DOD Personnel Clearances: Preliminary Observations Related to	 
Backlogs and Delays in Determining Security Clearance Eligibility
for Industry Personnel (06-MAY-04, GAO-04-202T).		 
                                                                 
Because of increased awareness of threats to national security	 
and efforts to privatize federal jobs, the demand for security	 
clearances for government and industry personnel has increased.  
Industry personnel are taking on a greater role in national	 
security work for the Department of Defense (DOD) and other	 
federal agencies. Because many of these jobs require access to	 
classified information, industry personnel need security	 
clearances. As of September 30, 2003, industry workers held about
one-third of the approximately 2 million DOD-issued security	 
clearances. Terrorist attacks have heightened national security  
concerns and underscored the need for a timely, high-quality	 
personnel security clearance process. However, GAO's past work	 
found that DOD had a clearance backlog and other problems with	 
its process. GAO was asked to review the clearance eligibility	 
determination process and backlog for industry personnel. This	 
testimony presents our preliminary observations on the security  
clearance process for industry personnel and describes (1) the	 
size of the backlog and changes in the time needed to issue	 
eligibility determinations, (2) the impediments to reducing the  
backlog and delays, and (3) some of the initiatives that DOD is  
considering to eliminate the backlog and decrease the delays.	 
Later this month, we plan to issue our final report.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-202T					        
    ACCNO:   A09948						        
  TITLE:     DOD Personnel Clearances: Preliminary Observations       
Related to Backlogs and Delays in Determining Security Clearance 
Eligibility for Industry Personnel				 
     DATE:   05/06/2004 
  SUBJECT:   Classified defense information			 
	     Classified information				 
	     Eligibility determinations 			 
	     Labor force					 
	     Performance measures				 
	     Personnel management				 
	     Security clearances				 
	     Strategic planning 				 
	     Work measurement					 
	     Timeliness 					 

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GAO-04-202T

United States General Accounting Office

GAO Testimony

Before the Committee on Government Reform, House of Representatives

For Release on Delivery

Expected at 10:00 a.m. EDT DOD PERSONNEL

Thursday, May 6, 2004

CLEARANCES

Preliminary Observations Related to Backlogs and Delays in Determining Security
                  Clearance Eligibility for Industry Personnel

Statement of Gregory C. Wilshusen, Acting Director Defense Capabilities and
Management

GAO-04-202T

Highlights of GAO-04-202T, a testimony before the House Committee on
Government Reform

Because of increased awareness of threats to national security and efforts
to privatize federal jobs, the demand for security clearances for
government and industry personnel has increased. Industry personnel are
taking on a greater role in national security work for the Department of
Defense (DOD) and other federal agencies. Because many of these jobs
require access to classified information, industry personnel need security
clearances. As of September 30, 2003, industry workers held about
one-third of the approximately 2 million DOD-issued security clearances.

Terrorist attacks have heightened national security concerns and
underscored the need for a timely, high-quality personnel security
clearance process. However, GAO's past work found that DOD had a clearance
backlog and other problems with its process. GAO was asked to review the
clearance eligibility determination process and backlog for industry
personnel.

This testimony presents our preliminary observations on the security
clearance process for industry personnel and describes (1) the size of the
backlog and changes in the time needed to issue eligibility
determinations, (2) the impediments to reducing the backlog and delays,
and (3) some of the initiatives that DOD is considering to eliminate the
backlog and decrease the delays. Later this month, we plan to issue our
final report.

www.gao.gov/cgi-bin/getrpt?GAO-04-202T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory Wilshusen at (202)
512-6244 or [email protected].

May 6, 2004

DOD PERSONNEL CLEARANCES

Preliminary Observations Related to Backlogs and Delays in Determining Security
Clearance Eligibility for Industry Personnel

On the basis of our preliminary observations, long-standing backlogs and
delays in determining security clearance eligibility for industry
personnel continue to exist and can have adverse effects. DOD's security
clearance backlog for industry personnel was roughly 188,000 cases as of
March 31, 2004. The backlog included estimates by the Defense Security
Service (DSS)-the agency responsible for administering DOD's personnel
security investigations program-that consisted of

o  more than 61,000 reinvestigations (required for renewing clearances)

that were overdue but had not been submitted to DSS,  o  over 101,000 new
DSS investigations or reinvestigations that had not

been completed within DOD's established time frames, and

o  	over 25,000 cases awaiting adjudication (a determination of clearance
eligibility) that had not been completed within DOD's established time
frames.

From fiscal year 2001 through fiscal year 2003, the average time that it
took DOD to determine clearance eligibility for industry personnel
increased by 56 days to over 1 year. Delays in completing reinvestigations
of industry personnel and others doing classified work can increase
national security risks. In addition, delays in determining clearance
eligibility can affect the timeliness, quality, and cost of contractor
performance on defense contracts.

Several impediments hinder DOD's ability to eliminate the backlog and
decrease the amount of time needed to determine clearance eligibility for
industry personnel. Impediments include a large number of new clearance
requests; an increase in the proportion of requests for top secret
clearances, which require more time to process; inaccurate workload
projections for both the number and type of clearances needed for industry
personnel; and the imbalance between workforces and workloads. Industrial
contractors cited the lack of full reciprocity (the acceptance of a
clearance and access granted by another department, agency, or military
service) as an obstacle that can cause industry delays in filling
positions and starting work on government contracts. Furthermore, DOD does
not have an integrated, comprehensive management plan for addressing the
backlog and delays.

DOD is considering a number of initiatives to supplement actions that it
has implemented in recent years to reduce the backlogs and the time needed
to determine eligibility for a security clearance. Additional initiatives
include (1) conducting a phased, periodic reinvestigation; (2)
establishing a single adjudicative facility for industry; and (3)
reevaluating investigative standards and adjudicative guidelines. GAO's
forthcoming report will provide a more complete discussion of these and
other initiatives.

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss our preliminary observations on
the process the Department of Defense (DOD) uses to determine security
clearance eligibility for industry personnel.

For a variety of reasons, including an increased awareness of threats to
our national security resulting from the terrorist attacks on the United
States on September 11, 2001, and efforts over the past decade to
privatize federal jobs, the demand for security clearances for both
government employees and industry personnel has increased over the last
few years. Individuals working for industry are playing an increasingly
larger role in national security work conducted by DOD and other federal
agencies. Many industry personnel hold jobs that allow them to work on
classified programs and activities and that require access to classified
information. To handle classified information, industry personnel must
hold a security clearance. As of September 30, 2003, industry personnel
held about 682,000 (or about 34 percent) of the approximately 2 million
DOD-issued security clearances.

Terrorist attacks have heightened national security concerns and have
highlighted the need for a timely, high-quality personnel security
clearance process. As part of a three-stage process, DOD determines
whether industry personnel are eligible for a security clearance by
conducting a background investigation and adjudication (determining
eligibility for access to classified information). However, some
government and industry officials have recently expressed concern about
the security clearance backlog-overdue security clearance
reinvestigations1 that have not been requested and new investigations and
adjudications that have not been completed within established time
frames-and the amount of time it takes to determine eligibility for a
security clearance for industry personnel.

Since at least the late 1990s, the timeliness of DOD's personnel security
clearance process has been at issue. As our previous work has shown,
backlogs and delays in personnel security investigations and adjudications
historically have been problems for DOD, and they affect industry

1 Reinvestigations are conducted periodically to determine whether an
individual's security clearance should be renewed.

personnel as well as service members and civilian employees.2 In February
and September 2000 testimonies before the Subcommittee on National
Security, Veterans Affairs, and International Relations, House Committee
on Government Reform,3 we noted our concerns about the amount of time
needed to obtain clearances and that DOD had historically reported a large
backlog of overdue but not submitted reinvestigations for security
clearances. In our February 2004 report, for example, we identified
several impediments that hinder DOD's ability to eliminate its security
clearance backlog and made recommendations for decreasing the backlog and
improving timeliness.4 Likewise, this committee reported that DOD's
personnel security investigations backlog poses a threat to national
security and recommended actions to address the backlog.5

Mr. Chairman, in June 2003, you and the Vice Chairman of this committee
asked us to review the process DOD uses to determine security clearance
eligibility for industry personnel. Later this month, we plan to provide
you with a report containing the final results and our recommendations.

Today, I will present our preliminary observations on DOD's security
clearance process for industry personnel. Specifically, I will discuss (1)
the size of the backlog and changes during the last 3 fiscal years in the
time needed to issue eligibility determinations, (2) the impediments to
reducing the backlog and delays, and (3) some of the initiatives that DOD
is considering to eliminate the backlog and decrease the delays.

2 See U.S. General Accounting Office, DOD Personnel: More Consistency
Needed in Determining Eligibility for Top Secret Clearances, GAO-01-465
(Washington, D.C.: Apr. 18, 2001); U.S. General Accounting Office, DOD
Personnel: More Actions Needed to Address Backlog of Security Clearance
Reinvestigations, GAO/NSIAD-00-215 (Washington, D.C.: Aug. 24, 2000); and
U.S. General Accounting Office, DOD Personnel: Inadequate Personnel
Security Investigations Pose National Security Risks, GAO/NSIAD-00-12
(Washington, D.C.: Oct. 27, 1999).

3 See U.S. General Accounting Office, DOD Personnel: Inadequate Personnel
Security Investigations Pose National Security Risks, GAO/T-NSIAD-00-65
(Washington, D.C.: Feb. 16, 2000) and U.S. General Accounting Office, DOD
Personnel: More Accurate Estimate of Overdue Security Clearance
Reinvestigations Is Needed, GAO/T-NSIAD-00-246 (Washington, D.C.: Sept.
20, 2000).

4 See U.S. General Accounting Office, DOD Personnel Clearances: DOD Needs
to Overcome Impediments to Eliminating Backlog and Determining Its Size,
GAO-04-344 (Washington, D.C.: Feb. 9, 2004).

5 See Committee on Government Reform, Defense Security Service: The
Personnel Security Investigations [PSI] Backlog Poses a Threat to National
Security, H.R. 107-767 (Oct. 24, 2002).

In conducting this review, we examined DOD policy guidance, regulations,
instructions, and statistical evidence on the security clearance process
for industry personnel. In addition, we reviewed reports by GAO, DOD,
congressional staff, and other government entities. We also interviewed
DOD and industry officials, observed the procedures used to process
clearance information, and assessed the reliability of databases. We
determined that the data for fiscal years 2001 and thereafter were
sufficiently reliable for the purpose of our work. At the end of my
statement is a list of related GAO products. We conducted our review from
July 2003 through April 2004 in accordance with generally accepted
government auditing standards.

Summary 	Long-standing backlogs and delays in determining security
clearance eligibility for industry personnel continue to exist and can
have adverse effects. As of March 31, 2004, DOD estimated that its
security clearance backlog for industry personnel was roughly 188,000
cases. DOD identified more than 61,000 reinvestigations that were overdue
but had not been submitted, over 101,000 backlogged investigations, and
over 25,000 backlogged adjudications. In the 3-year period from fiscal
year 2001 through fiscal year 2003, the average time that it took DOD to
determine clearance eligibility for industry personnel increased by 56
days to over 1 year. Delays in initiating reinvestigations for individuals
working on classified programs and activities can increase national
security risks while delays in determining eligibility for clearances for
industry personnel can affect the timeliness, quality, and cost of
contractor performance on defense contracts. Such delays prevent industry
personnel from beginning or continuing work on classified programs and
activities, hinder industrial contractors from hiring the most experienced
and best qualified personnel, increase the time needed to complete
national-security-related contracts, and increase costs to the federal
government.

A number of impediments hinder DOD's ability to eliminate the backlog and
decrease the amount of time needed to determine eligibility for security
clearances for industry personnel. Impediments include large investigative
and adjudicative workloads resulting from a large number of clearance
requests in recent years; an increase in the proportion of requests
requiring top secret clearances, which take longer and are more expensive
to complete than secret clearances; inaccurate workload projections; and
the imbalance between workforces and workloads. Industrial contractors
cited the lack of full reciprocity-a policy that requires acceptance by an
agency of an equivalent personnel security

clearance and access granted by another agency-as an impediment that can
cause industry contractors delays in filling positions and starting work
on government contracts. Furthermore, DOD does not have a management plan
to address the impediments in a comprehensive and integrated manner.

DOD is considering a number of initiatives to reduce the backlog and the
amount of time needed to determine eligibility for a security clearance.
Among those steps that DOD is exploring are conducting a phased periodic
reinvestigation; establishing a single adjudicative facility for industry;
and reevaluating investigative standards and adjudicative guidelines. Even
if these initiatives prove promising, they face obstacles- such as the
need to change investigative standards, coordinate these policy changes
with other agencies, and ensure reciprocity-that could prevent their
implementation or limit their use. Our May 2004 evaluative report will
provide a more complete discussion of these and other initiatives.

In March 1997, a White House memorandum implemented adjudicative
guidelines, temporary eligibility standards, and investigative standards
governmentwide.6 The National Security Council is responsible for
overseeing these guidelines and standards. Within DOD, the Office of the
Under Secretary of Defense for Intelligence (OUSD [I]) is responsible for
coordinating and implementing DOD-wide policies related to access to
classified information.7 Within OUSD (I), the Defense Security Service
(DSS) is responsible for conducting background investigations and
administering the personnel security investigations program for DOD and 24
other federal agencies that allow industry personnel access to classified

Background

6 See The White House, "Implementation of Executive Order 12968,"
Memorandum (Washington, D.C.: Mar. 24, 1997). This memorandum includes the
Investigative Standards for Background Investigations for Access to
Classified Information and Adjudicative Guidelines for Determining
Eligibility for Access to Classified Information. It approves the
adjudicative guidelines, temporary eligibility standards, and
investigative standards required by Executive Order No. 12968, Access to
Classified Information (Aug. 4, 1995).

7 Previously, this responsibility resided within the Office of the
Assistant Secretary of Defense for Command, Control, Communications, and
Intelligence. OUSD (I) was created in 2002 by the Bob Stump National
Defense Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314 S: 901
(Dec. 2, 2002).

information.8 DSS's Defense Industrial Security Clearance Office (DISCO)
adjudicates cases that contain only favorable information or minor
security issues. The Defense Office of Hearings and Appeals (DOHA) within
DOD's Office of General Counsel adjudicates cases that contain more
serious security issues.

As with military members and federal workers, industry personnel must
obtain a security clearance to gain access to classified information,
which is categorized into three levels: top secret, secret, and
confidential. Individuals who need access to classified information over a
long period are required to periodically renew their clearance (a
reinvestigation). The time frames for reinvestigations are 5 years for top
secret clearances, 10 years for secret clearances, and 15 years for
confidential clearances.9

To ensure the trustworthiness, judgment, and reliability of contractor
personnel in positions requiring access to classified information, DOD
relies on a three-stage personnel security clearance process that includes
(1) determining that the position requires a clearance and, if so,
submitting a request for a clearance to DSS, (2) conducting an initial
investigation or reinvestigation, and (3) using the investigative report
to determine eligibility for access to classified information-a procedure
known as "adjudication." Figure 1 depicts this three-stage process and the
federal government offices that have the lead responsibility for each
stage.

8 Executive Order No. 10865, Safeguarding Classified Information within
Industry (Feb. 20, 1960), which was amended by Executive Order No. 12829,
National Industrial Security Program (Jan. 6, 1993), authorizes DOD to
reach agreement with other federal departments and agencies to extend its
regulations concerning authorizations for access to classified information
by industry. Three federal agencies (the Department of Energy, the Central
Intelligence Agency, and Nuclear Regulatory Commission) also may grant
security clearances to industry personnel who work on
national-security-related programs.

9 See Adjudicative Guidelines for Determining Eligibility for Access to
Classified Information, 32 C.F.R. Part 147, Subpart B, Attach. A and
Attach. C (2003).

Figure 1: DOD's Personnel Security Clearance Process for Industry
Personnel

Note: Cases involving access to sensitive compartmented information (see
footnote 21) are sent through the requesting agency's central adjudication
facility for adjudication.

In the preinvestigation stage, the industrial contractor must determine
that a position requires the employee to have access to classified
information. If a clearance is needed, the industry employee completes a
personnel security questionnaire, and the industrial contractor submits it
to DSS. All industry requests for a DOD-issued clearance are submitted to
DSS while requests for military members and federal employees are
submitted to either DSS or the Office of Personnel Management (OPM).

In the investigation stage, DSS, OPM, or one of their contractors conducts
the actual investigation of the industry employee by using standards
established governmentwide in 1997 and implemented by DOD in 1998.10 As
table 1 shows, the type of information gathered in an investigation
depends on the level of clearance needed and whether an initial
investigation or a reinvestigation is required. DSS forwards the completed
investigative report to DISCO.

10 See Assistant Secretary of Defense for Command, Control,
Communications, and Intelligence, "Personnel Security Investigations and
Adjudications," Memorandum (Washington, D.C.: Nov. 10, 1998). In
implementing the federal adjudicative guidelines, DOD Directive 5200.2,
DOD Personnel Security Program (Apr. 9, 1999), sets forth the policies and
procedures for granting DOD military, civilian, and industry personnel
access to classified information. The policies and procedures for granting
industrial personnel security clearances and adjudicative procedural
guidance for appealing cases if an unfavorable clearance decision is
reached also are contained in DOD Directive 5220.6, Defense Industrial
Personnel Security Clearance Review Program (Apr. 20, 1999).

Table 1: Information Gathered to Determine Eligibility for a Security Clearance
                           Type of security clearance

Confidential or secret Top secret

Initial investigation or reinvestigation Initial investigation
Reinvestigation

                          Type of information gathered

1. Personnel security questionnaire: The subject's X X X
self-reported answers on a paper SF-86 form or an
electronic form

2. National agency check: Data from Federal Bureau X X X
of Investigation, military records centers, Treasury, etc.

3. Credit check: Data from credit bureaus where the X X X
subject lived/worked/attended school for at least
6 months

4. Local agency checks: Data from law enforcement X X X
agencies where the subject lived/worked/attended
school during past 5 years

5. Date and place of birth: Corroboration of X X
information supplied on the personnel security
questionnaire

6. Citizenship: For individuals born outside of the X
United States, verification of U.S. citizenship directly
from the appropriate registration authority

7. Education: Corroboration of most recent or X X
significant claimed attendance, degree, or diploma

8. Employment: Review of employment records X X
and interviews with workplace references, such as
supervisors and coworkers

9. References: Data from interviews with X X
subject-identified and investigator-developed leads

10. National agency check for spouse or X X
cohabitant: National agency check without fingerprint

11. Former spouse: Data from interview(s) conducted X X
with spouse(s) divorced within the last 10 years

12. Neighborhoods: Interviews with neighbors and X X
verification of residence through records check

13. Public records: Verification of issues, such as X X
bankruptcy, divorce, and criminal and civil court cases

14. Subject interview: To collect relevant data, X X
resolve significant inconsistencies, or both

Source: DSS.

In the adjudicative stage, DISCO uses the information from the
investigative report to determine whether an individual is eligible for a
security clearance. If the report is determined to be a "clean" case-a
case that contains no potential security issue or minor issues-then DISCO
adjudicators determine eligibility for a clearance. However, if the case
is an "issue" case-a case containing issues that might disqualify an
individual for a clearance (e.g., foreign connections or drug-or
alcohol-related problems)-then the case is forwarded to DOHA adjudicators
for the clearance-eligibility decision. Regardless of which office
determines eligibility, DISCO issues the clearance-eligibility decision
and forwards this determination to the industrial contractor. All
adjudications are based on 13 federal adjudicative guidelines established
governmentwide in 1997 and implemented by DOD in 1998.

Recent legislation could affect DOD's security clearance process. The
National Defense Authorization Act for Fiscal Year 2004 authorized the
transfer of DOD's personnel security investigative functions and more than
1,800 investigative employees to OPM.11 However, as of March 31, 2004,
this transfer had not taken place. The transfer can occur only after the
Secretary of Defense certifies to Congress that certain conditions can be
met and the Director of OPM concurs with the transfer.

  Long-standing Backlogs and Delays in Determining Security Clearance
  Eligibility for Industry Personnel Continue to Exist and Can Have Adverse
  Effects

DOD's security clearance backlog for industry personnel is sizeable, and
the average time needed to determine eligibility for a clearance increased
during the last 3 fiscal years to over 1 year. DSS has established
case-completion time frames for both its investigations and adjudications.
For investigations, the time frames range from 75 to 180 days, depending
on the investigative requirements.12 For DISCO adjudications, the time
frames are 3 days for initial clearances and 30 days for periodic
reinvestigations. DOHA's time frame is to maintain a steady workload of
adjudicating 2,150 cases per month within 30 days of receipt. Cases
exceeding these time frames are considered backlogged.

11 See Pub. L. No. 108-136, S: 906 (Nov. 24, 2003).

12 DSS's performance goal is to complete at least 75 percent of each type
of investigation within the specified time limits. However, monitoring of
the backlog requires a determination of whether each investigation was
completed within the time frame-not whether an aggregate performance goal
was met for a particular type of investigation.

o  	Sizeable backlog continues to exist-As of March 31, 2004, the security
clearance backlog for industry personnel was roughly 188,000 cases. This
estimate is the sum of four separate DSS-supplied estimates: over 61,000
reinvestigations that were overdue but had not been submitted, over
101,000 ongoing DSS investigations, over 19,000 cases awaiting
adjudication at DISCO, and more than 6,300 cases awaiting adjudication at
DOHA that had exceeded the case-completion time frames established for
conducting them. However, as of March 31, 2004, DOHA independently
reported that it had eliminated its adjudicative backlog.

Moreover, the size of the total DSS-estimated backlog for industry
personnel doubled during the 6-month period ending on March 31, 2004, as
the comparison in table 2 shows. This comparison does not include the
backlog of overdue reinvestigations that have not been submitted because
DSS was not able to estimate that backlog as of September 30, 2003.

  Table 2: Comparison of Backlog Sizes As of September 30, 2003, and March 31,
                                      2004

Estimated number of backlogged cases for industry personnel Increase in
backlog

                                                                Percentage of 
      Type of backlog      Sept. 30,    Mar. 31,    Number of        increase 
                             2003         2004        cases     
Investigative backlog       44,600      101,000       56,400 
    Adjudicative backlog       12,800       19,000        6,200 
          at DISCO                                              
    Adjudicative backlog        4,500        6,300        1,800 
          at DOHA                                               
           Total               61,900      126,300       64,400 

Sources: DSS and the Case Control Management System (data); GAO
(analysis).

Note: Although DSS provided the backlog estimates in table 2, DOHA
independently reported that, as of March 31, 2004, it had eliminated its
adjudicative backlog.

The industry backlogs for investigations and adjudications represent about
one-fifth of the DOD-wide backlog for investigations and adjudications as
of September 30, 2003 (the date of the most recent DOD-wide data). On that
date, the estimated size of the investigative backlog for industry
personnel amounted to roughly 44,600 cases, or 17 percent of the larger
DOD-wide backlog of approximately 270,000 cases, which included military
members, federal employees, and industry personnel. Similarly, the
estimated size of the adjudicative backlog for industry personnel totaled
roughly 17,300 cases, or 19 percent of the approximately 93,000 cases in
the DOD-wide adjudicative backlog on that date.

Furthermore, the size of the industrial personnel backlog may be
underestimated. In anticipation of the authorized transfer of the

investigative function from DSS to OPM, DSS had opened relatively few
cases between October 1, 2003, and March 31, 2004. More specifically, DSS
had not opened almost 69,200 new industry personnel requests received in
the first half of fiscal year 2004. Because these requests have not been
opened and investigations begun, they are not part of the 188,000 case
backlog identified above. An unknown number of these cases might have
already exceeded the set time frames for completing the investigation.

o  	Average time to determine clearance eligibility has increased-In the
3-year period from fiscal year 2001 through fiscal year 2003, the average
time that DOD took to determine clearance eligibility for industry
personnel increased from 319 days to 375 days, an increase of 18 percent.
(See table 3.) During fiscal year 2003, DOD took an average of more than 1
year from the time DSS received a personnel security questionnaire to the
time it issued an eligibility determination. From fiscal year 2001 through
fiscal year 2003, the number of days to determine clearance eligibility
for clean cases increased from 301 days to 332 days, whereas the time
increased for issue cases from 516 days to 615 days.

Table 3: Average Number of Days Needed to Determine Eligibility for a
Security Clearance for Industry Personnel, Fiscal Years 2001-3

Average number of days to determine eligibility for a security clearance
for industry personnel

     Fiscal year     All industry cases     Clean cases a       Issue cases b 
        2003                          375        332        
        2002                          343        316        
        2001                          319        301        

Sources: DISCO and the Case Control Management System.

Note: Although DSS's case management system can provide the total elapsed
time between opening a case and issuing the final security clearance
eligibility determination, it is not capable of generating separate time
estimates for the intermediate stages of the clearance process. Nor does
it have the capability to identify how much time DOHA needed to adjudicate
issue cases. Therefore, all of the time-based findings include the time
period beginning when personnel security questionnaires were entered into
the case management system and ending when DISCO notified the industrial
contractor of the DISCO or DOHA adjudicators' decisions to grant a
clearance.

aIncludes investigative time and DISCO review time.

bIncludes investigative time, DISCO and DOHA review time, and additional
time when some cases were sent back for additional investigation or were
appealed after a denial or revocation of a clearance.

o  	Backlogs and delays can have adverse effects-Delays in renewing
security clearances for industry personnel and others who are doing
classified work can lead to a heightened risk of national security
breaches.

In a 1999 report, the Joint Security Commission II pointed out that delays
in initiating reinvestigations create risks to national security because
the longer the individuals hold clearances, the more likely they are to be
working with critical information and systems.13 In addition, delays in
determining security clearance eligibility for industry personnel can
affect the timeliness, quality, and cost of contractor performance on
defense contracts. According to a 2003 Information Security Oversight
Office14 report, industrial contractor officials who were interviewed said
that delays in obtaining clearances cost industry millions of dollars per
year and affect personnel resources.15 The report also stated that delays
in the clearance process hampered industrial contractors' ability to
perform duties required by their contracts and increased the amount of
time needed to complete national-security-related contracts. Industrial
contractors told us about cases in which their company hired competent
applicants who already had the necessary security clearances, rather than
individuals who were more experienced or qualified but did not have a
clearance. Industry association representatives told us that defense
contractors might offer monetary incentives to attract new employees with
clearances-for example, a $15,000 to $20,000 signing bonus for individuals
with a valid security clearance, and a $10,000 bonus to current employees
who recruit a new employee with a clearance. In addition, defense
contractors may hire new employees and begin paying them, but not be able
to assign any work to them-sometimes for a year or more- until they obtain
a clearance. Contractors may also incur lost-opportunity costs if
prospective employees decide to work elsewhere rather than wait to get a
clearance.

13 See Joint Security Commission II, Report by the Joint Security
Commission II (Aug. 24, 1999), pp. 5-6.

14 Executive Order No. 12829, National Industrial Security Program, Jan.
6, 1993, requires the Director of the Information Security Oversight
Office to implement and monitor the National Industrial Security Program
and oversee agency, contractor, licensee, and grantee actions; review all
agency implementing regulations, internal rules or guidelines; and gives
the Director the authority to conduct periodic on-site reviews of the
implementation of the program by each program member that has access to
classified information or stores it. This office is part of the National
Archives and Records Administration.

15 See Information Security Oversight Office, The National Industrial
Security Program, Industry's Perspective: Making Progress, but Falling
Short of Potential (2003).

  Impediments Hinder Elimination of the Backlog and Reduction of Time Needed to
  Determine Eligibility for a Clearance

A number of impediments hinder DOD's efforts to eliminate the clearance
backlog for industry personnel and reduce the time needed to determine
eligibility for a clearance. Impediments include large investigative and
adjudicative workloads resulting from a large number of clearance requests
in recent years and an increase in the proportion of requests requiring
top secret clearances, inaccurate workload projections, and the imbalance
between workforces and workloads. The underutilization of reciprocity is
an impediment that industrial contractors cited as an obstacle to timely
eligibility determinations. Furthermore, DOD does not have a management
plan that could help it address many of these impediments in a
comprehensive and integrative manner.

o  	Large number of clearance requests-The large number of clearance
requests that DOD receives annually for industry personnel, military
members, and federal employees taxes a process that already is
experiencing backlogs and delays. In fiscal year 2003, DOD submitted over
775,000 requests for investigations to DSS and OPM, about one-fifth of
which (almost 143,000 requests) were for industry personnel. Table 4 shows
an increase in the number of DOD eligibility determinations for industry
personnel made during each of the last 3 years.16 DOD issued about 63,000
more eligibility determinations for industry personnel in fiscal year 2003
than it did 2 years earlier, an increase of 174 percent. During the same
period, the average number of days required to issue an eligibility
determination for industry personnel grew by 56 days, or about 18 percent.
In other words, the increase in the average wait time was small compared
to the increase in the number of cases.

Table 4: Number of Clearance-Eligibility Determinations for Industry Personnel,
Fiscal Years 2001-3 Number of clearance-eligibility determinations for industry
                                   personnel

     Fiscal year      All industry cases      Clean cases         Issue cases 
         2003                        99,652      87,172                12,480 
         2002                        86,226      78,836                 7,390 
         2001                        36,370      33,294                 3,076 

             Source: DISCO and the Case Control Management System.

16 The outcomes of the clearance requests are eligibility determinations,
but the determinations may be made in the year subsequent to the year when
the request was submitted.

o  	Increase in the proportion of requests for top secret clearances- From
fiscal year 1995 through fiscal year 2003, the proportion of all requests
requiring top secret clearances for industry personnel grew from 17 to 27
percent. According to OUSD (I), top secret clearances take eight times
more investigative effort to complete and three times more adjudicative
effort to review than do secret clearances. The increased demand for top
secret clearances also has budget implications for DOD. In fiscal year
2003, security investigations obtained through DSS cost $2,640 for an
initial investigation for a top secret clearance, $1,591 for a
reinvestigation of a top secret clearance, and $328 for an initial
investigation for a secret clearance. Thus, over a 10-year period, DOD
would spend $4,231 (in current-year dollars) to investigate and
reinvestigate an industry employee for a top secret clearance, a cost 13
times higher than the $328 it would require to investigate an individual
for a secret clearance.

o  	Inaccurate workload projections-Although DSS has made efforts to
improve its projections of industry personnel security clearance
requirements, problems remain. For example, inaccurate forecasts for both
the number and type of security clearances needed for industry personnel
make it difficult for DOD to plan ahead to size its investigative and
adjudicative workforce to handle the workload and fund its security
clearance program. For fiscal year 2003, DSS reported that the actual cost
of industry personnel investigations was almost 25 percent higher than had
been projected. DOD officials believed that these projections were
inaccurate primarily because DSS received a larger proportion of requests
for initial top secret investigations and reinvestigations. Further
inaccuracies in projections may result when DOD fully implements a new
automated adjudication tracking system, which will identify overdue
reinvestigations that have not been submitted DOD-wide.

o  	Imbalance between workforces and workloads-Insufficient investigative
and adjudicative workforces, given the current and projected workloads,
are additional barriers to eliminating the backlog and reducing security
clearance processing times for industry personnel. DOD partially concurred
with our February 2004 recommendation to identify and implement steps to
match the sizes of the investigative and adjudicative workforces to the
clearance request workload. According to an OPM official, DOD and OPM
together need roughly 8,000 full-time-equivalent investigative staff to
eliminate the security clearance backlogs and deliver

timely investigations to their customers.17 In our February 2004 report,
we estimated that DOD and OPM have around 4,200 full-time-equivalent
investigative staff who are either federal employees or contract
investigators.18

In December 2003, advisors to the OPM Director expressed concerns about
financial risks associated with the transfer of DSS's investigative
functions and 1,855 investigative staff authorized in the National Defense
Authorization Act for Fiscal Year 2004. The advisors therefore recommended
that the transfer not occur, at least during fiscal year 2004. On February
6, 2004, DSS and OPM signed an interagency agreement that leaves the
investigative functions and DSS personnel in DOD and provides DSS
personnel with training on OPM's case management system and investigative
procedures as well as access to that system. According to our
calculations, if all 1,855 DSS investigative employees complete the 1-week
training program as planned, the loss in productively will be equivalent
to 35 person-years of investigator time. Also, other short-term decreases
in productivity will result while DSS's investigative employees become
accustomed to using OPM's system and procedures.

Likewise, an adjudicative backlog of industry personnel cases developed
because DISCO and DOHA did not have an adequate number of adjudicative
personnel on hand. DISCO and DOHA have, however, taken steps to augment
their adjudicative staff. DISCO was recently given the authority to hire
30 adjudicators to supplement its staff of 62 nonsupervisory adjudicators.
Similarly, DOHA has supplemented its 23 permanent adjudicators with 46
temporary adjudicators and, more recently, has requested that it be able
to hire an appropriate number of additional permanent adjudicators.

o  	Reciprocity of access underutilized-While the reciprocity of security
clearances within DOD has not been a problem for industry personnel,
reciprocity of access to certain types of information and programs within
the federal government has not been fully utilized, thereby preventing
some industry personnel from working and increasing the workload on

17 OPM has estimated that DOD and OPM account for 80 percent of the
investigations conducted for the federal government.

18 See GAO-04-344.

already overburdened investigative and adjudicative staff.19 According to
DOD and industry officials, a 2003 Information Security Oversight Office
report on the National Industrial Security Program,20 and our analysis,
reciprocity of clearances appears to be working throughout most of DOD.
However, the same cannot be said for access to sensitive compartmented
information and special access programs21 within DOD or transferring
clearances and access from DOD to some other agencies. Similarly, a recent
report by the Defense Personnel Security Research Center concluded that
aspects of reciprocity for industrial contractors appear not to work well
and that the lack of reciprocity between special access programs was a
particular problem for industry personnel, who often work on many of these
programs simultaneously.22

Industry association officials told us that reciprocity of access to
certain types of information and programs, especially the lack of full
reciprocity in the intelligence community, is becoming more common and one
of the top concerns of their members. One association provided us with
several examples of access problems that industry personnel with
DOD-issued security clearances face when working with intelligence
agencies. For example, the association cited different processes and
standards used by intelligence agencies, such as guidelines for (1) the
type of investigations and required time frames, (2) the type of polygraph
tests, and (3) not accepting adjudication decisions made by other
agencies.

19 Reciprocity, which is required by Executive Order No. 12968, is a
policy that requires background investigations and eligibility
determinations conducted under the order be mutually and reciprocally
accepted by all agencies, except when an agency has substantial
information indicating that an employee may not satisfy the standards
under this order. Reciprocity also involves the ability to transfer (1) an
individual's existing, valid security clearance and (2) access from one
department, agency, or military service to another or from the federal
government to the private sector (and vice versa) when the individual
changes jobs without having to grant another clearance or access.

20 See Information Security Oversight Office, The National Industrial
Security Program, Industry's Perspective: Making Progress, but Falling
Short of Potential (2003).

21 Sensitive compartmented information is classified intelligence
information derived from intelligence sources, methods, or analytical
processes, which is handled by systems established by the Director of
Central Intelligence. A special access program is a sensitive program that
imposes need-to-know and access controls beyond those normally provided
for access to confidential, secret, or top secret information.

22 See Defense Personnel Security Research Center, Reciprocity: A Progress
Report, PERSEREC Technical Report 04-2 (Monterey, Calif.: Apr. 1, 2004).

In addition to the reciprocity concerns relating to access to sensitive
compartmented information and special access programs, industry officials
identified additional reciprocity concerns. First, DSS and contractor
association officials told us that some personnel with an interim
clearance could not start work because an interim clearance does not
provide access to specific types of national security information, such as
sensitive compartmented information, special access programs, North
Atlantic Treaty Organization data, and restricted data. 23 Second,
intelligence agencies do not always accept clearance reinstatements and
conversions (e.g., a security clearance may be reactivated depending on
the recency of the investigation and the length of time since the
clearance was terminated). Third, the Smith Amendment-with exceptions-
prohibits an individual with a clearance from being eligible for a
subsequent DOD clearance if certain prohibitions (e.g., unlawful user of a
controlled substance) are applicable.24

o  	Lack of overall management plan-Finally, DOD has numerous plans to
address pieces of the backlog problem but does not have an overall
management plan to eliminate permanently the current investigative and
adjudicative backlogs, reduce the delays in determining clearance
eligibility for industry personnel, and overcome the impediments that
could allow such problems to recur. These plans do not address process
wide objectives and outcome-related goals with performance measures,
milestones, priorities, budgets, personnel resources, costs, and potential
obstacles and options for overcoming the obstacles.

23 Under the Atomic Energy Act of 1954 (as amended), the term "restricted
data" means all data (information) concerning the (1) design, manufacture,
or utilization of atomic weapons, (2) the production of special nuclear
material, or (3) the use of special nuclear material in the production of
energy, but shall not include data declassified or removed from the
restricted data category pursuant to S: 142 of the Act. Pub. L. No. 83-703
S: 11 (Aug. 30, 1954), codified at 42 U.S.C. S: 2014.

24 See Floyd D. Spence National Defense Authorization Act for Fiscal Year
2001, Pub. L. No. 106-398, S: 1071 (Oct. 30, 2000) (codified at 10 U.S.C.
S: 986).

  DOD Is Considering Several Initiatives to Decrease the Backlog and Time Period
  Needed to Obtain Eligibility for a Clearance

DOD and industry association officials have suggested several initiatives
to reduce the backlog and delays in issuing eligibility for a security
clearance. They indicated that these steps could supplement actions that
DOD has implemented in recent years or has agreed to implement as a result
of our recommendations or those of others. Even if positive effects would
result from these initiatives, other obstacles, such as the need to change
investigative standards, coordinate these policy changes with other
agencies, and ensure reciprocity, could prevent their implementation or
limit their use. Today, I will discuss three of the suggested initiatives.
Our final report to you will provide a more complete evaluation of these
and other initiatives.

o  	Conducting a phased periodic reinvestigation-A phased approach to
periodic reinvestigations for top secret clearances involves conducting a
reinvestigation in two phases; the second phase would be conducted only if
potential security issues were identified in the initial phase. Phase 1
information is obtained through a review of the personnel security
questionnaire, subject and former spouse interviews, credit checks, a
national agency check on the subject and former spouse or current
cohabitant, local agency checks, records checks, and interviews with
workplace personnel. If one or more issues are found in phase 1, then
phase 2 would include all of the other types of information gathered in
the current periodic reinvestigation for a top secret investigation.
Recent research has shown that periodic reinvestigations for top secret
clearances conducted in two phases can save at least 20 percent of the
normal effort with almost no loss in identifying critical issues for
adjudication.25 According to DSS, this initiative is designed to use the
limited investigative resources in the most productive manner and reduce
clearance-processing time by eliminating the routine use of low-yield
information sources on many investigations and concentrating
information-gathering efforts on high-yield sources. While analyses have
not been conducted to evaluate how the implementation of phasing would
affect the investigative backlog, the implementation of phasing could be a
factor in reducing the backlog by decreasing some of the hours of
fieldwork required in some reinvestigations. Even if additional testing
confirms promising earlier findings that the procedure very rarely fails
to identify critical issues, several obstacles, such as noncompliance with
existing governmentwide investigative standards and reciprocity

25 See Defense Personnel Security Research Center, A New Approach to the
SSBI-PR: Assessment of a Phased Reinvestigation, PERSEREC Technical Report
01-6 (Monterey, Calif.: Oct. 29, 2001) and Implementation of the Phased
SSBI-PR at DSS: An Evaluation with Recommendations, PERSEREC Technical
Report 04-X (Monterey, Calif.: in press).

problems, could prevent the implementation or limit the use of this
initiative.

o  	Establishing a single adjudicative facility for industry-Under this
initiative, DOD would consolidate DOHA's adjudicative function with that
of DISCO's to create a single adjudicative facility for all industry
personnel cases. At the same time, DOHA would retain its hearings and
appeals function. According to OUSD (I) officials, this consolidation
would streamline the adjudicative process for industry personnel and make
it more coherent and uniform. A single adjudicative facility would serve
as the clearinghouse for all industrial contractor-related issues. As part
of a larger review of DOD's security clearance processes, DOD's Senior
Executive Council is considering this consolidation. An OUSD (I) official
told us that the consolidation would provide greater flexibility in using
adjudicators to meet changes in the workload and could eliminate some of
the time required to transfer cases from DISCO and to DOHA. If the
consolidation occurred, DISCO officials said that their operations would
not change much, except for adding adjudicators. On the other hand, DOHA
officials said that the current division between DISCO and DOHA of
adjudicating clean versus issue cases works very well and that combining
the adjudicative function for industry into one facility could negatively
affect DOHA's ability to prepare denials and revocations of industry
personnel clearances during appeals. They told us that the consolidation
would have very little impact on the timeliness and quality of
adjudications.

o  	Evaluation of the investigative standards and adjudicative
guidelines-This initiative would involve an evaluation of the
investigative standards used by personnel security clearance investigators
to help identify requirements that do not provide significant information
relevant for adjudicative decisions. By eliminating the need to perform
certain tasks associated with these requirements, investigative resources
could be used more efficiently. For example, DSS officials told us that
less than one-half of one percent of the potential security issues
identified during an investigation are derived from neighborhood checks;
however, this information source accounts for about 14 percent of the
investigative time. The modification of existing investigative standards
would involve using risk management principles based on a thorough
evaluation of the potential loss of information. Like a phased periodic
reinvestigation, this initiative would require changes in the
governmentwide investigative

standards. In addition, the evaluation and any suggested changes would
need to be coordinated within DOD, intelligence agencies, and others.

Mr. Chairman, this concludes my prepared statement. I will be happy to
respond to any questions you or other Members of the committee may have at
this time.

Appendix I: GAO Contacts and Staff Acknowledgments

GAO Contacts 	Gregory C. Wilshusen, (202) 512-6244
Jack E. Edwards, (202) 512-8246

Acknowledgments 	Individuals making key contributions to this statement
include Mark A. Pross, James F. Reid, William J. Rigazio, and Nancy L.
Benco.

Related GAO Products

Industrial Security: DOD Cannot Provide Adequate Assurances That Its
Oversight Ensures the Protection of Classified Information. GAO-04-332.
Washington, D.C.: March 3, 2004.

DOD Personnel Clearances: DOD Needs to Overcome Impediments to Eliminating
Backlog and Determining Its Size. GAO-04-344. Washington, D.C.: February
9, 2004.

DOD Personnel: More Consistency Needed in Determining Eligibility for Top
Secret Security Clearances. GAO-01-465. Washington, D.C.: April 18, 2001.

DOD Personnel: More Accurate Estimate of Overdue Security Clearance
Reinvestigation Is Needed. GAO/T-NSIAD-00-246. Washington, D.C.: September
20, 2000.

DOD Personnel: More Actions Needed to Address Backlog of Security
Clearance Reinvestigations. GAO/NSIAD-00-215. Washington, D.C.: August 24,
2000.

DOD Personnel: Weaknesses in Security Investigation Program Are Being
Addressed. GAO/T-NSIAD-00-148. Washington, D.C.: April 6, 2000.

DOD Personnel: Inadequate Personnel Security Investigations Pose National
Security Risks. GAO/T-NSIAD-00-65. Washington, D.C.: February 16, 2000.

DOD Personnel: Inadequate Personnel Security Investigations Pose National
Security Risks. GAO/NSIAD-00-12. Washington, D.C.: October 27, 1999.

Background Investigations: Program Deficiencies May Lead DEA to Relinquish
Its Authority to OPM. GAO/GGD-99-173. Washington, D.C.: September 7, 1999.

Military Recruiting: New Initiatives Could Improve Criminal History
Screening. GAO/NSIAD-99-53. Washington, D.C.: February 23, 1999.

Executive Office of the President: Procedures for Acquiring Access to and
Safeguarding Intelligence Information. GAO/NSIAD-98-245. Washington, D.C.:
September 30, 1998.

Privatization of OPM's Investigations Service. GAO/GGD-96-97R. Washington,
D.C.: August 22, 1996.

Cost Analysis: Privatizing OPM Investigations. GAO/GGD-96-121R.
Washington, D.C.: July 5, 1996.

Personnel Security: Pass and Security Clearance Data for the Executive
Office of the President. GAO/NSIAD-96-20. Washington, D.C.: October 19,
1995.

Privatizing OPM Investigations: Perspectives on OPM's Role in Background
Investigations. GAO/T-GGD-95-185. Washington, D.C.: June 14, 1995.

Background Investigations: Impediments to Consolidating Investigations and
Adjudicative Functions. GAO/NSIAD-95-101. Washington, D.C.: March 24,
1995.

Security Clearances: Consideration of Sexual Orientation in the Clearance
Process. GAO/NSIAD-95-21. Washington, D.C.: March 24, 1995.

Personnel Security Investigations. GAO/NSIAD-94-135R. Washington, D.C.:
March 4, 1994.

Nuclear Security: DOE's Progress on Reducing Its Security Clearance Work
Load. GAO/RCED-93-183. Washington, D.C.: August 12, 1993.

Personnel Security: Efforts by DOD and DOE to Eliminate Duplicative
Background Investigations. GAO/RCED-93-23. Washington, D.C.: May 10, 1993.

DOD Special Access Programs: Administrative Due Process Not Provided When
Access Is Denied or Revoked. GAO/NSIAD-93-162. Washington, D.C.: May 5,
1993.

Administrative Due Process: Denials and Revocations of Security Clearances
and Access to Special Programs. GAO/T-NSIAD-93-14. Washington, D.C.: May
5, 1993.

Security Clearances: Due Process for Denials and Revocations by Defense,
Energy, and State. GAO/NSIAD-92-99. Washington, D.C.: May 6, 1992.

Due Process: Procedures for Unfavorable Suitability and Security Clearance
Actions. GAO/NSIAD-90-97FS. Washington, D.C.: April 23, 1990.

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