[Senate Hearing 109-621]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-621
 
PROGRESS OR MORE PROBLEMS: ASSESSING THE FEDERAL GOVERNMENT'S SECURITY 
                           CLEARANCE PROCESS

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

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                 THE FEDERAL WORKFORCE AND THE DISTRICT
                        OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 17, 2006

                               __________

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


   OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Andrew Richardson, Staff Director
              Richard J. Kessler, Minority Staff Director
            Nanci E. Langley, Minority Deputy Staff Director
                      Emily Marthaler, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................    15

                               WITNESSES
                        Wednesday, May 17, 2006

Hon. Clay Johnson, III, Deputy Director for Management, Office of 
  Management and Budget..........................................     4
Kathy Dillaman, Associate Director, Federal Investigative 
  Services Division, Office of Personnel Management..............     5
Robert Andrews, Deputy Under Secretary for Counterintelligence 
  and Security, U.S. Department of Defense.......................     7
Robert Rogalski, Special Assistant, Office of the Under Secretary 
  For Intelligence, accompanied by Janice Haith, Acting Director 
  for Defense Security Service, U.S. Department of Defense.......     7
Derek Stewart, Director, Defense Capabilities and Management, 
  U.S. Government Accountability Office..........................     9

                     Alphabetical List of Witnesses

Andrews, Robert:
    Testimony....................................................     7
    Prepared statement...........................................    37
Dillaman, Kathy:
    Testimony....................................................     5
    Prepared statement with an attachment........................    30
Johnson, Hon. Clay III:
    Testimony....................................................     4
    Prepared statement...........................................    27
Rogalski, Robert:
    Testimony....................................................     7
    Prepared statement...........................................    39
Stewart, Derek:
    Testimony....................................................     9
    Prepared statement...........................................    47

                                APPENDIX

Questions and answers submitted for the Record from:
    Ms. Dillaman.................................................    65
    Mr. Rogalski.................................................    70


PROGRESS OR MORE PROBLEMS: ASSESSING THE FEDERAL GOVERNMENT'S SECURITY 
                           CLEARANCE PROCESS

                              ----------                              


                        WEDNESDAY, MAY 17, 2006

                                     U.S. Senate,  
                    Oversight of Government Management,    
                            the Federal Workforce and the  
                          District of Columbia Subcommittee
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich and Akaka.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The Committee will please come to order.
    Thank you all for coming.
    Today the Subcommittee on Oversight of Government 
Management holds its third hearing this Congress on the Federal 
Government security clearance progress, entitled ``Progress or 
More Problems: Assessing the Federal Government's Security 
Clearance Process.''
    A process that lacks the ability to clear highly skilled 
employees in a timely and efficient manner has serious 
consequences for the Federal Government and the security of our 
Nation. Our current system makes civilian military and contract 
employees wait too long for their security clearances. The Bush 
Administration and Congress have taken several steps to fix 
this process and we must remain devoted to accomplishing the 
goal.
    During the Subcommittee's first security clearance hearing 
we discussed the transfer of investigative functions from the 
Department of Defense to the Office of Personnel Management and 
the impact this shift will have on the government's ability to 
investigate and adjudicate security clearances in a thorough 
and expeditious manner.
    It has now been over a year since this transfer took place 
and I am interested in hearing your views on the effect of this 
transfer.
    At our second hearing, held on November 2005, we examined 
two critical components of reforming the security clearance 
process. First, we reviewed Executive Order 13381 issued June 
28, 2005 and the steps the Office of Management and Budget have 
taken to implement the order.
    Second, we examined the Office of Personnel Management's 
strategic plan to address the long-standing backlog of security 
clearance investigations, which was released on November 8, 
2005.
    Today we will assess OPM's progress in implementing their 
plan. We will also explore OMB's next steps regarding Executive 
Order 13381.
    Finally, we will address the temporary halt by the Defense 
Security Service (DSS) in processing government contractor 
security clearances.
    Mr. Johnson, I applaud the commitment and leadership you 
have shown on this issue. I am hopeful that the Executive Order 
will be renewed. I look forward to learning about how you 
intend to further improve the process. Your committed 
leadership is very important to our progress.
    Ms. Dillaman, I look forward to your assessment of how OPM 
is implementing its plan. Specifically, OPM was mandated by the 
Intelligence Reform Act to complete 80 percent of their 
investigations within 90 days by the end of calendar year 2006. 
We will explore whether OPM will meet this and other goals set 
by the law.
    However, any progress that we have seen recently is 
overshadowed by the recent temporary halt by the Defense 
Security Service in processing government contractor security 
clearances. DSS blames this action on higher-than-expected 
clearance requests, which has led to a budget shortfall. Based 
on current predictions for year, DSS estimates they will need 
an additional $91 million to continue operating until the end 
of the fiscal year.
    Although DSS is projected to have a budget shortfall this 
year, I understand currently they have funds necessary to 
process the accounts.
    Additionally, the Government Accountability Office has 
noted, for a number of years, that the DOD clearance program 
regularly has problems estimating the number of clearances it 
will need each year. This is clearly evident in this case.
    Given these facts, it is hard to understand why the sudden 
and unexpected halt happened in the first place. I was happy to 
see that DSS began accepting initial secret applications on 
Monday of this week but it did not include top secret 
clearances.
    The inability of DSS to accurately estimate its work has 
serious consequences for the security clearance community. I 
have been receiving many complaints from contractors about this 
situation.
    First, it has increased the backlog of security clearances. 
Second, OPM plans its staffing needs based on estimates 
submitted by DSS and other agencies. As a result, OPM may not 
have the necessary work force to complete all investigations in 
a timely manner. Third, and most importantly, a prolonged halt 
in processing security clearances could be a serious threat to 
national security.
    I was reading this morning in the paper that this is such a 
problem that some contractors are offering a $25,000 bonus to 
somebody that has a clearance, or even an automobile to get 
them to come over and work on their projects. What if a 
contract was awarded to figure out how we could identify 
improvised explosive devices. What if the contractors were 
waiting around for individuals with clearances. They have the 
technologies but no one with a clearance. I just wonder how 
many other instances--and I am not saying this is one--but how 
many instances that could be like this are we encountering as a 
result of the fact that we are not doing the clearance job that 
we should be doing?
    Mr. Rogalski, I expect you to explain to the Subcommittee 
why DSS felt it necessary at this time to halt contractor 
personnel clearances without any warning to the contracting 
community, OPM, OMB, and Congress. Additionally, I would like 
to know how DSS plans to resolve the problem for the long-term. 
This incident is unacceptable and raises serious questions of 
communication between all of the agencies involved with the 
security clearance process and basic management competence.
    For example, did Clay Johnson know that you stopped 
accepting applications? Did Kathy Dillaman know that you 
stopped taking applications?
    All of us here today share a common goal of fixing the 
process. As I have stated in the past hearings, I am committed 
to working on this issue to ensure that motivated and qualified 
individuals do not have to wait for long periods of time to 
receive their security clearances.
    I would like to thank our witnesses for their participation 
this afternoon. I look forward to their testimony.
    We have excellent witnesses today, thank you for your 
participation. I look forward to your testimony and discussion.
    Your full statements will be entered into the record in 
their entirety and I would appreciate it if you would summarize 
your statements in the allotted 5 minutes.
    It is the custom of this Subcommittee to swear in all 
witnesses. Please stand to be sworn in.
    Do you swear that the testimony you are about to give this 
Subcommittee is the truth, the whole truth, and nothing but the 
truth, so help you, God?
    Mr. Johnson. I do.
    Ms. Dillaman. I do.
    Mr. Rogalski. I do.
    Mr. Stewart. I do.
    Mr. Andrews. I do.
    Ms. Haith. I do.
    Senator Voinovich. Thank you.
    Our witnesses this afternoon include Clay Johnson, who is 
Deputy Director for Management at the Office of Management and 
Budget. It is always nice to have you testify before our 
Subcommittee. Welcome back.
    Kathy Dillaman is the Associate Director of the Federal 
Investigative Services Division of the office of Personnel 
Management. It is nice to see you here, too.
    Mr. Rogalski is a Special Agent to the Undersecretary of 
Defense for Intelligence. Mr. Rogalski, thank you for coming 
today. We appreciate you being here.
    Derek Stewart is the Director of Military and Civilian 
Personnel Issues at the Government Accountability Office. 
Welcome.
    I understand that, Mr. Andrews, you are going to be taking 
over the job. Welcome.
    We will start with Mr. Johnson.

  TESTIMONY OF HON. CLAY JOHNSON, III,\1\ DEPUTY DIRECTOR FOR 
          MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Johnson. Mr. Chairman, thank you for having me up here 
today. In your opening statement, you asked the question: ``Are 
we making progress or do we have more problems?'' I am here to 
say that we are making progress and, in some cases, significant 
progress. But, we are not where we want to be at this point in 
time.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Johnson appears in the Appendix 
on page 27.
---------------------------------------------------------------------------
    We are still committed to the goals laid out in the Intel 
Bill that called for certain levels of performance by December 
2006 and we are working very diligently to achieve those goals.
    Overall since fiscal year 2005, we have reduced the time it 
takes to provide a security clearance to someone by 40 days. 
This is the month of April performance versus fiscal year 2005. 
The time it takes to submit a security clearance application 
material to OPM or the investigative agency has been reduced 
from 32 days to 21 days. Department of Commerce and DOD have 
done a particularly good job of adopting the use of electronic 
transfer, eQIP, and improving their turnaround time and 
submission materials to OPM.
    The time it takes to do an investigation has been reduced 
by 40 days. I will let Ms. Dillaman talk about that.
    The time it takes to adjudicate a security clearance 
request has increased 10 days. That is not acceptable. The 
Department of Commerce, Department of Energy, Department of 
Transportation and Homeland Security are all about 50 percent 
or 60 or 70 percent of where they need to be. They are 
processing about 50 percent of their adjudications within 30 
days. At the other end of the spectrum, DOD is processing about 
5 percent of their adjudications in 30 days. The total net time 
it takes to adjudicate one of these things has increased, not 
decreased.
    Everyone knows what they need to do. We have goals. 
Everybody is committed to reform this process. The most 
distinguishing characteristic about this whole process, in my 
opinion, and I have been involved in a lot of government-wide 
efforts to do things, the singular most distinguishing 
characteristic about this effort is the level of commitment by 
particularly the six large agencies and by the investigating 
agency, OPM, to fix this problem. This is going to get fixed.
    Personally, I believe our biggest challenges in this are in 
working with the FBI primarily, but also DOD, in getting 
records provided to OPM so they can complete an investigation 
in an acceptable period of time. We are not very good at that 
now.
    I believe also the second big challenge is to improve the 
process, the timeliness of our adjudications. The reason I say 
I think these are the two biggest challenges is they require us 
to hire and train additional people. We know how many we need 
to hire in both cases. We know how to train them. But, we have 
not done that yet. So that still needs to take place and it is 
critical that it take place in a timely enough fashion that we 
are able to achieve our goals by December 2006.
    Those are my comments and I look forward to any questions 
you or anybody else might have at the end of the opening 
statements.
    Thank you.
    Senator Voinovich. Thank you very much, Mr. Johnson. Ms. 
Dillaman.

  TESTIMONY OF KATHY DILLAMAN,\1\ ASSOCIATE DIRECTOR, FEDERAL 
INVESTIGATIVE SERVICES DIVISION, OFFICE OF PERSONNEL MANAGEMENT

    Ms. Dillaman. Mr. Chairman, it is my privilege to testify 
today, on behalf of the Office of Personnel Management (OPM), 
to provide you with an update on the progress that has been 
made to improve the timeliness of the security clearance 
process and reduce the backlog of background investigations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Dillaman with an attachment 
appears in the Appendix on page 30.
---------------------------------------------------------------------------
    OPM's mission is to ensure that the Federal Government has 
an effective civilian workforce. To accomplish this mission, 
OPM provides background investigation services to agencies OPM 
makes security clearance and suitability decisions on civilian, 
military, and contractor personnel on behalf of the agencies.
    At OPM, the division responsible for conducting background 
investigations is our Federal Investigative Services Division 
headquartered in Boyers, Pennsylvania. This division supports 
over 100 Federal agencies with thousands of security offices 
worldwide. Its automated processing systems and vast network of 
field investigators handle a high volume of investigations. In 
fact, we expect to process over 1.7 million investigations this 
year.
    Since February 2005, OPM has had responsibility for about 
90 percent of all personnel background investigations for the 
Federal Government. Subsequently, the Office of Management and 
Budget (OMB) formalized this by officially designating OPM as 
the investigative agency responsible for conducting background 
investigations.
    We have worked closely with OMB and the major clearance 
granting agencies to meet the timeliness requirements of the 
Intelligence Reform Act of 2004. During my last appearance 
before this Subcommittee in November, I outlined how our 
performance improvement plan addressed four critical areas of 
the investigation and security clearance process: Workload 
projections, timeliness and quality of agency submissions for 
investigations, investigations timeliness, and adjudications 
timeliness.
    Since that time, I am happy to report that we have made 
great strides in improving overall timeliness in reducing the 
inventory of cases, and we are continuing to work aggressively 
to resolve any issues that are hindering the background 
investigations process.
    OPM provides reports each quarter to OMB and clearance 
granting agencies on the progress that has been made to meet 
the goals of the performance plan I earlier referenced. As an 
attachment to my testimony today, I am providing a chart which 
depicts the overall performance improvement trends for all 
agencies.
    To staff the investigations program responsibly, we need 
agencies to work toward projecting their annual need within a 
margin of error of 5 percent. Overall, agencies' projections 
are within 17 percent of actual submissions this year. The 
Department of Defense, which represents over 80 percent of 
national security investigations, has exceeded their annual 
projections by 59 percent for the first half of the fiscal 
year. We have asked all agencies to reevaluate their 
projections for the balance of the year and, based on any 
adjustments provided, we may need to further increase our 
Federal and contractor staff to keep pace with demand.
    The first step in improving the timeliness of the 
investigation and clearance process is timely and accurate 
submission of the subject's background information to OPM. The 
expanded use of the Electronic Questionnaires for 
Investigations Processing (eQIP), by submitting agencies has 
improved submission timeliness and lowered the rate of 
rejection due to inaccurate or inadequate information.
    OPM continues to make significant process in reducing the 
amount of time it takes to conduct background investigations. I 
have included a table in my written statement that demonstrates 
this progress.
    The improvement in timeliness can be attributed largely to 
increased staffing and productivity of our field agents. 
Currently, we are maintaining a staff level of over 8,600 
employees and contractors devoted to the background 
investigations program.
    In addition, we began deploying field agents overseas in 
August 2005 and currently have more than 40 agents working at 
more than 30 military institutions worldwide to handle 
international coverage requirements.
    Although we have been able to reduce the number of overdue 
initial clearance investigations, our inventory of pending 
investigations is increasing because of the difficultly we have 
in obtaining information from some national, State, and local 
record providers. Working with OMB, Federal agencies that 
provide records have developed aggressive plans to improve 
their performance.
    During the second quarter of this fiscal year, agencies 
that reported their adjudications to OPM averaged 78 days to 
complete those actions. OPM is working with those agencies to 
improve the time it takes to deliver completed investigations 
and report their adjudication actions.
    Mr. Chairman, when the Senate confirmed OPM Director Linda 
Springer last summer, I know she assured you that our work on 
security clearance reforms would be one of her highest 
priorities. I am proud to have been given the opportunity to 
work closely with our Director to put my own 30 years of 
Federal experience in this area to work, in order to meet the 
expectations that Congress and the President have set on this 
critical issue.
    This concludes my remarks. I would be happy to answer any 
questions.
    Senator Voinovich. I need to recess the hearing, as I am 
going to go over and vote. But, I will be back shortly.
    Thank you.
    [Recess.]
    Senator Voinovich. The hearing will reconvene.
    I understand, Mr. Andrews, that you want to make a short 
statement before we get to the testimony of Mr. Rogalski.

   TESTIMONY OF ROBERT ANDREWS,\1\ DEPUTY UNDER SECRETARY OF 
 DEFENSE FOR COUNTERINTELLIGENCE AND SECURITY, U.S. DEPARTMENT 
                           OF DEFENSE

    Mr. Andrews. Yes, sir, I certainly do.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Andrews appears in the Appendix 
on page 37.
---------------------------------------------------------------------------
    I am the Deputy Under Secretary of Defense for 
Counterintelligence and Security. The decision to suspend the 
security investigations was made shortly after I took up my 
post. It happened on my watch.
    This was not the finest hour for Defense Security Service, 
which reports to me. We failed, Senator, to accurately estimate 
the demand for security clearances or security investigations. 
We compounded that problem by failing to understand the 
systemic problems that further contributed to suspending the 
investigations.
    As I mentioned to you outside, I am responsible for taking 
steps to resume the investigations. I am also responsible for 
fixing the underlying problems in the process, so that 
something like this is unlikely to happen again. I want to 
assure you, that I will fulfill my responsibilities.
    We have lifted the suspensions for secret clearances and we 
have submitted to Congress a reprogramming action to permit us 
to lift the suspension on top secret and periodic 
reinvestigations.
    I believe we are on the path toward fixing fundamental 
flaws in our process. In the coming weeks, I will keep you and 
the Committee abreast of our progress and, at your convenience, 
consult with you as we move forward.
    To my left is Rob Rogalski, Special Assistant to the Under 
Secretary of Defense for Intelligence. Rob is the person most 
knowledgeable about the suspension and I have asked him to lay 
out what happened and to outline the near-term, and longer-
term, solutions we have identified. Thank you, sir.
    Senator Voinovich. Thank you. I would like to see you in my 
office in several weeks so that I can find out from you how DSS 
is doing.
    Mr. Andrews. I would be glad to be here, sir.
    Senator Voinovich. Great. Mr. Rogalski.

 TESTIMONY OF ROBERT ROGALSKI,\2\ SPECIAL ASSISTANT, OFFICE OF 
THE UNDER SECRETARY OF DEFENSE FOR INTELLIGENCE, ACCOMPANIED BY 
  JANICE HAITH, ACTING DIRECTOR FOR DEFENSE SECURITY SERVICE, 
                   U.S. DEPARTMENT OF DEFENSE

    Mr. Rogalski. Good afternoon, Mr. Chairman.
---------------------------------------------------------------------------
    \2\ The prepared statement of Mr. Rogalski appears in the Appendix 
on page 39.
---------------------------------------------------------------------------
    Prior to the appointment of Mr. Andrews, I was the Acting 
Deputy Under Secretary of Defense for Counterintelligence 
Security. I am joined by Janice Haith, Acting Director for 
Defense Security Service, DSS, and we are prepared to answer 
your questions today.
    The Under Secretary of Defense for Intelligence asked me to 
lead a DOD team to diagnose what caused DSS to suspend industry 
investigations due to a $90 million funding shortfall. The work 
we have done has uncovered a number of systemic problems 
associated with the industrial security process. We have 
identified immediate changes which we believe will help address 
these problems.
    By way of background, the Department of Defense budgets and 
provides payment to OPM to cover the cost of security clearance 
investigations for DOD contractors and the contractors for 23 
other Federal agencies, as part of the National Industrial 
Security Program.
    On April 25, the Acting Director of DSS directed the 
Defense Industrial Security Clearance Office (DISCO), which 
processes requests from industries for investigations, to 
suspend submissions to OPM for two types of investigations: 
Initial investigations and periodic.
    On April 28, DSS notified the industrial security community 
to stop sending requests for investigations to DISCO. DSS 
projected that it did not have sufficient funds available to 
pay OPM for additional investigations. DSS took this action to 
comply with the Anti-Deficiency Act. DSS could not knowingly 
request investigations without available funding.
    Let me stress that DSS did not direct OPM to stop work on 
any industrial investigations, initial or periodic, submitted 
prior to April 25, and DSS has paid for all work submitted to 
OPM through April 25.
    During fiscal year 2006, and prior to April 25, DSS 
submitted to OPM over 100,000 requests for additional 
investigations. Based on our current projections, we anticipate 
submitting another 100,000 industry investigations for fiscal 
year 2006. Again, none of the more than 100,000 industrial 
investigations submitted by DSS to OPM prior to April 25, have 
been affected by DSS's action to suspend the submission of 
investigations.
    A number of factors contributed to the problems faced by 
DSS. First, DSS did not adequately budget for the cost of 
industry investigations in fiscal year 2006. In October 2004, 
the Department signed an agreement with OPM to transfer the 
personnel security investigation function from DOD to OPM. As 
part of the agreement, DOD agreed to pay to OPM up to a 25 
percent premium of the base cost of investigations to offset 
potential operating losses incurred by OPM. The DOD budget 
request, which was delivered to Congress in February 2005, 
prior to OPM publication of its fiscal year 2006 rates, did not 
include funds to pay the premium to OPM.
    In addition, the DSS budget was further reduced during the 
Congressional deliberation on the fiscal year 2006 budget and 
DSS did not appropriately manage the reduction.
    Second, when DOD transferred the personnel security 
function to OPM, DSS had approximately 45,000 pending industry 
investigation requests which they did not transfer to OPM. DSS 
directed industries to resubmit many of these investigations 
and it appears they are being submitted during this fiscal 
year. DSS failed to track the status of these investigations 
and did not request funding for them in its fiscal year 2006 
budget submission.
    Let me address the immediate steps the Department has taken 
to address the suspension. DOD's Comptroller provided DSS $28 
million to restart industry investigations. DSS has expended $5 
million of these funds to pay the most recent bill from OPM. 
Yesterday DSS notified industry to begin submitting requests 
for initial investigations for secret clearances to ensure 
individuals requiring a clearance for employment are placed in 
the OPM processing queue. Based on our present projections, the 
remaining $23 million will allow DSS to send to OPM for 
processing industry initial secret clearance requests through 
the end of June 2006.
    DOD, with OMB approval, submitted a reprogramming request 
to Congress for $90 million yesterday to enable DSS to submit 
the remaining protected industry investigations through the end 
of fiscal year 2006.
    As you have heard from Mr. Andrews, the Deputy Under 
Secretary of Defense for Counterintelligence Security, he has 
directed the following actions to address the systemic 
problems: The establishment within DSS of a central oversight 
office to perform a variety of functions to include developing 
a process to link security investigation requirements and 
funding with current and future DOD contracts; monitor, 
initially on a daily basis, the industry investigation process; 
and develop trip wires to reduce the probability of any need to 
impose a future suspension.
    The DOD Comptroller will immediately begin work with DSS to 
develop new processes for DSS to use in preparing its budget 
submission. DSS will continue to work with OPM so that the two 
organizations can identify and track investigations submitted 
to OPM for processing as well as the associated funding.
    The Department senior leadership is committed to correcting 
the systemic problems that have been identified in the personal 
security process. The Department recognizes that inadequate 
oversight was a major contributor to this problem.
    Mr. Chairman, this concludes my statement. We are available 
to answer any questions you may have.
    Senator Voinovich. Thank you very much. Mr. Stewart.

      TESTIMONY OF DEREK B. STEWART,\1\ DIRECTOR, DEFENSE 
  CAPABILITIES AND MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Mr. Stewart. Thank you, Mr. Chairman, Senator Akaka. We are 
pleased to be back again for this third hearing on personnel 
security clearances.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Stewart appears in the Appendix 
on page 47.
---------------------------------------------------------------------------
    Executive Order 10865, dated February 1960, authorized DOD 
to enter into agreements with other Federal departments and 
agencies for clearances for industry personnel. This was a 1960 
Executive Order.
    Today, DOD has agreements with 23 departments and agencies, 
including the Departments of State, Homeland Security, Justice, 
etc. Industry personnel hold an estimated 700,000 to 800,000 of 
the roughly 2 million DOD issued clearances.
    So given the expanse of DOD's program, we believe this is 
truly a matter of national security. Today, I want to touch on 
three issues. I am going to give you an update on our ongoing 
work, looking at top secret clearances for industry personnel. 
Second, I will discuss the July expiration of Executive Order 
13381. And last, I will discuss DOD's decision to temporarily 
stop processing industry clearances.
    Regarding our ongoing work, we continue to assess the 
timeliness and completeness of DOD's and OPM's processes to 
grant eligibility for top secret clearances for industry 
personnel. Although our final report will be issued to you, Mr. 
Chairman, and other requesters in September, several 
preliminary observations have begun to emerge from our work. 
One of the more significant observations relates to performance 
problems of OPM's investigative workforce, primarily due to 
inexperience.
    OPM has made significant efforts to develop a domestic 
investigative workforce but it estimates it may take a couple 
of years before the workforce actually reaches desired 
performance levels.
    The July 1, 2006 expiration of the Executive Order could 
slow improvements in the clearance processes government-wide. 
The Executive Order, among other things, delegated to OMB the 
responsibility for improving the clearance process. We have 
been encouraged by OMB's high level of commitment, as 
demonstrated by the development of a government-wide plan to 
address clearance-related problems.
    Because there has been no indication that the Executive 
Order will be extended, we are concerned about whether the 
progress made to date will continue without OMB's high-level 
management attention. If OMB does not continue in its current 
role, we believe it is critical to continue to have a single 
entity in charge of the overall process and that this entity be 
viewed as an impartial and of sufficient clout to maintain the 
momentum established under OMB's leadership.
    Finally, DOD's decision to temporarily stop processing 
clearances for industry personnel has been attributed to a 
number of factors. Of these, we believe that DOD's perpetual 
inability to accurately project its security clearance workload 
is most problematic. This is not a new problem. Mr. Chairman, 
the record will show that each of the two times I have 
testified before this Subcommittee, I have raised this as a 
serious issue.
    Also, we have repeatedly raised the issue in our recent 
reports and recommended steps be taken to address this matter. 
DOD has concurred with our recommendations to improve its 
clearance workload projections but has done little to follow 
through. Consequently, we are far from confident and even less 
optimistic that DOD will follow through on its commitment to 
improve this situation for the long-term.
    Mr. Chairman, this concludes my remarks. I will be happy to 
respond to questions.
    Senator Voinovich. Thank you very much.
    I am glad Senator Akaka is here and I apologize that you 
were not able to hear the first part of the testimony, but I am 
sure that you have had a chance to familiarize yourself with 
it. Senator Akaka.
    Senator Akaka. Thank you. I have a prepared statement I 
would like to submit for the record at this time.
    [The prepared statement of Senator Akaka follows:]

                  PREPARED STATEMENT OF SENATOR AKAKA

    Thank you very much, Mr. Chairman. As always, I am delighted to 
work with you in our effort to make the Federal Government more 
efficient--more effective--and more responsive. One area that will 
benefit from our continued oversight is the government's security 
clearance process, and I'm sure that government contractors, whose 
applications for clearances were cut off three weeks ago, will agree.
    Today's hearing is on the progress made by the Office of Personnel 
Management (OMP), the Defense Security Services (DSS), and the Office 
of Management and Budget (OMB) in attacking the backlog of security 
clearance applications since we started our oversight. In addition, we 
will also discuss the unilateral decision by DSS to stop accepting 
security clearance applications from contractors on April 28, 2006.
    I strongly believe this particular action illustrates the 
government's lack of strategic vision to identify problems today that 
will create bottlenecks in Federal programs in the future.
    Certainly I am pleased that DSS submitted its reprogramming request 
to Congress to transfer nearly $91 million to fund contractor 
applications for the remainder of fiscal year 2006, in time for this 
hearing. However, it's troubling that contractor applications were 
stopped even though there was money to fund the program, and DSS knew 
as early as January that additional funds were needed for the remainder 
of the fiscal year.
    I reviewed Mr. Rogalski's statement, and I was heartened by his 
candid admission that DSS has difficulties in forecasting funding and 
projecting clearance needs. I was also pleased to learn that DSS is 
taking immediate steps to address the interruption in accepting 
contractor applications and is looking at long term solutions.
    However, had the Department of Defense (DOD) complied with a 
provision in the fiscal year 2001 National Defense Authorization Act 
that required DOD to establish a process for expediting investigations 
and conducting annual reviews of the process, we might not be facing 
this problem today. In my capacity as the ranking member of the Armed 
Services Readiness Subcommittee, I've spent significant time working on 
DOD's business transformation, and I want to see results. Like Chairman 
Voinovich, I understand that unless the government's security clearance 
system works smoothly, our national security may be compromised, 
program failures can occur because of inadequate staffing, or 
contractor costs can increase significantly due to schedule delays.
    Last month, the DOD Inspector General found that delays in the 
security clearance process ``may impact national security, completion 
of critical DOD missions, and support of the warfighter.'' This is 
unacceptable.
    We must strengthen existing relationships and improve communication 
among DOD, OPM, and industry. Agencies cannot respond to problems in 
isolation. I want to make sure that the three agencies represented here 
today--and OMB--understand that the long-standing problems affecting 
the government's security clearance program must be addressed jointly 
and openly. Too much depends on it.
    Chairman Voinovich, our goal is simple: We want to get the 
personnel security clearance program off of the GAO high-risk list. We 
have challenged OMB, designated by the Administration to take the lead 
in resolving these problems, to work with OPM and DOD. While there has 
been forward motion, the halt in industry applications is a significant 
step backwards. However, I am confident that with our continued 
oversight of this high-risk area we will see results.
    Thank you, Mr. Chairman.

    Senator Voinovich. With your permission, is it all right if 
we get on with the questions?
    Senator Akaka. Yes.
    Senator Voinovich. Mr. Stewart states that the 
communication problems between DOD and OPM may be limiting 
government-wide efforts to improve the personnel security 
clearance process. The failure by DSS to inform OMB and OPM 
ahead of time of its intention to stop processing contractor 
security clearance is a case in point. Is there a communication 
problem here?
    Ms. Haith. No, sir. We did not notify either OPM or OMB of 
the stopped processing. That was a miscommunication of our 
agency's process and we acknowledge that and have taken 
corrective action to ensure it does not happen again, on any 
matter.
    Senator Voinovich. What is corrective action? What does 
that mean?
    Ms. Haith. We have instituted some new policies that will 
prohibit external communications from going out of any 
magnitude that impact personnel security facility clearance 
processing without proper notification to, not only our chain 
and DOD, but also to appropriate entities, such as OPM or OMB.
    We have also taken appropriate disciplinary action with the 
employee that failed to do the coordination in advance.
    Mr. Rogalski. Can I follow up on that, Mr. Chairman?
    Senator Voinovich. Yes.
    Mr. Rogalski. Let me address the communication from the 
policy level from the Department of Defense with OPM.
    There are several fora that are in place today where DOD 
and OPM do work together. OPM chairs a background investigator 
stakeholders group with the Federal agencies. DOD participates 
in that group.
    The Acting Director of Security for the Department of 
Defense meets with Ms. Dillaman on a periodic basis, as a 
matter of fact it has been pretty frequent lately, to ensure 
that we are addressing those issues to work together.
    DOD is committed to OPM's success. We also communicate with 
OPM on their automation initiatives. So in this particular 
case, though, as Ms. Haith has already addressed, the 
Department did not adequately inform OMB, OPM, or Members of 
Congress, and we regret that.
    But I do want to add that there is communications channels 
open. Mr. Johnson, as well, chairs a group that senior 
leadership from DOD attends with the major security holders in 
the government to include DOD, CIA, Department of Homeland 
Security, and so on. So I would assess that the communications 
is open between the Department, OPM, and OMB. In this 
particular case, that did not occur.
    Senator Voinovich. Mr. Johnson, because the Executive Order 
is coming out of OMB, have you put instituted policies that 
would require agencies to notify you if they were going to 
tinker with the process.
    Mr. Johnson. No, sir.
    Senator Voinovich. Why not?
    Mr. Johnson. It just never occurred to me that was ever 
going to happen. By the way, the communication problem 
associated with this, as I understand it, is not just DOD to 
other entities. It was internal DOD as well. When this 
happened, a lot of people in DOD were not aware of it. So there 
was a lot of dissatisfaction all around.
    Senator Voinovich. Mr. Johnson, I think that you ought to 
get the word out to folks that if you are going to tinker with 
the system and you have any problems with it, they better pick 
up the phone and let you know about it. I think I would make it 
darn clear, on behalf of the Administration, that you want that 
done.
    Mr. Johnson. Yes, sir.
    Senator Voinovich. Are any of you aware of government 
contractors attempting to recruit government employees that 
have clearance? In other words, to hire people that have 
already got a clearance to get them on the payroll?
    Mr. Stewart. Mr. Chairman, we did another study, as you may 
recall, in February 2004. And we met with a number of industry 
associations and we heard that, in particular, the Northern 
Virginia Technology Council, NVTC, represents about 1,500 high-
tech organizations. And they were very clear that their members 
were going across the street and hiring away other folks who 
had clearances, offering them trips to Las Vegas, a $10,000 
signing bonus, and $5,000 for any additional employee that they 
could bring to the organizations with a clearance. So it is 
alive and well. It is happening.
    Mr. Rogalski. Mr. Chairman, might I follow-up on that?
    Senator Voinovich. Mr. Rogalski.
    Mr. Rogalski. There are two dynamics here. One is, as with 
the situation just described, that it has been a long ongoing 
practice within the industrial community. Clearances do make 
you marketable.
    The issue of people being offered bonuses happened before 
the DSS suspension. So, that is just the nature of the business 
of having this commodity called a security clearance, which is 
very valuable in the industrial security community.
    But, let me address the impact of this particular 
suspension, because we have looked at this carefully. I met 
with the key security directors in the industry on May 10, who 
represent probably 80 or 85 percent of the cleared industrial 
security community for the Department.
    I asked them the impact. I asked them what they saw. As we 
have looked at the numbers, we receive, on average, 4,000 
requests per week from industry for investigations. Of these 
4,000 requests, approximately 2,400 are for periodic 
reinvestigations.
    In the 2-week period that we have assessed we received 
8,000 requests. Of those requests, 2,400 are for periodic 
reinvestigations, meaning that those people are still at work. 
Their clearance did not stop, whether it is 5 years for TS. 
This means that approximately 5,600 people are new hires, whose 
investigations we were not able to process because of the 
suspension that DSS implemented on April 28. So, we assess the 
impact of about 5,600.
    Now, that is 5,600 too many. We recognize that. But, I 
think the perception of the suspension may not be as great as 
the reality.
    Senator Voinovich. I want to let you know that I am going 
to give you 6 months to put together a plan to fix DSS. This 
has got to stop.
    Another issue that we need to address is the issue of how 
many of these jobs really need clearances and at what level.
    And I am still, Mr. Johnson, hearing complaints from 
individuals who have clearances going through investigation 
when they move agencies. Gordon England has had to get 
clearances for every job that he has had. We need to respect 
reciprocity.
    Mr. Johnson. Specifically, with regard to Gordon England, I 
think that clearance would have been per the White House. And 
they, just last week, agreed that there will be reciprocity.
    Senator Voinovich. I would like to see the reciprocity 
program. Dale Klein is currently the Assistant to the Secretary 
of Defense for Nuclear and Chemical Biological Defense 
Programs. Big clearance. He has been nominated to be Chairman 
of the NRC. He had to go through an extensive background check. 
It took 4 months. They started from the beginning. That is just 
foolishness.
    Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    From your questioning and from the responses, I believe 
that one of the solutions is to strengthen relationships and 
improve communication--it is a simple way of saying it--between 
DOD, OPM, and the industry. Agencies cannot continue to respond 
to problems in isolation.
    I want to make sure that the three agencies represented 
here today understand that the long-standing problems affecting 
the security clearance program process must be addressed 
jointly and openly. Too much depends on it. And this, I think, 
is obvious.
    Mr. Rogalski, the 2001 fiscal year National Defense 
Authorization Act required the Department to establish a 
process for expediting security clearance investigations. The 
end result would have been quite similar to what you proposed 
in your testimony today.
    My question to you is, do you know what progress DOD had 
made on the Congressional mandate prior to the transfer of 
security clearances to OPM last year?
    Mr. Rogalski. There is three dynamics from what we 
understand from the Act. One is to the qualification of 
requirements for those background investigations. We do survey 
the industrial community and ask the DOD components, annually, 
to project their requirements.
    In addition, through that process, on the military and 
government side, there is a process where we identify those 
critically sensitive positions. There is already a priority in 
place. Basically it is a categorization of those personnel on 
the basis of their degree, what they need access to. So there 
is a certain population within the Department that requires 
access to top secret. So that is a part of the process today 
within the Department.
    Within the industry, there is not an equivalent process. 
One of the things that we recognize, and to follow on the 
Chairman's question, we have established that tiger team. As a 
matter of fact, I was asked, or directed, about a week-and-a-
half ago to get my arms around this, to fix the problem. So we 
put together a team with representatives from the Department, 
military departments, Office of General Counsel, Comptroller, 
acquisition technology and logistics because this must be tied 
to contracting.
    So I think, to answer your question, we have identified, we 
have that prioritization if you will, on the DOD government and 
military population.
    We do not have a similar process on the industry side. It 
is clear we have to get greater traction between that DOD 
program manager. So, for example, if I am the program manager 
for a DOD acquisition program, I need to determine what is the 
priority for those clearances.
    That is one of the things we are looking at in this tiger 
team to get greater traction. The words I used with industry on 
May 10 were when that clearance requirement becomes a twinkle 
in your eye, we need to understand that requirement, it needs 
to be validated by the DOD sponsor, and then be put in the 
queue, and the follow-on with that is the process needs to be 
tied to budgeting. That is the systemic problem that is just 
not happening in the Department today. We will fix that.
    Senator Akaka. I am glad to hear that there will be an 
effort to fix it.
    It seems to me that if DOD had taken strong action on the 
NDAA requirement, perhaps the DSS transfer to OPM might not 
have been needed. What do you think about that?
    Mr. Rogalski. Since I was not privy to those discussions 
concerning the NDAA, and the discussions involved in the 
transfer, I cannot answer that question. We can take that as a 
question for record.
    I can say, though, that was a business case that the 
Department made to ensure there would be one Federal provider 
of industry--of investigations, not just industry, all 
background investigations, security clearance investigations. 
And the Department made that, went to an agreement with OPM to 
really drive two things. One, we thought the cost could come 
down through that agreement. And two, timeliness would improve.
    Senator Akaka. Mr. Stewart, would you care to comment on 
that, too?
    Mr. Stewart. Yes, sir, I would. Senator Akaka, thank you.
    I was around when the NDAA 2001 legislation was written. As 
Mr. Rogalski said, it does require DOD to quantify the 
requirements for security clearances. And Mr. Rogalski is 
correct in that the DOD does an annual survey.
    The problem is the response rate is extremely low. Not all 
the contractors respond. So that leaves DOD still in a position 
of not knowing exactly how many clearance requests are going to 
come in.
    We also believe that an annual survey is not sufficient. It 
has to be done more than annually. It is like you start out at 
the beginning of a fiscal year and you have a budget. We all 
know that you have to modify that budget. Things do not stay 
the same for a year. So given the dynamic environment of 
security clearances, you have to survey more than once a year.
    Senator Akaka, we issued a report in 2004, and made a 
recommendation to DOD, that they needed to quantify the 
requirements. They needed to get a better handle on what their 
requirements were. And they concurred with our recommendation. 
They came back. It is in the report. The response was 
everything Mr. Rogalski just said. They were going to get a 
handle on requirements. They were going to link the 
requirements to the budget. It is all right here and for 2 
years now we keep hearing there is going to be this plan and 
there is going to be this effort to move out and it never quite 
happens, sir.
    Senator Akaka. I hope some things begin to happen.
    Mr. Rogalski, you said the business case was to transfer 
the function to get a lower cost on investigations and for the 
sake of timeliness. Has that happened?
    Mr. Rogalski. I guess, first of all, I have to defer to OPM 
to answer that question. I think, again, we are still early in 
the process. The transfer has only been in place for a little 
over a year. But, our hope is that over time there will be an 
increased timeliness. You heard OPM testify, there has been 
some increase in timeliness. We all would like to see a greater 
increase in timeliness, obviously. And we, from the DOD 
perspective, obviously would want to see a decrease in cost.
    Senator Akaka. Thank you, Mr. Chairman. My time has 
expired.
    Mr. Johnson. Senator, may I add a comment?
    Senator Voinovich. Go ahead.
    Mr. Johnson. On the subject of looking back, is it a good 
thing that the investigative work is being done by OPM? From my 
oversight role I believe the answer is clearly yes. The 
investigative work is being done 40 days faster than it was for 
fiscal year 2005. It is being done 22 percent faster. The 
process is being reformed. The time to grant security 
clearances is being improved.
    You were not here when I said it in my opening statement, 
but the time to submit an accurate request to the investigators 
is down one-third, from 32 days to 21 days. The goal is 14. The 
investigative time has gone from 189 days to 149 days. The time 
to adjudicate has increased 10 days, not decreased, increased 
10 days. Some agencies have made huge strides. Others have not. 
So in some cases, there has been significant improvements, in 
other cases not.
    Overall, the time to grant a clearance has gone down 40 
days, which is about 15 to 20 percent. So the process is being 
improved. We are not where we want to be. We still have our 
eyes set on the goals laid out by the Intel Bill for December 
1, 2006, 2007, 2008, and 2009. We are still moving in the 
direction of accomplishing those goals, laid out for December 
of this year. And we are making every effort and working very 
hard and are very committed to achieving those goals.
    Senator Akaka. Thank you.
    Senator Voinovich. Mr. Johnson, you said that there are 
some agencies doing a better job at adjudicating clearances. 
What has OMB done to bring to the attention of those agencies 
that are not doing it that they ought to shape up and get it 
right?
    Mr. Johnson. Ms. Dillaman and OPM publishes information 
monthly, with big summaries for all of the agencies quarterly, 
but monthly for the six large agencies, that shows where they 
are on all the key metrics. This goes to the lead person for 
this reform effort at each of the six large agencies.
    They have given me plans that show where they want to be on 
all of these key metrics by April 1, July 1, and October 1 of 
this year.
    So, when the information came out for the end of March, 
some of them were where they said they wanted to be by April 1. 
Many of them were not where they said they wanted to be.
    I then told them OK, the plan we had, where we wanted to 
be, we are not there in all cases. I asked them to review their 
plan, come back to me and tell me what they were going to do 
different, faster, less of, more of.
    Senator Voinovich. Pardon me but who are you talking to? Do 
you talk to the top person in the Department? Or are you 
talking to somebody down the chain?
    Mr. Johnson. I do not know where they are in the chain. 
With DOD it was Mr. Rogalski, before Bob Andrews arrived. There 
is great responsiveness. I have not felt like I was being told 
that they were working on it and the evidence was that they 
were not working on it. If I felt that was the case, I would 
have gone up the food chain until I got some attention being 
paid.
    But, as I mentioned earlier, there was a great deal of 
commitment to get this done. I do not sense any lack of 
commitment or lack of attention to getting this done.
    And it is so transparent. It is so clear where every agency 
is on every key dimension. We do not have to guess who is doing 
the work and who is not. I can tell you exactly on each of the 
key metrics.
    Senator Voinovich. Have you ever brought the ones that are 
doing it together with the ones that are not doing it----
    Mr. Johnson. We do that----
    Senator Voinovich [continuing]. To try and get their best 
thoughts on maybe how they can improve their operation?
    Mr. Johnson. In terms of best practices, let me tell you 
the meeting process. We have met, since August 1 when we first 
formed this group, or August 10, we have met I think six or 
seven times. We met the last time on April 26, and we are 
scheduled to meet the end of June.
    There is a group that meets, which involves all of the six 
agencies, that deals with reciprocity issues. You have a group 
that deals with standardization of applications and so forth. 
So there is a number of individual working groups.
    But specifically on adjudications, for instance, we have 
not.
    I know that in DOD's case, to get adjudicating at the 
satisfactory rate where they are adjudicating, I think it is 80 
percent within 30 days, they have identified a need to hire, I 
think it was, 31 adjudicators, or 45 adjudicators. And they 
knew where they could get the money for most of it and they 
have looked at the training time and how they could compress 
the training times and so forth. So, there is a very specific 
plan for getting the number of adjudicators they need on board, 
trained, and doing the work.
    So, it is not ``are you committed to doing this'' and 
taking their word for it. It is ``what is their plan?'' And did 
they meet their interim goal? And, if they did meet their 
interim goal, what modifications to their plan are they going 
to make?
    So, we are just now getting the modifications to their 
plans back for me to look at. I'll then sit down with each of 
them and then agree that the changes in their strategy appear 
to me to be appropriate or they appear to be inappropriate.
    But there is a lot of give and take. It is now typically on 
a quarterly basis where we say here is where you said you were 
going to be. You have done it or you have not. If you have not, 
what are you going to do different to get back on track? So 
there is an oversight, an active oversight process underway.
    Senator Voinovich. One of the things I discussed with Mr. 
Portman earlier today is that I start looking at agencies right 
across the board. And in so many instances they do not have the 
budget to do the jobs that they have been asked to do. I really 
think it is incumbent upon OMB, to start looking at agencies 
that are not performing the way they ought to.
    It is not a matter of mismanagement. But the fact is they 
just do not have the budget to do the job that they have been 
asked to do.
    Mr. Rogalski, you are talking about a tiger team 
internally. I have to tell you something, you have got industry 
people out there who are livid about the system.
    In quality management you look at your internal team. Then 
you go to your customers and you say, ``what can we do to work 
with you to speed the process up and make it happen?'' You are 
dealing with corporations that are pretty efficient. You ought 
to take advantage of it. You ought to get them in and say what 
is it that we are doing? Look at our process. And can you 
suggest to us how you can make it better?
    I did that when I was governor. We went out to the 
customers and we said, ``what are your thoughts? We want you to 
be happy. Give us your thoughts on how we can improve the 
situation.''
    Mr. Rogalski. Let me make two comments, one on our 
relationship with industry. We have an excellent relationship 
with industry. DSS, through its Industrial Security Program, 
meets with industry on a frequent basis. There is a member from 
the USDI staff at the Aerospace Industry Association this week.
    So, we have an ongoing dialogue with all the key elements 
of industry. On May 10, I chaired a meeting with the key 
defense industry directors of security--and I have known most 
of these folks for years, some are personal friends--to get 
their input. That is exactly what I said. We need to work this 
together. I need to know from your perspective, because here is 
almost a quote--I do not want DOD to come with a bureaucratic 
draconian solution to this. We need to work this together with 
industry so we are coming up with a smart solution and fixes.
    Our fix in that Central Oversight office we are 
establishing at DSS is to be partnered with industry. So one, 
we take that very seriously and we will continue to work with 
industry to get their best practices and figure out how we can 
do it smarter for the Department of Defense.
    Second, our projections. It has always been a challenge for 
the Department of Defense to get adequate projections. And, I 
cannot address again what was done previously. But I can tell 
you today, having looked at this, being responsible for this 
tiger team, there are several dynamics here.
    As the Department increases intelligence information and 
information sharing, and we have gotten this from the military 
departments, there is a greater need for higher level of 
security clearances for our war fighters. That has attributed 
to a spike in the number of security clearance requirements. 
And, I agree, we projected these numbers annually, but part of 
our systemic process is to look at it across the board.
    If there is a new requirement that drops on the Department, 
or if we see it coming, we need to be flexible and agile enough 
to be able to predict that, advise OPM we may need more 
resources to meet that situation. So the first dynamic of 
projections is the increased intel going out there to the war 
fighter.
    The second thing we have seen here is greater use of 
intelligence community networks, also to the war fighter. That 
has also caused a spike in the number of investigations. We 
asked the military departments, about 3 or 4 weeks ago, to 
reassess their projections for the remainder of this fiscal 
year. We received those results last week. We are re-looking at 
those.
    We have an effective model in the Department of Defense 
today. The Air Force uses a model, a pretty good predictive 
tool, that we want to see if we can adopt it for the entire 
Department of Defense. But we have not done well in our 
projections.
    Industry, coincidentally enough, has done a pretty good job 
of forecasting those projections. But for the management of the 
Department of Defense, it is clear we must do a better job.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Thank you, Mr. Chairman.
    I would like to ask this question to DOD, Ms. Haith or Mr. 
Rogalski. Mr. Johnson discussed the monthly reports issued by 
OPM. Wouldn't those reports have given clues that DOD was 
outspending its budget for fiscal year 2006 for security 
clearances for contractors?
    Ms. Haith. Sir, yes, we do receive those monthly reports 
and we do analyze them. However, the process is not as exact is 
it appears. We have been in discussions with OPM about how that 
reports syncs up with what we actually submit. And we are still 
working to resolve the fact that they do not exactly sync, and 
we need to resolve that soon.
    Mr. Rogalski can answer about the Department, for the 
Department.
    Senator Akaka. Would you comment?
    Mr. Rogalski. We went back and looked at, what I will 
categorize as the funding chronology, and why we got into the 
situation we are today. It was clear that, as DSS started 
tracking the numbers and started seeing the potential shortfall 
that they experienced in April, that DSS, within the 
Department, did try to get additional funding. For example, we 
looked at the Global War on Terrorism Supplemental. We were 
unable to get funds there. So DSS was looking for additional 
sources of funding prior to the stoppage, prior to the 
suspension.
    They advised industry that we could no longer accept 
expedited cases, since those cost us more money. For example, 
the base cost for an investigation into a top secret clearance 
is $3,750. The expedited cost is $4,350. So, DSS was looking at 
ways, within their control, to try to bring the cost down, 
because, very candidly, we were trying to squeeze every dollar 
we could.
    DSS was reaching the Anti-Deficiency Act situation, and we 
could not get a good handle on the projected dollars. At the 
end of April, DSS was in a situation that they were faced with 
only one option to avoid violating the Anti-Deficiency Act: 
Suspending investigations.
    When you look at this in retrospect, it is clear, and that 
is one thing I mentioned in my testimony, we need those trip 
wires sooner in the process. Get greater fidelity between the 
OPM billing process, what DOD has in its pot, if you will, to 
ensure that we will not be faced with the situation to suspend 
investigations again.
    Senator Akaka. Mr. Rogalski, if you were looking at the 
supplemental, why weren't members of the Armed Services 
Committee aware of this problem?
    Mr. Rogalski. I would have to take that as a question for 
the record. I do not know the answer to that. That was with the 
internal discussions within the Department on us looking for 
funding. The communication of this, or the lack of 
communication to Congress, I am not prepared to address.
    Senator Akaka. Mr. Rogalski, is DSS or the Office of 
Counterintelligence and Security, part of the Department's 
business transformation efforts? And if so, what is the level 
of participation?
    Mr. Rogalski. I will let Ms. Haith answer the question as 
it relates to DSS.
    Ms. Haith. The business transformation for DSS has been in 
progress since we transferred the workload to OPM. It has 
involved taking what was initially the primary program, 
personnel security investigations, and no longer having that 
there, we have made the three other programs in the Agency the 
focal points with equal balance as to how we accomplish the 
mission.
    We are still in the process of transforming the Agency. We 
are looking at new ways to do business using automation. We are 
looking at new policies, that we have to work with OSD, that 
will help us move forward with those missions. But we are still 
transforming. It is still a work in progress, a definite work 
in progress.
    Senator Akaka. Ms. Dillaman, you may recall from our June 
hearing that I asked about the need for OPM agents overseas to 
investigate the foreign activities of individuals seeking 
security clearances such as linguists. Your testimony today 
indicates there are more than 40 field agents working at more 
than 30 military installations around the world. Can you tell 
us how many backlogged cases need overseas coverage?
    Ms. Dillaman. Yes, sir, I can. At the point of transfer a 
year ago, 15,000 pending overseas leads were transferred with 
the program. In the process of establishing an international 
presence, that backlog grew to 29,000 investigations requiring 
international coverage.
    Since our deployment, and we have had a steady deployment 
internationally, that number has been reduced to 14,000. Our 
intent is to continue to have a steady presence abroad.
    Recently, we have been working with the Department of 
Defense to supplement our own core staff by using contractor 
staff, as well. So I am highly optimistic that by the end of 
the year overseas cases will be current.
    Senator Akaka. Do you have an idea of how many additional 
agents are needed to eliminate the overseas backlog?
    Ms. Dillaman. Yes, sir. We believe a continued presence of 
40 is needed until the backlog is eliminated, and then a 
substantially smaller number, 25 plus contractors as needed. 
But we have ongoing work with the State Department and the 
Department of Defense to continue to refine the international 
coverage requirements so that we are not spending one 
additional resource more than we need for minimum required 
coverage.
    Senator Akaka. Thank you. Thank you, Mr. Chairman.
    Senator Voinovich. Mr. Johnson, is the President going to 
extend the Executive Order?
    Mr. Johnson. There will be continued oversight. The feeling 
was this responsibility for this process will eventually be 
passed to the Director of National Intelligence. The question 
is ``are they ready to take responsibility?'' I bet the answer 
is no, in which case, I would bet today, that OMB's involvement 
will continue, along with the issuance of another Executive 
Order. But that is just my speculation at this point.
    But, I think long-term we envision the DNI taking on the 
oversight responsibility for the security clearance process.
    Senator Voinovich. As you know, one of the goals that 
Senator Akaka and I have is we want to get this off the high-
risk list.
    Mr. Johnson. Me, too.
    Senator Voinovich. I would feel a lot more comfortable if 
you would stay involved and not give it over. They have their 
hands full right now.
    Mr. Johnson. Right. I think they understand that.
    Senator Voinovich. I would like to get with the President, 
in fact if I see him this afternoon, which I may, I may tell 
him that I would love to have you continue to stay there and do 
it.
    Mr. Johnson. Perfect. I like being loved.
    Senator Voinovich. Reciprocity guidelines, do you have 
them?
    Mr. Johnson. We have them. The area that we do not have 
them, where they are the most ticklish, is for SAP programs, 
Special Access Programs, with DOD. We are making good progress 
on resolving that and our goal is to have that reciprocity 
policy involving SAP programs established and agreed to by mid-
June. And then our goal would be to implement it and to get 
industry and our own security organization, particularly DOD, 
implementing it and honoring it. And I am confident that we 
will be able to do that.
    Senator Voinovich. But the fact is that currently some of 
the non-DOD agencies are not abiding by that? Is that right?
    Mr. Johnson. I have no doubt. But I also know that they 
are. There is more granting of reciprocity. One of the things 
we are trying to do in the oversight world is find better ways 
of measuring the level of reciprocity. Ms. Dillaman's group at 
OPM, when they get requests to do investigative work, one of 
the things we are in the process of establishing is account of 
how many requests we get for clearance work that has already 
been done. We do not have those metrics yet.
    We are also in the process, we get sort of anecdotal 
directional information from industry about where they think we 
should have granted reciprocity, where we did not. We have just 
made our first collection of that. I think it was for the month 
of March. But we will be able to track that over time.
    So we are not where we need to be. But we understand it is 
important. We understand that we need to be able to measure it 
and hold people accountable for honoring this, the new 
definition of reciprocity.
    Senator Voinovich. In your written testimony, you discuss 
the use of the eQIP by agencies to submit investigative 
requests for investigations. Apparently, when they are doing 
it, it has really helped a great deal.
    Mr. Johnson. Yes, sir.
    Senator Voinovich. Currently, only 42 percent of the 
agencies are using it, and the goal was by April 1 for 100 
percent of them to be using it. What is the problem?
    Mr. Johnson. We all agreed last fall, all six agencies, 
that there was no reason why we could not be at 100 percent by 
April 1. We are halfway there. Some agencies are at 80 percent. 
DOD went from virtually nothing to 44 percent, which for that 
many people is a huge accomplishment.
    But our goal was 100 percent. So, we have made good 
progress, in some cases huge progress. But, we are not where we 
said we wanted to be on that. So I have gone back to every 
agency and they are now coming back to me, as we speak, with 
OK, we said we would be there April 1. Here is what we are 
going to do and here is when I now think we will be there, at 
100 percent.
    Senator Voinovich. Ms. Dillaman, the last time we were 
together there was talk about the high turnover rate for 
private contractors doing investigations for OPM. Is this still 
a problem? What is your response to what Mr. Stewart said in 
terms of the training that is going to be needed?
    What did you say, Mr. Stewart, 2 years before some of them 
would be trained to get the job done. Where are we on that?
    Ms. Dillaman. Yes, sir. I think we are in excellent shape. 
We still have the same six companies under contract. They are 
continuing to add resources. Their attrition rate has 
stabilized. In the month of April it was about 1.5 percent.
    On the Federal side of things, our attrition rate is lower. 
I have about a 1 percent attrition rate for the month of April.
    And so are keeping pace with attrition by hiring employees 
to replace the ones who retire.
    We have a full-blown academy in place. In fact, Mr. Stewart 
had two of his representatives attend one of our academy 
sessions. So between us and our contractors, we are quite 
capable of bringing in the additional resources we need and 
training them well.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Thank you, Mr. Chairman.
    Ms. Dillaman, you testified that all agencies have been 
asked to reevaluate their projections for the remainder of this 
fiscal year which may result in an increase to your Federal and 
contractor staff levels.
    Do you know how many additional employees would be needed 
based on existing staff and application levels?
    Ms. Dillaman. Sir, as it stands today, we are adequately 
staffed to deal with today's workloads. The unknown is what I 
can expect for the balance of the year, whether or not the 
Department of Defense's receipts will continue to stay high, 
whether or not they will annualize and stabilize more closely 
to their projections by the end of the year. And that is what 
we are going to have to wait for to calculate overall FTE 
needs.
    I will tell you, using a broad base of contractors, six 
companies, certainly helps the ability to respond to 
fluctuations in workloads because work is distributed between 
the Federal staff and six contracting companies. So I believe 
we have a very flexible platform that can adjust. It is just 
trying to wrap our arms around what to adjust to?
    Senator Akaka. Ms. Dillaman and Mr. Johnson, some of the 
problems in completing investigations can result from delays in 
obtaining information from national, State, and local record 
providers. Ms. Dillaman testified that OPM is working with OMB 
and Federal agencies that provide records to rectify this 
problem.
    Could you both provide us with more details on what you are 
doing in this regard?
    Ms. Dillaman. Let me start, sir.
    First of all, by far the most problematic right now are two 
Federal agencies' record systems that need some significant 
work or have significant backlogs. Today, I have 70,000 
investigations pending where all I am waiting for is a final 
national agency record from either the FBI or the Department of 
Defense. Both agencies have put together plans on how they will 
reduce the backlogs in providing these files and get to a state 
of currency by the end of this year so that we can all meet the 
terms of the Intelligence Reform Act.
    For each group it is a question of system engineering, 
proper staffing, and setting up a mechanism for retrieval and 
responsiveness. I am highly optimistic we are going to get 
there. The FBI has made significant progress. They have 
recently submitted a plan that looks at the engineering process 
and what their staffing and cost needs are going to be.
    Quite frankly, I do expect, because we do pay a user fee to 
the FBI for their records, and because they are going to need 
additional funding, we are going to see a spike in the user fee 
as a result of this. But if that is what is necessary to get 
this backlog under control and get these records processed, 
that is what is going to have to happen.
    Senator Akaka. Mr. Johnson.
    Mr. Johnson. Just to add to what Ms. Dillaman just said, 
they have identified how many people they need to be able to 
get to the desired level by the end of the year and there are 
three alternative ways of getting that. It is a combination of 
they hire more people and/or they take some people from OPM and 
transfer them into the FBI operation for a period of time and/
or they hire contractors. So they know how many people. There 
are three alternative ways of getting it done. They know what 
the cost is. It is a cost that, if it is OPM people there is a 
cost that they have to incur in how they get reimbursed for 
that. So they are in the process of working through there.
    We first met with the FBI, I think it was February, to work 
through these matters. So it is now 3 months. When I think back 
about it, I should have been more aggressive at bringing this 
to closure. I should have been more aggressive at having a plan 
before us to say yes or no over, and begin the implementation 
of in way less than 90 days. And I was neglectful in doing 
that.
    Senator Akaka. Mr. Johnson, the cost to our national 
security and agency missions are indeed high for failing to 
complete security clearances in a timely manner. My question to 
you is, has OMB calculated how much money is lost due to the 
delay in completing security clearances for contractors?
    Mr. Johnson. To my knowledge, we have not. For one year in 
my past life, I was a market research director for a large 
company. I remember one of our disciplines that we tried to 
abide by was do not ask any question if it will not make any 
difference in what you are trying to do. If it will not impact 
whether you go in this direction or that direction, there is no 
point in answering the question.
    And I would suggest that the cost is obviously large. Our 
commitment is to reform the process, per the goals established 
by the Intel Bill, and we are fully committed to doing that and 
working very hard to do that. I am not sure whether, if we 
found out that the cost was this or that, that we would be any 
more committed to doing this and be working any more 
aggressively than we are now to reform the process.
    But, to my knowledge, we do not know what that number is.
    Senator Akaka. Mr. Stewart, has GAO looked into this?
    Mr. Stewart. We have not. Senator Akaka, we have not looked 
at the cost, no.
    Senator Akaka. Mr. Chairman, thank you.
    Senator Voinovich. I have no more questions. Do you have 
any more, Senator Akaka?
    Senator Akaka. I will submit my questions.
    Senator Voinovich. I want to thank all of you for your 
testimony.
    Mr. Andrews, I would like to set up a time where we can get 
together and talk about what you are doing.
    Mr. Johnson, I am real interested in the Executive Order.
    Mr. Stewart, I still would like GAO to stay involved with 
this issue.
    Mr. Andrews, in 6 months I want a bang up plan that deals 
with streamlining this, getting it done, and also to get your 
best thought on how we are going to do a better job of 
predicting the workload.
    I just want you to know I am going to stay on this thing, 
and so is Senator Akaka. We are going to get the security 
clearance process off the list. This is going to be one of the 
things the Administration is going to brag about, that we 
finally, after years, took a screwed up system and improved it 
and made it good and got it off the high risk list where it has 
been since 1990.
    This goal is very important for our country. We are talking 
about our national security. I think that should be the 
incentive to really make this work. Thank you.
    Senator Akaka. I want to thank the Chairman for really 
moving on this and continuing to deal with these questions.
    I want to thank you, Mr. Johnson, and also Comptroller 
General Walker. As we work on high risk elements, we really are 
trying to get at the problems that are out there. And so, as we 
hear you, you are trying. We want to really be able to help you 
in doing this.
    I offered that there is a way of doing this, and that is to 
talk to each other and to work together on this. It is clear 
that some of the problems exist between agencies. We need to 
find a solution to the lack of communication.
    I just wanted to say that the Chairman and I are really 
here to try to help you resolve all of these problems. Please 
let us know how we can help, too. Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Akaka.
    I want to finish on a more positive note. I want to say 
thank you very much for the progress that you have made. I know 
it is not easy and we concentrated today on the problems. But 
Ms. Dillaman I want to say thank you, you are moving ahead and 
I know you are serious about this. So thank you very much.
    The meeting is adjourned.
    [Whereupon, at 4:15 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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