to ask questions.
    Mr. Terry. Yes. I have got a couple of mop-up questions, if 
you do not mind. I appreciate it. The field that you 
investigated from the 530 cases, I apologize for maybe asking 
questions that are already involved in your statement. I assume 
those 530 were random.
    Ms. Schuster. Yes.
    Mr. Terry. They were not particularly pulled out of a field 
that was waiting to be investigated.
    Ms. Schuster. Right. If I could just explain our 
methodology.
    Mr. Terry. I would appreciate that, yes.
    Ms. Schuster. We took all of the cases that were sent four 
of the adjudication facilities, in January and February 1999. 
Those four adjudication facilities were the Army, Navy, Air 
Force, and the National Security Administration. We included 
all of the cases that went there for adjudication, which means 
they were going to decide whether to approve or deny a 
clearance at the top secret level.
    We took a statistical sample of those cases. I think there 
were 1,698. We took 530 of those.
    Mr. Terry. That is a pretty good percentage.
    Ms. Schuster. The size got us to certain tolerance levels. 
To be able to project results to that universe of cases that 
were there. Now, those four adjudication facilities were 
selected because they represent 73 percent of all the cases 
that are adjudicated in the defense area. So, it does indicate, 
I think, that our findings are representative of a systemic 
problem. So, that is how we selected those.
    Mr. Terry. The phrase ``systemic,'' shall we assume that it 
was equally weighted from the four adjudication centers or was 
it one that was predominantly the problem while one was doing 
an excellent job?
    Ms. Schuster. What we found was that all had problems. The 
lowest one was 88 percent in the Army. That statistic that I 
gave you about 92 percent had one thing. It was 88 percent in 
the Army, 91 percent in the Navy, 94 percent at the National 
Security Agency, and 95 percent in the Air Force. So, all of 
them were pretty deficient.
    Mr. Terry. Well, that is incredibly depressing.
    Ms. Schuster. I did not come here to depress you.
    Mr. Terry. No, but it is disturbing. It really is, 
especially the 16 percent with derogatory information that 
lacked any follow-through and followup. It really speaks 
volumes. You have done an excellent job, I think, in your 
report about learning where the problems lay; identifying that 
there is in fact a problem that we need to address. Now, let us 
look toward the solutions.
    You mentioned that General Cunningham has already started 
addressing them. That became obviously the shorter part of your 
report and presentation here today, but I think that is where 
we need to focus on now, since you have done an excellent job 
of identifying the problems.
    Let us focus now on the solutions. What has he been able to 
implement to-date? Where can we help out? Where have been the 
obstacles that you have been able to identify toward doing a 
better job?
    Ms. Schuster. Let me first compliment General Cunningham. 
He has really taken the bull by the horns and has taken actions 
on every single item that we recommended in our report. GAO is 
not used to the agency coming back and agreeing with us 100 
percent. But in this particular case, the Department did agree 
with all of our recommendations.
    Some of the things that he has done on the management 
front: we asked for a strategic plan, and for performance 
measures to try to measure how much progress they are trying to 
make to meet their goals. He has developed a strategic plan. 
They are working on it and a performance plan to set milestones 
for trying to correct some of the problems there.
    They are designating this investigation program, as a 
material weakness to the Department of Defense under the 
Federal Managers Financial Integrity Act. He has brought the 
standards back in line with the Federal Standards so that the 
investigators will be following the same standards that other 
investigators throughout the Government are following, and has 
created a new manual for them to follow, and will be providing 
them training.
    He has re-established the Quality Control Unit within DSS. 
These staff will be periodically tested on the standards to try 
to maintain the quality of the investigations. In terms of the 
backlog, this is a real difficult problem for them to solve. I 
understand that what they have done is to go back and try to 
re-evaluate the backlog to see whether in fact all of the 
people that were in the backlog really in fact needed an 
update.
    Some people, for instance, retired. Some people were 
separated. Some people were no longer working in classified 
areas. So, they are trying to get a better fix on exactly the 
extent of the backlog. Because there were quotas established on 
how many could be sent to DSS for investigation, there is sort 
of a pent-up demand. The statistical data base was not really 
very good at capturing the total universe of this backlog.
    They are taking several actions. One in particular, I 
think, is very promising. They are working on an algorithm that 
will try to identify those cases that are most likely to result 
in a denial of a clearance, based on their past experience. 
That will allow them, if they can get this to work, to identify 
those cases that are most risky to the Government and be able 
to process those in a priority manner.
    Mr. Terry. Let me interrupt. What do they need to make that 
work so that we do not run into the same problem that you 
identified in your testimony as spending $100 million on 
automation that has not worked?
    Ms. Schuster. Right. Well, that is a fair question. I do 
not know the answer to that question because we have not really 
gotten into the details of how they are developing that 
algorithm. The idea is certainly a good one. They also are 
contracting out for some of the backlog. They have put some 
Reservists on active duty to temporarily work on the backlog. 
They have OPM working on some of the civilian investigations. 
They are thinking about also having a contract that would do 
some end-to-end investigations from the very start to the very 
end with contractors who would be focusing on some of the 
cleaner cases, the ones that do not seem to be as risky. They 
would contract those out.
    So, they are doing a lot of things on that front. As you 
alluded to, they have a lot of problems with the Automated Case 
Control Management System. That, to my mind, is the biggest 
challenge that they face. That automated system just was not 
planned properly. It was not implemented properly. The people 
who were trying to procure that system and manage it really 
were not totally qualified to do that.
    They did not have the background in a major acquisition 
program. They did not have the information technology expertise 
to really do that. I think all of these weaknesses have been 
acknowledged. So, they are at a juncture now where they have 
got to decide whether they are going to try to patch up the 
system, or if they are going to just give up on it and try to 
replace it. That is going to be a major decision for them to 
make.
    Regarding past evaluations, there was a DOD red team that 
came in, and evaluated what they should do with that system, 
and what went wrong with the system, and what they would 
recommend. A TRW contractor evaluation also looked at it from a 
technical standpoint.
    Both of those groups pointed out numerous problems with the 
way the thing was put together, the lack of documentation, the 
lack of checks and controls, just what you would expect of an 
automated system, to the point that the TRW investigation did 
not feel like it was salvageable.
    Mr. Terry. I was curious if any of the people from the 
outside that have reviewed this made any suggestions. You are 
saying TRW has made a suggestion that you walk away from it. I 
assume that there are probably people on the inside, for want 
of a better word. When you invest $100 million and a lot of 
reputation, that is probably emotionally hard to walk away 
from, but that is what TRW is recommending?
    Ms. Schuster. That is what they recommended in their 
evaluation. Now, I understand that there is another evaluation 
going on right now. I am not sure who is conducting that. But 
that evaluation is supposed to come up with a recommendation to 
the Secretary, I think it is May 1st of this year, who would 
make the decision: Are we going to try to fix this system or 
are we going to consider an alternative?
    One point that should be brought out is that if they do go 
with a new system, that would fall under the Clinger-Cohen Act, 
which would mean that they would have to look at things like: 
Is this an inherently Governmental function? Does it have to be 
done by the Government? Should it be governmental or could it 
be privatized?
    Are there other alternatives out there, such as OPM's 
system that might be an alternative? Is a new system by the 
Government needed and should one be procured? So, all of those 
decisions. Make this sort of tough. It will take awhile to work 
through that, if the decision would be made to go with a new 
system.
    Mr. Terry. But they are moving toward that direction. So, 
that is movement and that is appreciated.
    Ms. Schuster. They are at least considering all of the 
alternatives now, and a decision is going to be made apparently 
the first of May.
    Mr. Terry. All right. Thank you very much.
    Mr. Shays. Mr. Mica.
    Mr. Mica. Thank you. Just a couple of questions, if I may. 
Tell me about the numbers of personnel that we are dealing 
with, with DSS. How many full-time equivalent employees?
    Ms. Schuster. The employees that we are talking about that 
do investigations are 11,075, roughly, at the time of our 
review, and 112 case analysts who also work in this area. The 
total number of DSS employees is 2,500 or thereabouts. I could 
get the exact numbers for you for the record, if you would 
like.
    Mr. Mica. Well, wait a second. Now, 2,500?
    Ms. Schuster. Total DSS employees.
    Mr. Mica. That is total DSS. The 11,000 are those 
conducting the investigations?
    Ms. Schuster. I am sorry, 1,175. I misspoke.
    Mr. Mica. OK. They conduct how many background 
investigations?
    Ms. Schuster. They conduct about 150,000 investigations. 
That would include secret, confidential, and top secret. I 
would like to check that number and get back to you on that 
exact number.
    Mr. Mica. I would like to know the figures on that.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T6789.014
    
    Mr. Mica. Then I am curious, OK, then they do a rash of 
other sort of renewable?
    Ms. Schuster. Right. There are other kinds of 
investigations.
    Mr. Mica. Maybe you could give us a breakdown of figures on 
that.
    Ms. Schuster. OK.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T6789.015
    
    [GRAPHIC] [TIFF OMITTED] T6789.016
    
    Mr. Mica. The budget was $320 million. Is that right?
    Ms. Schuster. It was $320 for fiscal year 2000.
    Mr. Mica. 2000.
    Ms. Schuster. Right.
    Mr. Mica. Now, did that include any of the--how much of 
that is personnel? Was any of that capital $100,000?
    Ms. Schuster. No.
    Mr. Mica. Was that already spent?
    Ms. Schuster. Yes. I think that $100 million is what has 
already been spent to-date. Then they have estimates of what 
additional funds might be needed to try to fix things.
    Mr. Mica. I am trying to get a handle on what it costs to 
operate this, as far as personnel. Another big item, you said 
they contract out work. How much in dollars is contracted out 
for conducting these activities?
    Ms. Schuster. I would have to get those details for you. I 
do not have those with me today.
    Mr. Mica. OK.
    [The information referred to follows:]


                Defense Security Service Fiscal Year 2000
------------------------------------------------------------------------
        Contract Costs for Personnel Security             In Millions
------------------------------------------------------------------------
Investigation Backlog                                              $45.4
------------------------------------------------------------------------
Source: Defense Security Service


    Ms. Schuster. I can say that the investigations are an 
important part of DSS, but they also have other missions that 
these 2,500 people conduct. One is the Industrial Security 
Program. Then they also do security training and education.
    Mr. Mica. Do they do this also for contractors, for private 
contractors?
    Ms. Schuster. Right. It is for civilian, military, and 
contractors.
    Mr. Mica. Is there any way for the contractors to reimburse 
for the cost of that service? Are they billed for that?
    Ms. Schuster. I am just not familiar with the way they are 
paid. I know they are trying to move toward a fee-for-service 
kind of a thing. It has not gotten off the ground. I think that 
has been put on hold right now because they have not made much 
movement toward that fee-for-service.
    Mr. Mica. Because people do not want to pay for it. I think 
that is something we ought to look at. As chairman of Civil 
Service for 4 years, kicking and screaming of course, we were 
successful in reducing the Office of Personnel Management from 
nearly 6,000 to about 3,000.
    Of the 3,000 we eliminated, we privatized all of the 
investigators into an ESOP, Employee Stock Ownership Plan. If 
you think that was not controversial, Mr. Shays, they did 
everything to subvert that possibly. But it was actually most 
successful. Do you know if they contract with our ESOP at all 
to, yes, I see your shaking of the head. Are they doing a good 
job? I see another shake of the head. We are getting 
affirmative shakes of the heads from the audience, just for the 
record.
    I know privatization strikes fear into the heart of anyone 
on a Federal payroll, but it does work and it is a great 
example of it. I am not sure what could be privatized, or what 
portion of this could be done, or how much could be contracted 
out to the entity already privatized. I think it would be good 
to look at the number of people, what we are producing.
    Who is paying for the services? The Government picking up 
the tab for private contractors who are doing business with the 
Government. There ought to be some reimbursement in it. 
Certainly, the way it is operating now, just the information 
from your initial study seems that we have to be able to do a 
better job doing this.
    Possibly a little innovation might be in order. $320 
million is a pretty big sizable budget. If possible, maybe you 
could submit for the record and also for me, I would like to 
see both a flow chart of the organization, and then I would 
like to see a breakdown of the expenditures. I do not see it. I 
looked through here and did not see it of how much is in these 
different categories for personnel, for contracted services, 
and other expenditures. Maybe we could get a handle on that.
    Ms. Schuster. We can provide that for the record. That was 
not part of the scope of our investigation, but we can 
certainly get those numbers for you.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T6789.017
    
    Mr. Mica. I noticed in your recommendations, one of the 
things is prioritizing. That they need some better system of 
prioritization. I would imagine some of those would be of the 
utmost urgency and highest level of security clearance, which 
would have to be done in a certain fashion by a very secure 
personnel to start with. Then as it filters on down, maybe some 
change in procedures in the way that is done. I guess that is a 
part of your recommendation.
    Ms. Schuster. Yes. Our recommendation was that they try to 
work on that backlog as a priority matter. What they have done 
is they have found several different means to try to catch up 
with that backlog. Then they are also working on this algorithm 
that is going to try to identify those cases that, from their 
past experience, tells them that they might be most likely to 
be denied a clearance.
    They have an automated personnel questionnaire that flags 
certain items. Based on their past experience, if there is 
derogatory information on certain elements, it tells them that 
the likelihood this clearance might be denied is higher than 
another. So, that is what they are working on internally to try 
to find a means of prioritizing the workload. That seems like a 
good idea.
    Mr. Mica. The other final question that deals with $100 
million spent on the unsuccessful computerization.
    Ms. Schuster. What they did was they took the long 
questionnaire that probably all of us have filled out and they 
automated that into an electronic form. The whole idea was that 
everything would be paperless.
    Mr. Mica. Right.
    Ms. Schuster. Throuigh this Case Control Management System, 
they would be assigning the cases to the investigators.
    Mr. Mica. What basically went wrong? I mean, was it 
something in the specifications that the agency provided, or 
was it something that the vendor did not produce?
    Ms. Schuster. Just about everything that you can imagine 
that could go wrong did go wrong, I think.
    Mr. Mica. Was the vendor held liable or did we pay the 
whole thing?
    Ms. Schuster. I am not so sure it was the vendor's fault 
although maybe some of it was the vendor's fault. But the basic 
underlying factors are that it really was not planned very well 
as an acquisition program. The people were not very well 
qualified in either IT or acquisition management.
    A lot of the basic planning steps that you would go through 
for a major procurement program, such as determining your 
requirements, and drawing up a plan, and developing a testing 
plan, those basis just were incompletely followed. So, when 
they got to the point where they wanted to implement this, the 
electronic questionnaire was only being used about 50 percent 
of the time. Because it was designed as a totally automated 
paperless system, and you still had paper, then you were trying 
to keep two systems going; one with paper and one without 
paper.
    It just caused all sorts of delays because they could not 
get the cases to the investigators fast enough. So, that really 
did contribute to the backlog that we are seeing today.
    Mr. Mica. Thank you, Mr. Chairman.
    Mr. Terry [presiding]. Mr. Shays.
    Mr. Shays. Thank you. As I fully grasp what you are saying, 
and I am not fully there yet, it is astounding. I do not know 
how DSS could be in worst shape, or how they could have done a 
worst job, given the backlog. I want to ask a few more 
questions. Their budget was $74 million and then it went to $84 
million?
    Ms. Schuster. For the whole agency?
    Mr. Shays. Yes.
    Ms. Schuster. $340 million.
    Mr. Shays. Where am I getting this $74 million?
    Ms. Schuster. $320 million for fiscal year 2000 was their 
budget.
    Mr. Shays. OK. It must be just one part. Was that the 
contractors?
    Ms. Schuster. Total budget.
    Mr. Shays. We had an AIA member company survey. They tried 
to estimate what its impact, what the backlog was on the 
companies. These are some of the companies. Boeing had 570 
employees that were zero to 90 days. I want to take the 90 days 
beyond; 1,161 employees. They believe it cost them $52.1 
million.
    Honeywell, 31 employees. They think it cost them $1 
million. Northrup-Grummend, 735 employees. They believe it cost 
them $27 million. Lockheed-Martin. Now, they divided in 
technical services 58 employees, 4.8; LMTAS, I do not know if 
they call it LMTAS or what, but 529; employees, $28.4 million. 
Skunk Works, 540 employees, $26.6 million.
    United Defense, 145 employees and they did not give a cost 
in that one. Aero Jet General, 40 employees, $4 million. 
General Dynamics Information Systems 8 employees. They did not 
give us a cost. Where we have the cost $143 million, which is 
basically almost half of what the budget is. Now, I make an 
assumption, and maybe you can answer this, that the cost that 
these companies incurred ultimately gets passed on in terms of 
the cost of the project to the Government.
    Ms. Schuster. I would assume that is correct, that is the 
information you are bringing to light. While I do not know 
those figures, I do know that during the course of when this 
backlog was building up, there was some association of these 
contractors--I forget the name of it--that complained to DSS 
about this and emphasized that it was costing them a lot of 
money to have these delays.
    Mr. Shays. But just 3,247 employee backlog, the private 
sector of these companies has basically determined it cost $143 
million. We are talking about potentially hundreds of 
thousands. So, it is the kind of thing I begin to wonder about 
the $600 toilet seat. We do know it cost the Government money. 
We do know that somehow we have not factored that in.
    Ms. Schuster. Right.
    Mr. Shays. That is a strong argument to provide the 
resources necessary to DSS to get the job done. To the extent 
Congress has not done it, and it may be that we privatize more. 
My understanding is that when we hear from DSS that they are 
basically going to tell us that they have a 50 percent 
assistance from the private sector, ultimately when they get 
their number down from contractors, those employees disappear.
    I am basically wondering this question. They had a 
tremendous backlog so they were to find ways to streamline. It 
strikes me that the streamlining not only did not streamline, 
it did the exact opposite. It created even more backlog and it 
provided a less acceptable quality of result, such as ignoring 
a large percent, was that 16 percent, of indications you should 
look at something. That was ignored. Am I correct here? 
Reinventing got the backlog larger and it compromised the 
system. I am not looking for a big answer.
    Ms. Schuster. OK. There were several reasons that led to 
this backlog. The first thing is back in 1995, the Assistant 
Secretary of Defense put quotas on the number that could be 
sent forward. So, you got sort of a pent-up demand that is now 
a part of that backlog that was not submitted. Then we had new 
requirements that were instituted during this period for re-
investigations on secret and confidential clearances. Those had 
not been requirements before. So, this added to the periodic 
backlog.
    Mr. Shays. So, when you said the 5 has been there for 
years, the 10 and the 15 were?
    Ms. Schuster. New.
    Mr. Shays. OK, fair enough.
    Ms. Schuster. Right. Also this automated system that we 
were talking about just did not work. So, the caseload was not 
going through there like they really wanted to. That 
contributed to the backlog. Then DSS, also point to a couple of 
other factors. One is that they feel that there are more people 
requesting clearances.
    Their customers are requesting more clearances because of 
information technology jobs that may require clearances and a 
couple of other factors. One was that there was a reduction in 
the number of investigators that they had. So, all of those 
factors collectively contributed to that problem. The re-
invention part certainly had an impact on the quality of the 
investigation.
    Mr. Shays. I did not want a long answer, but I needed it 
because you needed to clarify that there were a whole lot of 
factors.
    Ms. Schuster. A lot of factors.
    Mr. Shays. I know we have a vote, but I just want to just 
get into this last area. If you go into a company and you try 
to determine, well, they got bad and so on. You really want to 
face up to really how bad it is. This is so bad that you could 
almost be tempted to say, well, it could not be worse. But it 
could be worse in one respect. It could be that we have a 
larger backlog.
    When you go into a company and they say, well, you know, 
our total IOUs are $10 million and then you look further and 
you find it is $20 million, that is a shock. Can you tell me 
with 100 percent confidence that the backlog is not larger than 
we think it is?
    Ms. Schuster. No. I cannot tell you what the size of the 
backlog is. I would really question whether they have an exact 
fix on it.
    Mr. Shays. OK. Let me ask you, how was the backlog 
determined?
    Ms. Schuster. Each customer that comes to DSS with a need 
for an investigation has a fix on the number of clearances that 
they need investigated. But these inputs are not put into a 
data base that is reliable enough to the extent that you really 
know the totality of it. So, all they know is what is coming in 
to DSS to be investigated.
    Mr. Shays. So, you do not know, in a sense, your 
liabilities?
    Ms. Schuster. I would guess that they are probably just 
estimating the backlog, but you will have to ask General 
Cunningham exactly how they are estimating that.
    Mr. Shays. So, potentially it could be double or it could 
be half of what it is. We at least know that it is this number, 
but it could be worse.
    Ms. Schuster. It could be worse. It could be better. I do 
not think they really know.
    Mr. Shays. How could it be better? We have a number of 
actual people, do we not?
    Ms. Schuster. Well, what General Cunningham has said is 
they have been trying to look at that backlog with more 
scrutiny and determine whether all of those people that are in 
the backlog really need to be investigated, because some may 
have retired, been separated, et cetera.
    Mr. Shays. OK, fair enough. You are telling me I should 
have some question about the number.
    Ms. Schuster. Yes.
    Mr. Shays. That it is an estimate.
    Ms. Schuster. I agree.
    Mr. Shays. And it could go in either direction. So, we have 
to determine whether it was a conservative or a liberal 
estimate. In other words, you get the point. One last and final 
question. There were 11 recommendations. Is that right?
    Ms. Schuster. I think there were 14.
    Mr. Shays. So, they agreed to 11.
    Ms. Schuster. I think they agreed to all of them.
    Mr. Shays. Twelve.
    Ms. Schuster. Twelve.
    Mr. Shays. In fact, in every one that I see in the letter 
they wrote on October 13th, uncharacteristically but 
thankfully, they are succinct. They give you a recommendation 
and then they say ``concur.'' In ever instance, it is 
``concur.''
    Was there any additional recommendation that they did not 
concur? Was there any area where you had disagreement or can I 
basically accept the fact that all of your recommendations they 
concurred with and now the issue is how do you remedy it? In 
fact, you suggest how to remedy it.
    Ms. Schuster. Yes.
    Mr. Shays. They are following your guidelines in many 
cases.
    Ms. Schuster. Right. From their official response, we can 
conclude, at this point, that they are doing something about 
all of those recommendations, and that they do agree with them.
    Mr. Shays. And that is a very positive thing. So, the 
bottom line for me, though, is I should take a second look at 
the number. The committee should take a second look at how is 
the number determined and is it reliable, the backlog.
    Ms. Schuster. Right. I am sure General Cunningham can 
address that.
    Mr. Shays. OK. Mr. Chairman, thank you. I am finished.
    Mr. Terry. Thank you, Mr. Chairman. We will be in recess 
until----
    Mr. Shays. I think we have a couple of votes.
    Mr. Terry. Then we will talk to the Generals.
    Mr. Shays. It will probably be at least a half hour. So, I 
would say 20 minutes.
    Mr. Terry. We will take a 20-minute recess.
    [Recess.]
    Mr. Terry. Yes.
    Mr. Shays [presiding]. I call our second panel, our two 
witnesses, General Charles Cunningham, Director of Defense 
Security Service, and General Larry D. Welch, chairman, Joint 
Security Commission. I appreciate you remaining standing. I 
will swear you both in. Thank you.
    [Witnesses sworn.]
    Mr. Shays. Thank you very much. It is very nice to have 
both of you here. I know both of you have testimony. You can 
have your testimony as long as you find it necessary. I think 
we will start with you, General Cunningham. I know we will 
start with you. Thank you.

  STATEMENTS OF GENERAL CHARLES CUNNINGHAM, DIRECTOR, DEFENSE 
 SECURITY SERVICE; AND GENERAL LARRY D. WELCH, CHAIRMAN, JOINT 
                      SECURITY COMMISSION

    Mr. Cunningham. Thank you very much, Mr. Chairman. I made a 
statement and I would like to submit that for the record. If it 
is agreeable with you, sir, I would just like to abbreviate 
that in the interest of time.
    Mr. Shays. Sure. That testimony will be in the record.
    Mr. Cunningham. Thank you, sir.
    Sir, as the GAO reported, the agency did agree completely 
with the report. In fact, we have used it as a very, very 
helpful road map to fix the discrepancies and to go beyond 
those actions. So, I want to start by thanking the GAO. It is 
working very well in recovering the agency. I would quickly 
like to go through why we are in this situation. What are the 
problems? What are the solutions? Of course, I will not be able 
to cover all of the problems or all of the solutions, but I 
want to quickly get through this part.
    Mr. Shays. Feel free to be quick, but do not speak fast.
    Mr. Cunningham. All right, sir. The situation that we found 
ourselves in was caused by very much a breakdown in our 
management effectiveness as reported by the GAO. In fact, a 
substantive part of the effort made by management, those 
efforts by management were caused by a work force reduction. It 
is well-understood that the Defense Security Service was not 
the only activity in the Department of Defense being reduced in 
size.
    That was happening across the Department. Nevertheless, 
work force reduction was a major factor in that we reduced 
almost 40 percent of the work force. Investigative requirements 
increased as the GAO had testified. In fact, the quotas imposed 
all led to a buildup in the backlog of periodic re- 
investigations.
    A major factor in this was that in an effort to compensate 
for the reduction in personnel, information technology in the 
form of the Case Control Management System was seen as a major 
way to reconcile the difference in achieving our mission. 
Nevertheless, the Case Control Management System, as the GAO 
reported, was managed in such a way that it did not deliver.
    You will recall that the Case Control Management System was 
turned on in October 1998. Immediately it ran into problems. It 
was barely able to function at all for the first 6 weeks that 
it was in being. That was a major part of causing the situation 
we are in because: of the turbulence that it caused beyond just 
not getting the work done; the turbulence that it caused in the 
organization.
    Thus, the management decided, and I do not agree with it at 
all, the management decision to relax standards and cease the 
many of the quality control activities that were ongoing. I 
would hasten to add that the Security Policy Board also did not 
agree with that action.
    So, the problems, as they were seen inside the agency, were 
that there was an un-achievable task to be accomplished. The 
work force became demoralized. Training had been reduced. There 
was great fear of out-sourcing in the agency. All of that is 
not gone. There was a growing backlog. That becomes the 
definition or the metaphor for a larger problem.
    The agency, in fact, was trying to work with both the 
information technology, the electronic personnel security 
questionnaire and with a paper questionnaire. So that at the 
time that technology was supposed to be solving the problem, 
the old method had not gone away. There was the continuing 
false starts that occurred in the Case Control Management 
System because that program management was not organized, as 
reported by the GAO.
    Very quickly on solutions. The solutions for DSS have had 
to derive from a comprehensive change in how the agency 
operates. Quickly, the agency had to return to standards and 
quality. Training had to be emphasized. The timeframe that I am 
in now is the summer of 1999. Resources had to be organized to 
task. That is done. Training is reestablished in the DSS 
academy.
    Standards are reestablished in the agency, and operating 
instruction on August 16th achieved that. An investigations 
manual had to be redone, approved, and fielded in December. Our 
quality management activity has been reestablished and is 
staffed. We have returned to basics and sound management 
practices.
    By that, I mean we communicate as openly as possible. We 
have put our organization in a condition that has a unity of 
command in it. Everybody now knows their boss. We have reduced 
the span of control. We are still in the process of this. Be 
careful how I say that. We are in the process of reducing span 
of control in the field to where in situations where we had as 
many as 36 personnel under one first-line supervisor.
    In March, that will all be reduced across the board to 
11:1. It has been an essential factor in how we bring our 
people along. Especially, we have now put in something called 
standardization and evaluation. Standardization and evaluation 
is an activity whereby new investigators we call them agents 
after they complete appropriate academic training, which we now 
give in our academy that has been reestablished, they are given 
an initial qualification check by a standardization and 
evaluation examiner.
    After that, we have periodic and a periodic examinations or 
checks of what our agents are doing. We have begun hiring. We 
are going to increase across the board from about 2,450 people 
on board now. We will go up over the next year to about 2,600 
people. That will include about 100 more agents, taking us from 
1,200 to over 1,300 agents.
    Augmentation is a major part of what we are looking at. 
Before I arrived at the agency, the Deputy Secretary of Defense 
had ordered that augmentation begin. That was done. The 
decision was made in May. That augmentation came in the form of 
getting the help of OPM.
    Mr. Shays. Let me ask you. Who ordered that?
    Mr. Cunningham. The Deputy Secretary.
    Mr. Shays. The Deputy Secretary?
    Mr. Cunningham. Excuse me, sir, the Deputy Secretary of 
Defense. Thank you very much. It is hard to leave the Pentagon. 
Thank you. The augmentation that we are into now, then, has 
that first phase that Secretary Hamrey ordered in May, which 
uses OPM. In addition to that, letter contracts with a company 
named OMNISEC and a letter contract with a company named MSM. 
OPM's contractor is USIS. That was the one that Mr. Mica had 
mentioned earlier.
    In addition to that, and this has much higher potential for 
us, the phase two augmentation will consist of larger 
contractor support capabilities that we intend to align, as 
much as possible, with each of the military departments and 
with industry so that unique requirements can be best met. 
Those activities begin with the first contract coming on board 
as early as the end of this month. Four of those contracts we 
hope to have on board by the beginning of the summer.
    Sir, I will stop with that and standby for your questions.
    [The prepared statement of Mr. Cunningham follows:]
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    Mr. Shays. OK, thank you. I am going to ask you question 
now. I do not want you to answer it, even if you want to answer 
it, right yet, because I want you to think about it. I am going 
to ask you how confident you are in the backlog. I want you to 
know that I am going to be writing a letter of request to GAO 
that they verify the backlog number. That we not work with 
guesstimates.
    So, I want you, and frankly this could be a help to you 
because if the backlog is greater and you set out an agenda 
based on the backlog, you are dead before you start. Then 
somebody else will be taking your place saying the 
mismanagement that preceded them.
    So, General Welch, thank you. You are on.
    Mr. Welch. Thank you, Mr. Shays. The Joint Security 
Commission Report II is in the public record. That is really 
our report for the record. I do not have an opening statement. 
Let me take 1 minute and remind you of what the Joint Security 
Commission was about.
    Mr. Shays. Yes. I know nothing about the Security 
Commission. So, you feel free to really educate me.
    Mr. Welch. The first Joint Security Commission, one, was 
asked by the Department of Defense and the DCI for a set of 
recommendations to address what was seen as an incoherent and 
perhaps sometimes chaotic set of security guidelines. There was 
seen a need for much more coherent and security guidelines, 
both to increase effectiveness and to reduce cost.
    We reported out in 1994 with a set of recommendations. It 
eventually led to a Presidential Decision Directive to 
implement the key recommendations of the Joint Security 
Commission. The Joint Security Commission II convened 5 years 
later at the request, again, of the Department of Defense and 
the DCI. It was asked specifically to give a grade on how the 
Government was doing implementing the direction of the PPD and 
the recommendations of the first Joint Security Commission.
    The primary focus, or one of the primary foci of the Joint 
Security Commission I, was personnel security. Standards were 
inadequate and execution was inadequate. Once again, one of the 
primary recommendations of the Joint Security Commission II was 
that we had agreed to investigative and adjudicative standards, 
but they were not being followed by all of the Department. So, 
that was the background for the Joint Security Commission.
    Mr. Shays. Anything else you would like to say?
    Mr. Welch. No. That is it.
    [The prepared statement of Mr. Welch follows:]
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    Mr. Shays. OK. Let me just ask you, there was a Commission 
in 1986. Is this the same Commission that we are talking about 
now or was that a different Commission?
    Mr. Welch. No, sir. The Commission in 1986, whose name 
escapes me, was one of the three----
    Mr. Shays. Stillwell, was that it?
    Mr. Welch. Right. It was one of the three earlier 
Commissions that lead to increasing concern about the lack of 
standards, the lack of coherent standards for personnel, and 
security, and for security in general.
    Mr. Shays. So, there was in 1986. Was there one earlier or 
one later? There was one in 1994, right?
    Mr. Welch. There was one in 1986. There was one in about 
1988. There was another one in 1992. Then we reported out in 
1994.
    Mr. Shays. Then you were established in 1994?
    Mr. Welch. I am sorry?
    Mr. Shays. You say you were established in 1994?
    Mr. Welch. The Joint Security Commission I reported out 
their first report in 1994.
    Mr. Shays. You reported out your study. You had been in 
existence for how long.
    Mr. Welch. Then we disbanded. We met for a year and a half. 
We reported out. It eventually resulted in a Presidential 
Decision Directive, which then established the Security Policy 
Board, which was charged with implementing these 
recommendations. Then 5 years later, we were asked to 
reconvene, really for two purposes.
    One, because it had been 5 years and they wanted to check 
on how the Government was doing. Second, by that time, there 
were enough indications of problems with personnel security 
that we were asked to particularly focus on those issues.
    Mr. Shays. Well, you are well-aware of what GAO has said. 
What is your reaction to what they have said?
    Mr. Welch. I agree with what the GAO has said.
    Mr. Shays. I want you to characterize it. I mean, is it out 
of concern? Should I be greatly concerned? Should you be 
greatly concerned? I mean, I want some characterization of--I 
will just tell you up-front. For me, I read it and I find it so 
astounding. When I was speaking to someone on the floor before 
I came back, I said it is so bad, it is so big that you cannot 
get your arms around it in one way.
    I mean, if you had told me that when they did the 
reinvestigation the found 2 or 3 percent where they noticed 
that they should do further research, but when you come up with 
16 percent, it is like unbelievable. That is the whole point of 
the investigation is to identify your problem and then go after 
it. So, I want you to tell me how you characterize it.
    Mr. Welch. OK. It is bad, and big, and you can get your 
arms around it.
    Mr. Shays. You can, c-a-n?
    Mr. Welch. You can. So, let me tell you why I say that. 
Personnel security is a risk management business. That is the 
nature of the business. We are making judgments about the 
trustworthiness and the reliability of human beings. We now 
have, which we did not have in the past, a set of standards on 
which we base those judgments. Understanding that we are always 
talking about risk management and we are always talking about 
making judgments.
    So, the Government has agreed across all of the agencies of 
the Government, which is an immensely difficult task, that 
there is a set of standards that we can apply that will give us 
reasonable confidence that based on our knowledge of past 
behavior and current circumstances, we have a satisfactory 
standard for access to classified material.
    So, the standard is in place. The standard is 
implementable. The standard is quite reasonable. I do not think 
there is any question that we can achieve those standards. But 
we did not. Now, you have heard a lot of reasons why we did not 
achieve the standard, but the solution is very straightforward. 
The solution is enforce the standards. We have all agreed that 
those are the right standards.
    Mr. Shays. Are those standards different than what the 
report presented in 1994?
    Mr. Welch. The standards are quite different. When we 
entered the effort that was reported out in 1994, the going-in 
emphasis was on the cost of this largely incoherent system 
because there was a lot of county option. Each agency set their 
own standards. Just to give an anecdote to help understand it, 
at that time, I had three separate top secret clearances. I had 
four separate compartmented clearances.
    As we were meeting, I happened to, be undergoing three 
separate background investigations. My neighbors suggested to 
me that perhaps we should have a neighborhood barbeque and 
invite all of the investigators at one time. That was what we 
characterized. As we began to do our work, that 18-months' 
worth of work, we became very concerned about personnel 
standards.
    Our concern was that in the area of personnel security, 
some of the agencies had standards that we were so lax that we 
understood why many agencies would not accept those standards.
    Mr. Shays. You mean, so some agencies required more than 
others. So, that is why you had more than one check. Is this 
kind of like, I used to think that, you know, when you went 
from red, green, brown, and then black belt, when you reached 
black belt you were done. Then I learned later on that you had 
10 elements to black belt.
    Are you saying that we have different elements in our top 
secret, or are you saying that different agencies just would 
not accept the review of other agencies because of different 
standards?
    Mr. Welch. Both. Each agency set their own standards. The 
Department of Energy had a set of requirements to grant a ``Q'' 
clearance, which is the equivalent of a top secret clearance. 
It is the equivalent of a DOD top secret clearance. The DCI had 
a different set of requirements for clearances that went by the 
same name. So, there was no reciprocity, but more important we 
did not have an agreement on what was an adequate standard.
    Mr. Shays. That was 1994.
    Mr. Welch. That was 1994.
    Mr. Shays. So, the focus then was, let us have one review. 
Let us have common standards among the various departments and 
agencies.
    Mr. Welch. Yes.
    Mr. Shays. But you, in no way, were not suggesting that you 
relax the standards like what took place. I mean, could someone 
who had been with DSS go back and say listen, we were being 
motivated by the report that you all submitted? Could they 
blame your report for a part of the problem?
    Mr. Welch. Well, I suppose anyone can do that.
    Mr. Shays. Are they?
    Mr. Welch. No. Let me comment on a couple of issues that 
complicated it a bit. In the end, for the Department of 
Defense, the standards went up. They went up considerably. This 
was an interagency effort under the Security Policy Board. So, 
it took a number of years. I cannot even remember how many, I 
guess until 1997, for all of these Government agencies to agree 
on what the standard would be.
    That is when we came to the definition of what is required 
to grant a secret clearance, and what is required to grant a 
top secret clearance, and what the time period would be for re-
investigations. Those standards were more stringent than had 
previously been practiced by the Department of Defense.
    They were perhaps less stringent than someone's standards, 
although I do not know whose those would have been. So, from a 
DSS standpoint, the result of that effort was to raise the 
standards that DSS was expected to follow in their background 
investigations. Now, that would be demoralizing only if you 
then did not get the resources to do that.
    Mr. Shays. But you were also suggesting that they not have 
to do double and triple reviews.
    Mr. Welch. That is right. That is correct.
    Mr. Shays. So, there should have been some advantage there.
    Mr. Welch. Our hope was that, that would result in a 
significant cost savings. But our report did not suggest that 
we could reduce the cost of personnel security. We suggested 
you could reduce the cost of physical security and the cost of 
document security because of the change to electronics.
    Mr. Shays. You did not suggest lowering the standards. You 
did not suggest ignoring one of the nine elements. Is that true 
or not?
    Mr. Welch. Not at all. In fact, our whole emphasis was that 
we need an agreed-to Government standard, and then you simply 
must follow the standard. There are two reasons for that. One 
is you need an agreed-to bar, some standard of judgment based 
on behavior and circumstances. Second, the real essence of 
security is security awareness.
    Security does not just come from someone jumping over the 
bar and getting access. Within the organization, everybody in 
the organization has to be aware of security issues. You cannot 
have security awareness if the people that you are trying to 
persuade to have this kind of awareness do not see you adhering 
to standards.
    Mr. Shays. Thank you. General Cunningham, before I ask you 
the question, I said I was going to ask you, I want you to 
spare me this problem. If you say you have total confidence, 
then I would want to pursue under what basis you would have 
total confidence. I would have you try to explain to me, in 
some detail, how the number was derived.
    You may have total confidence. I just want to say that up 
front. I do not want to find that you have total confidence, 
but you do not know how they did it and so on. Bottom line 
question is do you have total confidence? First, what is the 
backlog?
    Mr. Cunningham. The backlog has been assessed by an 
integrated product team operating in OSD at 5,005.
    Mr. Shays. Do you have intricate knowledge of how they 
determined that? Are you accepting their number based on their 
expertise?
    Mr. Cunningham. I am accepting their number. However, I do 
not have total confidence in it.
    Mr. Shays. Fair enough. So, it is their best estimate as 
far as you are concerned.
    Mr. Cunningham. Yes, sir.
    Mr. Shays. What do you think we can do to nail down that 
number?
    Mr. Cunningham. Sir, the best way to nail down that number 
is to have very disciplined ``scrub and prioritize,'' scrub in 
this case, on the part of the military departments, industry, 
and other smaller entities in the security community. To that 
end, we, DSS, are working with the military departments to have 
them embrace the idea and resource the capability to have a 
central requirements facility on the front end of the process 
in the same way that there is a central adjudication facility 
on the back end of the process.
    Mr. Shays. If I were to ask you for your confidence level 
that the number would be higher or lower, if you have no sense 
either way, I do not want you to pick a direction. Do you think 
it is likely to be underestimated, or overestimated, or do you 
simply do not know?
    Mr. Cunningham. Sir, while I think it could be 
overestimated, I think the number is higher.
    Mr. Terry. Will you repeat that?
    Mr. Cunningham. While the number could be lower, I think 
the number is higher. That is my professional judgment.
    Mr. Shays. In other words, it could go either way, but if 
he was a betting man.
    Mr. Terry. It is or it is not, and that is your 
professional opinion.
    Mr. Shays. No, no. Since it was my question, what I hear 
you telling me is that it could go in either direction, but if 
you were a betting man, it would be higher.
    Mr. Cunningham. Yes, sir. That is it.
    Mr. Shays. Mr. Terry.
    Mr. Terry. I want your help in coming to a full 
understanding of an issue. So, I am going to ask you to apply 
what you are going to perceive as fairly elementary questions, 
but I have to admit that I am somewhat lost on the role of 
quotas. As I am perceiving from the some of the testimony and 
reading the report that some of the backlog, I do not want to 
say ``blame'' or ``excuse'' but the causal relationship of the 
backlog to these quotas.
    Can you explain to me when these quotas were implemented 
and what they are in their direct relationship toward the 
backlog?
    Mr. Cunningham. The quotas were implemented about 1994 in 
an effort to discipline the clearance requests that were coming 
in, in an effort to motivate those making their requests to 
indeed request the clearances they really needed to have. We no 
longer have those quotas.
    Mr. Terry. Did you do away with those?
    Mr. Cunningham. No. Those were done away with in early 
1999, I believe, before my arrival.
    Mr. Terry. But the damage had been done?
    Mr. Cunningham. Quotas were basically saying, out of a 
certain percentage of the re-investigations, I do not know what 
the exact quota is. So, maybe 10 percent or the real high 
priority ones, so we are only going to make you do 10 percent.
    Mr. Terry. Is that a good generalization? Is that a 
ballpark generalization?
    Mr. Cunningham. Let me tell you what I think I heard you 
say.
    Mr. Terry. All right.
    Mr. Cunningham. The quotas were put on to try to get the 
number that were really needed, 10 percent or whatever.
    Mr. Terry. Yes.
    Mr. Cunningham. But it was a large number. It was a 
reasonable number. However, it also, without intending to do 
so, created what the GAO was discussing as a pent-up demand. 
That pent-up demand finally becomes manifest in a backlog when 
the quotas are dropped.
    Mr. Terry. From my perspective, it looked like the quotas 
set a minimum bar that everybody strived to meet. Then just 
like the backlog built up from there and you used the quotas as 
the excuse to do that. So, I am pleased that the quotas have 
been dropped. Unfortunately, that puts you in a very tough 
position to deal with that.
    Could you discuss, as my last question, and you did hit on 
it during your statement, but I would like you to expand on the 
automation of the caseload and what steps you are taking now to 
review the current system that I think everyone agrees is not 
adequate. Where are you in that process of reviewing it? Where 
do you feel the direction is going?
    Mr. Cunningham. Yes, sir. The Case Control Management 
System was, as the GAO reported, in need of proper program 
management. Last summer, we asked for a Program Management 
Office, and properly trained people to run the program and run 
the recovery. Our judgment at that time was that it made 
prudent business sense to continue the system, to continue with 
the Case Control Management System until we knew that it was 
recoverable.
    There was nothing in any study that said that the system 
was not recoverable. Our mission is security and this was 
central to the system. So, it made good sense to continue. When 
we continued, we committed to get a Program Management Office 
to indeed have a test capability for the system, which was not 
in the original architecture; to develop a concept of 
operations; to identify the priority requirements, support, and 
concept of operations to do a baseline architecture; and to do 
a schedule and a budget.
    Those things had never been done before. They are now in 
the process. We will have our first look at those on March 1st. 
We have our Program Management Office up. It now manages all 
contractors. The DSS manages none of the contractors. In fact, 
it has identified time lines for the recovery of the system, in 
terms of stabilizing the system by June 1, 2000, improving the 
system by June 1, 2001. From June 1, 2001 through June 1, 2003, 
enhancing the system to meet those requirements that cannot now 
be foreseen.
    Mr. Terry. Thank you. Mr. Chairman, that concludes my 
questions.
    Mr. Shays. Thank you very much. I have a number of other 
questions; some that my staff wants me to get on the record as 
well. I would like to clarify the budget issue. My sense was 
that I was being accurate in saying your budget of $74 million 
went up to $84 million. That the difference of that number of 
the $300-something is money that goes into a fund that looks at 
the private sector employees. So, maybe you need to help me 
sort out your budget a little bit.
    Mr. Cunningham. The budget includes everything that we are 
doing this year. It is $324 million. The discrete breakout of 
what each one of those, each part of that composing that $324, 
I would like to submit that back to you in detail.
    Mr. Shays. Sure.
    My understanding is that basically your Government budgets, 
$84 million, and then you have a trust fund budget that really 
is contributed from the employers.
    Mr. Cunningham. Yes, sir. It is a working capital fund.
    Mr. Shays. Right.
    Mr. Cunningham. It is a financing capability by which the 
requesting entities that we, say essentially the military 
departments, identify what level of investigations will they 
need to have done. Then they put the money in to cover that for 
the year. They budget in advance. Then they move the money to 
us with their clearance requests.
    Mr. Shays. I realize that money is fungible. I mean, it may 
be the same person that pays ultimately. My sense is that a 
chunk of your budget is associated or tagged to a private 
company like Boeing or Honeywell, and that they then pay that 
cost.
    Mr. Cunningham. Sir, I am not aware of that. I would have 
to answer you back on that.
    Mr. Shays. OK.
    We will get into that later. It raises some interesting 
questions that I have. Ultimately, if the private sector is 
paying some of it, we end up paying for it in the final product 
we buy. It does raise some interesting questions as it relates 
to the question I asked earlier. If the AIA member companies' 
survey has taken Boeing and said they have a backlog of 90 days 
in November 1999.
    This is what it was. And it was 1,161 employees and it cost 
them $52 million, and when I went through the list, you came up 
with 3,247 employees costing $143 million. This is a wasted 
expenditure, as far as they are concerned. It would be an 
expenditure, if they were done in a timely basis, would not 
occur. Have you been presented that type of information from 
anyone?
    Mr. Cunningham. Yes, sir. I have a copy of that 
correspondence.
    Mr. Shays. Now, this is where my mind starts to work. I 
say, you got a backlog of hundreds of thousands, and just 3,247 
cost ultimately, I believe the Government, $143 million. I 
mean, if anybody has a good case for arguing that you get the 
backlog done and we invest in it, you do. I hope OMB has been 
exposed to this. Is this a document I should have comfort that 
is credible?
    Mr. Cunningham. Sir, I think that the private sector 
entities who identified that problem are in the best position 
to state what that is costing us collectively. You are right 
about that. So, I appreciate the urgency that must go against 
that kind of a problem.
    Mr. Shays. Have we, in the private sector, tried to 
estimate the cost? I mean, in other words, this same logic 
occurs. I mean, you have someone who is not given clearance. 
So, you cannot get the job done. You have people waiting in 
line. The job does not get done. It gets delayed. Well, that 
happens in the public sector as well.
    Mr. Cunningham. Yes, sir.
    Mr. Shays. Do we have people in the public sector that have 
tried to put a cost to this?
    Mr. Cunningham. Not to my knowledge, sir. In fact, you are 
highlighting what I am seeking on behalf of the agency to have 
``scrub and prioritize'' from everybody.
    Mr. Shays. Can you tell me how many of the clearance re-
investigation checks are the private sector versus the public 
sector?
    Mr. Cunningham. Yes, sir. In general terms, about 75 
percent of our work is in the military departments and 
otherwise public sector and about 25 percent is in the private 
sector.
    Mr. Shays. Thank you. What kind of risk assessment has been 
developed to determine the danger the backlog poses to national 
security?
    Mr. Cunningham. Sir, the GAO mentioned the algorithm that 
we have been working on and we have now completed. I will be 
most pleased to provide a copy to you and your committee. It is 
aimed at risk management. Our plan is to go into the total 
population of the backlog, apply the algorithm, identify which 
records come up as high risk from the algorithm, which we 
believe and have had scientific support will predict 89 
percent, based on a 6.5 percent sample size, that we use it 
against the backlog while we are bringing the backlog down.
    So that we both work the backlog down and, in the process, 
go after those that are identifiable as highest risk in the 
backlog.
    Mr. Shays. Is that document ultimately going to be a public 
document or will it be a secured document?
    Mr. Cunningham. Sir, it is a public document. I will be 
happy to provide it.
    Mr. Shays. I am going to ask you two benchmark issues. What 
is your timetable for eliminating the backlog? There is another 
question that I want to ask. That relates to what timeframe has 
been established to enhance the Case Control Management System? 
So, timeframes, benchmarks.
    Mr. Cunningham. Yes, sir. Sir, we believe that----
    Mr. Shays. And I am going to interrupt you. I am sorry. 
This is based on the number that has been presented to you as 
the backlog.
    Mr. Cunningham. Yes, sir. We believe that we can bring the 
backlog, as we now know it, we can eliminate the backlog by the 
end of calendar year 01. Sir, that is a hard task, and I will 
say that right up front, but I believe, as I have come to know 
the agency and the ability of private sector contractors who 
are seeking the work to augment us, that we will be able to do 
that.
    I believe that we can do it in good form in protecting our 
standards and our quality because we are requiring proper 
training, certification, applying our standardization and 
evaluation checking, our quality management, our operations 
research so we can do the trend analysis that goes along with 
it, and other activities.
    It is important, sir, if I may add, it is important that we 
are going to use our algorithm to determine which cases should 
go to those contractors so that cases that we predict we will 
have problems, we will keep those right in the agency. We 
intend that all problem cases, issue cases, derogatory 
information uncovered, that those cases revert back to the DSS.
    Mr. Shays. Is the integral of success, will you get so many 
each from this point on or will you see the vast bulk of them 
done from July 2001 to December 2001? In other words, by the 
end of this year, what do you anticipate you will have done? 
Will you have 50 percent of it done?
    Mr. Cunningham. By the end of this year, I think it will be 
fair for us to expect in the neighborhood of 15 to 20 percent 
of it. The reason that the rest of it is achievable in the next 
calendar year is because the contractors will have spun-up. Our 
timetable for the Case Control Management System, which I have 
mentioned before, will have taken root.
    So, that major constraint will be less so. And because all 
of the four contractors that we intend to put as major efforts, 
and they will have the opportunity to bring others in with 
them, that the way they manage their cases will be managed 
independently of our Case Control Management System.
    So, it will take the agency from complete dependence on 
this Case Control Management System over onto another 
capability, all of which will be visible to us so we know that 
they are being done properly. In other words, we are going to 
have belts and suspenders.
    Mr. Shays. I was with you until that last part. In other 
words, you are going to have what?
    Mr. Cunningham. Well, in this hearing term, ``belts and 
suspenders.'' You know, we will have it both ways. It is not a 
trivial point because we had all of our eggs in one basket and 
we are getting out of that.
    Mr. Shays. It begs the question of whether you get greater 
productivity from the private sector or from the public? I 
realize you have to work with both sides. I understand one 
reason why we do the private is that we ultimately will have 
phased down that unusual number. So then you do not want to 
buildup your bureaucracy. So, it makes sense to farm it out. 
Does the private sector have some inherent advantages that 
allow them a greater productivity?
    Mr. Cunningham. Yes, sir. They have agility. They are able 
to hire and remove people quickly. They are able to locate 
easily. They are able to spinup fast with a great deal of 
focus. They are able to marshal resources almost 
instantaneously, if they decide to go after the business.
    Mr. Shays. That is a very good answer and one that I would 
appreciate. One of the things that we have learned on the 
subcommittees of Government Reform is that in the private 
sector, three people make a decision. Ultimately, in the public 
sector it is 11. What that must do for ingenuity, and 
creativity, and timeliness is mind-boggling.
    Mr. Cunningham. Sir, if I may tag onto that. We will be 
watching very closely what happens with these private sector 
contractors. Where there are better methods and applications of 
IT, we intend to adopt those same things ourselves.
    Mr. Shays. Now, there are only two benchmarks so far I have 
heard. So, give me a few more. We are going to want to come 
back, I mean, whoever is chairman of this committee next year, 
I would imagine, and someone will pursue this issue. We will 
want to meet with you to determine that. We frankly would want 
to meet with you probably later on.
    Mr. Cunningham. Yes, sir. Let me give you a few of those. 
When we worked with the Program Management Office and the 
contractors, and we saw the way they went about considering 
progress on the Case Control Management System, those 
timeframes I mentioned for the Case Control Management System, 
we identified the same phasing for the overall recovery of the 
agency.
    We have a target right now for August of this year to be 
making the number of cases closed per day, on average, to hit 
that target. It happens to be 2,500 cases a day closed for the 
DSS. To hit that target in August, and to hit it in a 
sustainable way, and to hit it in a way that we are continuing 
to build capability.
    To be able to not only take care of the backlog, but also 
be prepared to be able to do more than that should that arise. 
We expect that it will arise because of what the security 
environment is becoming. Therefore, the date to stabilize the 
agency is September 1st.
    It will be manifest in the data of output exceeding input 
for August in a sustainable way. That we will improve the 
agency, not just the CCMS, but the whole agency, through June 
2001. And that we will enhance our capabilities from June 2001 
through June 2003. We are tying them all together, and a very 
good measurement will be when we hit that target in August.
    That is one that I am happy to see the agency held 
accountable to, and would be more than happy to come back when 
you say.
    Mr. Shays. Is that the first key date, as far as you are 
concerned?
    Mr. Cunningham. Yes, sir. The whole agency right now is 
marshaling to hit that target in a sustainable way.
    Mr. Shays. Just a few more questions here. What do you 
consider to be the most pressing problem confronting DSS? You 
have got lots of challenges, lots of problems. What would be 
really the most?
    Mr. Cunningham. I am often asked this by my boss, the 
ASDC3I, and the answer is----
    Mr. Shays. Wait a second.
    Mr. Cunningham. The Assistant Secretary of Defense for 
Command, Control, Communications and Intelligence.
    Mr. Shays. Thank you.
    Mr. Cunningham. Thank you, sir. Art Money asks me this 
question a lot. And the answer from the beginning was our 
people. Today, the answer is the same. It is our people. This 
work force has had a tremendously difficult time. To bolster 
their morale, and we are making progress on this, to ensure 
they get the right training, proper preparation, proper 
response from their systems, those are the kinds of things we 
have to work on, but it all centers on the people.
    Mr. Shays. You know, I have a few other questions. What I 
will do is submit them, if we feel it is necessary to followup. 
I will have the committee to submit it in writing and just have 
you respond to one or two others. I am happy to have either of 
you make any comment. Is there a question you wish I had asked 
you, General Cunningham that you could wax eloquently on?
    Mr. Cunningham. Wax eloquently, sir.
    Mr. Shays. You do not even have to wax eloquently. Is there 
a question you were really prepared to answer that you want to 
answer, or is there a question I should have asked?
    Mr. Cunningham. Yes, sir. You asked the question. The 
question that is sometimes not asked, but is the right one to 
ask is, what is your biggest problem?
    Mr. Shays. Do you want me to ask you what is your second 
biggest problem is?
    Mr. Cunningham. Yes, sir.
    What is it?
    Mr. Cunningham. It is the Case Control Management System 
because it becomes the pacing item for everything else that 
happens in the agency in investigations.
    Mr. Shays. Thank you. General Welch, is there a question 
that you would have liked me to ask or something that you want 
to say?
    Mr. Welch. Well, I am very happy with your questions.
    Mr. Shays. That makes me very concerned.
    If either of you have a closing comment, we can adjourn.
    Mr. Cunningham. Thank you very much.
    Mr. Welch. Thank you.
    Mr. Shays. Thank you very much. We appreciate you being 
here. We appreciate your cooperation and we wish you well.
    The hearing is closed.
    [Whereupon, at 12:25 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Helen Chenoweth-Hage 
follows:]
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