DOD Personnel Clearances: Funding Challenges and Other		 
Impediments Slow Clearances for Industry Personnel (17-MAY-06,	 
GAO-06-747T).							 
                                                                 
The Department of Defense (DOD) is responsible for about 2	 
million active personnel security clearances. About one-third of 
the clearances are for industry personnel working on contracts	 
for DOD and more than 20 other executive agencies. Delays in	 
determining eligibility for a clearance can heighten the risk	 
that classified information will be disclosed to unauthorized	 
sources and increase contract costs and problems attracting and  
retaining qualified personnel. On April 28, 2006, DOD announced  
it had stopped processing security clearance applications for	 
industry personnel because of an overwhelming volume of requests 
and funding constraints. GAO has reported problems with DOD's	 
security clearance processes since 1981. In January 2005, GAO	 
designated DOD's program a high-risk area because of longstanding
delays in completing clearance requests and an inability to	 
accurately estimate and eliminate its clearance backlog. For this
statement GAO addresses: (1) key points in the billing dispute	 
between DOD and OPM and (2) some of the major impediments	 
affecting clearances for industry personnel.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-747T					        
    ACCNO:   A54139						        
  TITLE:     DOD Personnel Clearances: Funding Challenges and Other   
Impediments Slow Clearances for Industry Personnel		 
     DATE:   05/17/2006 
  SUBJECT:   Eligibility determinations 			 
	     Interagency relations				 
	     Security clearances				 
	     Internal controls					 
	     Personnel security clearance programs		 
	     Personnel security policies			 
	     Timeliness 					 

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GAO-06-747T

     

     * Background
     * Summary
     * Unexpected Volume of Clearance Requests and Funding Constrai
     * If Not Effectively Addressed, Impediments Could Continue to
          * An Existing and a Potential New Impediment Could Lead to Con
          * Increased Demand for High-level Clearances and the Lack of R
     * Concluding Observations
     * Staff Contact and Acknowledgments
     * Related GAO Products
          * Order by Mail or Phone

Statement for the Record to the Committee on Government Reform, House of
Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 1:00 p.m. EDT

Wednesday, May 17, 2006

DOD PERSONNEL CLEARANCES

Funding Challenges and Other Impediments Slow Clearances for Industry
Personnel

Statement for the Record by Derek B. Stewart, Director Defense
Capabilities and Management

GAO-06-747T

Chairman Davis and Members of the Committee:

Thank you for the opportunity to provide this statement for your hearing
on the challenges facing the Department of Defense (DOD) and the Office of
Personnel Management (OPM) in processing requests for personnel security
clearances in a timely manner. Two years ago, we testified before this
committee on similar challenges.1 Before providing our observations about
the challenges, I would like to provide some background to (1) give a
general context for understanding clearances and describe the importance
of industry personnel to our national security, (2) discuss how clearance
problems can negatively affect national security, and (3) provide
information about several recent events affecting the overall status of
DOD's personnel security clearance program.

                                   Background

As you know, Mr. Chairman, for over two decades, we have reported on
problems with DOD's personnel security clearance program as well as the
financial costs and risks to national security resulting from these
problems (see Related GAO Reports at the end of this statement). For
example, at the turn of the century, we documented problems such as
incomplete investigations, inconsistency in determining eligibility for
clearances, and a backlog of overdue clearance reinvestigations that
exceeded 500,000 cases.2 More recently in 2004, we identified continuing
and new impediments hampering DOD's clearance program and made
recommendations for increasing the effectiveness and efficiency of the
program.3 Also in 2004, we testified before this committee on
clearance-related problems faced by industry personnel.4

1 GAO, DOD Personnel Clearances: Preliminary Observations Related to
Backlogs and Delays in Determining Security Clearance Eligibility for
Industry Personnel, GAO-04-202T (Washington, D.C.: May 6, 2004).

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

A critical step in the federal government's efforts to protect national
security is to determine whether an individual is eligible for a personnel
security clearance. Specifically, an individual whose job requires access
to classified information must undergo a background investigation and
adjudication (determination of eligibility) in order to obtain a
clearance. As with federal government workers, the demand for personnel
security clearances for industry personnel has increased during recent
years. Additional awareness of threats to our national security since
September 11, 2001, and efforts to privatize federal jobs during the last
decade are but two of the reasons for the greater number of industry
personnel needing clearances today. As of September 30, 2003, industry
personnel held about one-third of the approximately 2 million DOD-issued
clearances. DOD's Office of the Under Secretary of Defense for
Intelligence has overall responsibility for DOD clearances, and its
responsibilities also extend beyond DOD. Specifically, that office's
responsibilities include obtaining background investigations and
adjudicating clearance eligibility for industry personnel in more than 20
other federal agencies,5 as well as the clearances of staff in the federal
government's legislative branch.

3 GAO, DOD Personnel Clearances: Additional Steps Can Be Taken to Reduce
Backlogs and Delays in Determining Security Clearance Eligibility for
Industry Personnel, GAO-04-632 (Washington, D.C.: May 26, 2004); and GAO,
DOD Personnel Clearances: DOD Needs to Overcome Impediments to Eliminating
Backlog and Determining Its Size, GAO-04-344 (Washington, D.C.: Feb. 9,
2004).

4 GAO-04-202T .

Problems in the clearance program can negatively affect national security.
For example, delays reviewing security clearances for personnel who are
already doing classified work can lead to a heightened risk of disclosure
of classified information. In contrast, delays in providing initial
security clearances for previously noncleared personnel can result in
other negative consequences, such as additional costs and delays in
completing national security-related contracts, lost-opportunity costs,
and problems retaining the best qualified personnel.

Longstanding delays in completing hundreds of thousands of clearance
requests for servicemembers, federal employees, and industry personnel as
well as numerous impediments that hinder DOD's ability to accurately
estimate and eliminate its clearance backlog led us to declare the program
a high-risk area in January 2005. The 25 areas on our high-risk list at
that time received their designation because they are major programs and
operations that need urgent attention and transformation in order to
ensure that our national government functions in the most economical,
efficient, and effective manner possible.6

5 We identified 22 other agencies in GAO-04-632 . Exec. Order No. 10865,
Safeguarding Classified Information Within Industry, February 20, 1960,
which was amended by Exec. Order No. 12829, National Industrial Security
Program, January 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. The
agencies that have entered into agreements with DOD for security services
under the National Industrial Security Program are the (1) National
Aeronautics and Space Administration, (2) Department of Commerce, (3)
General Services Administration, (4) Department of State, (5) Small
Business Administration, (6) National Science Foundation, (7) Department
of the Treasury, (8) Department of Transportation, (9) Department of the
Interior, (10) Department of Agriculture, (11) Department of Labor, (12)
Environmental Protection Agency, (13) Department of Justice, (14) Federal
Reserve System, (15) U.S. Government Accountability Office (formerly U.S.
General Accounting Office), (16) U.S. Trade Representative, (17) U.S.
International Trade Commission, (18) U.S. Agency for International
Development, (19) Nuclear Regulatory Commission, (20) Department of Health
and Human Services, (21) Department of Homeland Security, and (22)
Department of Education. The Department of Energy and the Central
Intelligence Agency are signatories of the National Industrial Security
Program Operating Manual and thus have reciprocity with DOD under
provisions of the manual. Three federal agencies (the Department of
Energy, the Central Intelligence Agency, and the Nuclear Regulatory
Commission) also may grant security clearances to industry personnel who
work on national security-related programs.

6 GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January
2005).

Shortly after we placed DOD's clearance program on our high-risk list, a
major change in DOD's program occurred. In February 2005, DOD transferred
its personnel security investigations functions and about 1,800
investigative positions to OPM. Now DOD obtains nearly all of its
clearance investigations from OPM7, which is currently responsible for 90
percent of the personnel security clearance investigations in the federal
government.8 DOD retained responsibility for adjudication of military
personnel, DOD civilians, and industry personnel.

Other recent significant events affecting DOD's clearance program have
been the passage of the Intelligence Reform and Terrorism Prevention Act
of 2004 and the issuance of the June 2005 Executive Order No. 13381,
Strengthening Processes Relating to Determining Eligibility for Access to
Classified National Security Information. The act included milestones for
reducing the time to complete clearances, general specifications for a
database on security clearances, and requirements for greater reciprocity
of clearances (the acceptance of a clearance and access granted by another
department, agency, or military service). Among other things, the
executive order resulted in the Office of Management and Budget (OMB)
taking a lead role in preparing a strategic plan to improve personnel
security clearance processes governmentwide.

Using this context for understanding the interplay between DOD and OPM in
DOD's personnel security clearance processes, my statement addresses two
objectives in this statement: (1) key points of a billing dispute between
DOD and OPM and (2) some of the major impediments affecting clearances for
industry personnel.

7 Currently, the National Security Agency, Defense Intelligence Agency,
and National Reconnaissance Office each have a waiver that allows them to
contract for their own personnel security clearance investigations.

8 In GAO, DOD Personnel Clearances: Some Progress Has Been Made but
Hurdles Remain to Overcome the Challenges That Led to GAO's High-Risk
Designation, GAO-05-842T (Washington, D.C.: June 28, 2005), we listed the
departments/agencies having statutory or delegated authority to conduct
background investigations, as identified by the then Deputy Associate
Director of OPM's Center for Investigations Services. Those
departments/agencies are the Central Intelligence Agency; Department of
State; Department of the Treasury; Internal Revenue Service; Bureau of
Engraving and Printing; Federal Bureau of Investigation; National Security
Agency; U.S. Agency for International Development; Department of Homeland
Security; Bureau of Customs and Border Protection; U.S. Secret Service;
Small Business Administration; Broadcasting Board of Governors; Department
of Justice-Bureau of Alcohol, Tobacco, Firearms, and Explosives; U.S.
Postal Service; Tennessee Valley Authority; National Reconnaissance
Office; and Peace Corps. Even though these agencies have authority to
conduct their own investigations, some of them request that OPM conduct
all or part of their investigations.

As requested by this committee, we have an ongoing examination of the
timeliness and completeness of the processes used to determine the
eligibility of industry personnel to receive top secret clearances. We
expect to present the results of this work in the fall. My statement
today, however, is based primarily on our completed work and our
institutional knowledge from our prior reviews of the steps in the
clearance processes used by DOD and, to a lesser extent, other agencies.
In addition, we used information from the Intelligence Reform and
Terrorism Prevention Act of 2004; executive orders; and other documents,
such as a memorandum of agreement between DOD and OPM. We conducted our
work in accordance with generally accepted government auditing standards
in May 2006.

                                    Summary

The additional costs DOD has incurred for its investigations are
contributing to further delays in the processing of new security
clearances for industry personnel. Despite an already sizable backlog of
security clearance applications, DOD stopped processing applications for
industry personnel on April 28, 2006. DOD attributed the stoppage to a
large volume of industry clearance requests and funding constraints. The
funding constraints may be the result of a broader billing dispute that
has been taking place between DOD and OPM. As part of the agreement that
transferred DOD's clearance investigations function to OPM, OPM may charge
DOD for annual price adjustments plus a 25 percent premium, in addition to
the rates it normally charges other federal agencies for investigations.
DOD disputes the continued need for the premium and has asked OMB to
mediate; however, information from the two agencies indicates that OMB has
directed DOD and OPM to continue to work together to resolve the matter.
The inspectors general for both DOD and OPM are investigating the billing
dispute and are expected to report on the results of their investigations
this summer.

Some impediments, if not effectively addressed, can hinder the timely
determination of clearance eligibility for servicemembers, civilian
government employees, and industry personnel; whereas other impediments
mainly affect industry personnel. One impediment that could affect all
three employee groups is DOD's longstanding inability to accurately
estimate its future clearance requests. In fiscal years 2001 through 2003,
the department incorrectly estimated the number of requests by 90,000 to
150,000 cases per year. This impediment makes it difficult to determine
clearance-related budgets and staffing requirements. Another impediment
for all three employee groups pertains to the July 1, 2006, expiration of
Executive Order 13381, which delegated responsibility for improving the
clearance process to OMB. We have been encouraged by OMB's high level of
commitment during the development of a plan to improve clearance processes
governmentwide. Because there has been no indication that the executive
order will be extended, we are concerned about whether such progress will
continue. In contrast, greater demand for top secret clearances for
industry personnel and the lack of reciprocity would primarily affect
industry personnel. Between fiscal years 1995 and 2003, the proportion of
security clearance requests for industry personnel who required top secret
investigations and adjudications increased from 17 to 27 percent of the
workload. A rise in the demand for top secret clearances has negative side
effects that include the need to renew clearances more often (than secret
or confidential clearances), requirements for more information about
applicants, and much higher costs. A second impediment that might affect
industry personnel more than other employee groups is the absence of
reciprocity. In addition to slowing how quickly contractors can use newly
hired employees, this impediment increases the workload for already
overburdened investigative and adjudicative staff. Reciprocity problems
have occurred despite the issuance of governmentwide investigative
standards and adjudicative guidelines in 1997.

 Unexpected Volume of Clearance Requests and Funding Constraints Delay Security
                   Clearances for Industry Personnel Further

DOD stopped processing applications for clearance investigations for
industry personnel on April 28, 2006, despite an already sizeable backlog.
DOD attributed its actions to an overwhelming volume of requests for
industry personnel security investigations and funding constraints. We
will address the issue of workload projections later when we discuss
impediments that affect industry personnel as well as servicemembers and
federal employees, but first we would like to talk about the issue of
funding.

An important consideration in understanding the funding constraints that
contributed to the stoppage is a DOD-OPM billing dispute, which has
resulted in the Under Secretary of Defense for Intelligence requesting OMB
mediation. The dispute stems from the February 2005 transfer of DOD's
personnel security investigations function to OPM.

The memorandum of agreement signed by the OPM Director and the DOD Deputy
Secretary prior to the transfer lists many types of costs that DOD may
incur for up to 3 years after the transfer of the investigations function
to OPM. One cost, an adjustment to the rates charged to agencies for
clearance investigations, provides that "OPM may charge DOD for
investigations at DOD's current rates plus annual price adjustments plus a
25 percent premium to offset potential operating losses. OPM will be able
to adjust, at any point of time during the first three year period after
the start of transfer, the premium as necessary to cover estimated future
costs or operating losses, if any, or offset gains, if any."

The Under Secretary's memorandum says that OPM has collected approximately
$50 million in premiums in addition to approximately $144 million for
other costs associated with the transfer. The OPM Associate Director
subsequently listed costs that OPM has incurred. To help resolve this
billing matter, DOD requested mediation from OMB, in accordance with the
memorandum of agreement between DOD and OPM. Information from the two
agencies indicates that in response to DOD's request, OMB has directed
them to continue to work together to resolve the matter. The DOD and OPM
offices of inspector general are currently investigating all of the issues
raised in the Under Secretary's and Associate Director's correspondences
and have indicated that they intend to issue reports on their reviews this
summer.

 If Not Effectively Addressed, Impediments Could Continue to Hinder Efforts to
                           Provide Timely Clearances

Some impediments, if not effectively addressed, could hinder the timely
determination of clearance eligibility for servicemembers, civilian
government employees, and industry personnel; whereas other impediments
would mainly affect industry personnel. The inability to accurately
estimate the number of future clearance requests and the expiration of the
previously mentioned executive order that resulted in high-level
involvement by OMB could adversely affect the timeliness of eligibility
determinations for all types of employee groups. In contrast, an increased
demand for top secret clearances for industry personnel and the lack of
reciprocity would primarily affect industry personnel.

An Existing and a Potential New Impediment Could Lead to Continuing Problems for
All Types of Employees Seeking Clearances

A major impediment to providing timely clearances is the inaccurate
projections of the number of requests for security clearances DOD-wide and
for industry personnel specifically. As we noted in our May 2004 testimony
before this committee, DOD's longstanding inability to accurately project
its security clearance workload makes it difficult to determine
clearance-related budgets and staffing requirements. In fiscal year 2001,
DOD received 18 percent (about 150,000) fewer requests than it expected,
and in fiscal years 2002 and 2003, it received 19 and 13 percent (about
135,000 and 90,000) more requests than projected, respectively. In 2005,
DOD was again uncertain about the number and level of clearances that it
required, but the department reported plans and efforts to identify
clearance requirements for servicemembers, civilian employees, and
contractors. For example, in response to our May 2004 recommendation to
improve the projection of clearance requests for industry personnel, DOD
indicated that it was developing a plan and computer software that would
enable the government's contracting officers to (1) authorize a certain
number of industry personnel clearance investigations for any given
contract, depending on the number of clearances required to perform the
classified work on that contract, and (2) link the clearance
investigations to the contract number.

Another potential impediment that could slow improvements in personnel
security clearance processes in DOD-as well as governmentwide-is the July
1, 2006, expiration of Executive Order No. 13381. Among other things, this
executive order delegated responsibility for improving the clearance
process to the Director of OMB for about 1 year. We have been encouraged
by the high level of commitment that OMB has demonstrated in the
development of a governmentwide plan to address clearance-related
problems. Also, the OMB Deputy Director met with GAO officials to discuss
OMB's general strategy for addressing the problems that led to our
high-risk designation for DOD's clearance program. Demonstrating strong
management commitment and top leadership support to address a known risk
is one of the requirements for removing DOD's clearance program from GAO's
high-risk list. Because there has been no indication that the executive
order will be extended, we are concerned about whether such progress will
continue without OMB's high-level management involvement. While OPM has
provided some leadership in assisting OMB with the development of the
governmentwide plan, OPM may not be in a position to assume additional
high-level commitment for a variety of reasons. These reasons include (1)
the governmentwide plan lists many management challenges facing OPM and
the Associate Director of its investigations unit, such as establishing a
presence to conduct overseas investigations and adjusting its
investigative workforce to the increasing demand for clearances; (2)
adjudication of personnel security clearances and determination of which
organizational positions require such clearances are outside the current
emphases for OPM; and (3) agencies' disputes with OPM-such as the current
one regarding billing-may require a high-level third party to mediate a
resolution that is perceived to be impartial.

Increased Demand for High-level Clearances and the Lack of Reciprocity Are
Previously Identified Problems for Industry Personnel

As we have previously identified, an increase in the demand for top secret
clearances could have workload and budgetary implications for DOD and OPM
if such requests continue to occur. In our 2004 report, we noted that the
proportion of requests for top secret clearances for industry personnel
increased from 17 to 27 percent from fiscal years 1995 through 2003. This
increase has workload implications because top secret clearances (1) must
be renewed every 5 years, compared to every 10 years for secret
clearances, and (2) require more information about the applicant than
secret clearances do. Our 2004 analyses further showed that the 10-year
cost to the government was 13 times higher for a person with a top secret
clearance ($4,231) relative to a person with a secret clearance ($328).
Thus, if clearance requirements for organizational positions are set
higher than needed, the government's capacity to decrease the clearance
backlog is reduced while the cost of the clearance program is increased.

When the reciprocity of clearances or access is not fully utilized,
industry personnel are prevented from working. In addition to having a
negative effect on the employee and the employer, the lack of reciprocity
has adverse effects for the government, including an increased workload
for the already overburdened staff who investigate and adjudicate security
clearances. Problems with reciprocity of clearances or access,
particularly for industry personnel, have continued to occur despite the
establishment in 1997 of governmentwide investigative standards and
adjudicative guidelines.9 The Reciprocity Working Group, which helped to
prepare information for the governmentwide plan to improve the security
clearance process, noted that "a lack of reciprocity often arises due to
reluctance of the gaining activity to inherit accountability for what may
be an unacceptable risk due to poor quality investigations and/or
adjudications." Congress enacted reciprocity requirements in the
Intelligence Reform and Terrorism Prevention Act of December 2004,10 and
OMB promulgated criteria in December 2005 for federal agencies to follow
in determining whether to accept security clearances from other government
agencies. Because of how recently these changes were made, their impact is
unknown.

9 Reciprocity, as 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, expect 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.

10 Pub. L. No. 108-548, S: 3001 (d), Reciprocity of Security Clearance and
Access Determinations.

                            Concluding Observations

We will continue to assess and monitor DOD's personnel security clearance
program at your request. We are conducting work on the timeliness and
completeness of investigations and adjudications for top secret clearances
for industry personnel and we will report that information to this
committee this fall. Also, our standard steps of monitoring programs on
our high-risk list require that we evaluate the progress that agencies
make toward being removed from the list.11 Lastly, we monitor our
recommendations to agencies to determine whether steps are being taken to
overcome program deficiencies.

                       Staff Contact and Acknowledgments

For further information regarding this testimony, please contact me at
(202)512-5559 or [email protected]. Individuals making key contributions to
this testimony include Jack E. Edwards, Assistant Director; Jerome Brown;
Kurt A. Burgeson; Susan C. Ditto; David Epstein; Sara Hackley; James
Klein; and Kenneth E. Patton.

11 The general steps required to remove DOD's personal security clearance
program from the high-risk list are summarized in GAO, DOD Personnel
Clearances: Government Plan Addresses Some Longstanding Problems with
DOD's Program, But Concerns Remain, GAO-06-233T (Washington, D.C.: Nov. 9,
2005).

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2006.

Managing Sensitive Information: DOE and DOD Could Improve Their Policies
and Oversight. GAO-06-531T . Washington, D.C.: March 14, 2006.

GAO's High-Risk Program. GAO-06-497T . Washington, D.C.: March 15, 2006.

Questions for the Record Related to DOD's Personnel Security Clearance
Program and the Government Plan for Improving the Clearance Process.
GAO-06-323R . Washington, D.C.: January 17, 2006.

DOD Personnel Clearances: Government Plan Addresses Some Long-standing
Problems with DOD's Program, But Concerns Remain. GAO-06-233T .
Washington, D.C.: November 9, 2005.

Defense Management: Better Review Needed of Program Protection Issues
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Washington, D.C.: November 4, 2005.

DOD's High-Risk Areas: High-Level Commitment and Oversight Needed for DOD
Supply Chain Plan to Succeed. GAO-06-113T . Washington, D.C.: October 6,
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Questions for the Record Related to DOD's Personnel Security Clearance
Program. GAO-05-988R . Washington, D.C.: August 19, 2005.

Industrial Security: DOD Cannot Ensure Its Oversight of Contractors under
Foreign Influence Is Sufficient. GAO-05-681 . Washington, D.C.: July 15,
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DOD Personnel Clearances: Some Progress Has Been Made but Hurdles Remain
to Overcome the Challenges That Led to GAO's High-Risk Designation.
GAO-05-842T . Washington, D.C.: June 28, 2005.

Defense Management: Key Elements Needed to Successfully Transform DOD
Business Operations. GAO-05-629T . Washington, D.C.: April 28, 2005.

Maritime Security: New Structures Have Improved Information Sharing, but
Security Clearance Processing Requires Further Attention. GAO-05-394 .
Washington, D.C.: April 15, 2005.

DOD's High-Risk Areas: Successful Business Transformation Requires Sound
Strategic Planning and Sustained Leadership. GAO-05-520T . Washington,
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GAO's 2005 High-Risk Update. GAO-05-350T . Washington, D.C.: February 17,
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High-Risk Series: An Update. GAO-05-207 . Washington, D.C.: January 2005.

Intelligence Reform: Human Capital Considerations Critical to 9/11
Commission's Proposed Reforms. GAO-04-1084T . Washington, D.C.: September
14, 2004.

DOD Personnel Clearances: Additional Steps Can Be Taken to Reduce Backlogs
and Delays in Determining Security Clearance Eligibility for Industry
Personnel. GAO-04-632 . Washington, D.C.: May 26, 2004.

DOD Personnel Clearances: Preliminary Observations Related to Backlogs and
Delays in Determining Security Clearance Eligibility for Industry
Personnel. GAO-04-202T . Washington, D.C.: May 6, 2004.

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2001.

Determining Performance and Accountability Challenges and High Risks.
GAO-01-159SP . Washington, D.C.: November 2000.

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

DOD Personnel: More Accurate Estimate of Overdue Security Clearance
Reinvestigations Is Needed. GAO/T-NSIAD-00-246 . Washington, D.C.:
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DOD Personnel: More Actions Needed to Address Backlog of Security
Clearance Reinvestigations. GAO/NSIAD-00-215 . Washington, D.C.: August
24, 2000.

Security Protection: Standardization Issues Regarding Protection of
Executive Branch Officials. GAO/T-GGD/OSI-00-177 . Washington, D.C.: July
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Security Protection: Standardization Issues Regarding Protection of
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Action Is Required. GAO/AIMD-00-169 . Washington, D.C.: May 31, 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.

Department of Energy: Key Factors Underlying Security Problems at DOE
Facilities. GAO/T-RCED-99-159 . Washington, D.C.: April 20, 1999.

Performance Budgeting: Initial Experiences Under the Results Act in
Linking Plans With Budgets. GAO/AIMD/GGD-99-67 . Washington, D.C.: April
12, 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.

Inspectors General: Joint Investigation of Personnel Actions Regarding a
Former Defense Employee. GAO/AIMD/OSI-97-81R . Washington, D.C.: July 10,
1997.

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: Implementation Issues. GAO/T-GGD-95-186 .
Washington, D.C.: June 15, 1995.

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

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

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

Managing DOE: Further Review Needed of Suspensions of Security Clearances
for Minority Employees. GAO/RCED-95-15 . Washington, D.C.: December 8,
1994.

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

Classified Information: Costs of Protection Are Integrated With Other
Security Costs. GAO/NSIAD-94-55 . Washington, D.C.: October 20, 1993.

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.

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.

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.

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.

Weaknesses in NRC's Security Clearance Program. GAO/T-RCED-89-14 .
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Nuclear Regulation: NRC's Security Clearance Program Can Be Strengthened.
GAO/RCED-89-41 . Washington, D.C.: December 20, 1988.

Nuclear Security: DOE Actions to Improve the Personnel Clearance Program.
GAO/RCED-89-34 . Washington, D.C.: November 9, 1988.

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Clearance Program. GAO/RCED-88-28 . Washington, D.C.: December 29, 1987.

National Security: DOD Clearance Reduction and Related Issues.
GAO/NSIAD-87-170BR . Washington, D.C.: September 18, 1987.

Oil Reserves: Proposed DOE Legislation for Firearm and Arrest Authority
Has Merit. GAO/RCED-87-178 . Washington, D.C.: August 11, 1987.

Embassy Blueprints: Controlling Blueprints and Selecting Contractors for
Construction Abroad. GAO/NSIAD-87-83 . Washington, D.C.: April 14, 1987.

Security Clearance Reinvestigations of Employees Has Not Been Timely at
the Department of Energy. GAO/T-RCED-87-14 . Washington, D.C.: April 9,
1987.

Improvements Needed in the Government's Personnel Security Clearance
Program. Washington, D.C.: April 16, 1985.

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Effect of National Security Decision Directive 84, Safeguarding National
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1983.

Faster Processing of DOD Personnel Security Clearances Could Avoid
Millions in Losses. GAO/GGD-81-105 . Washington, D.C.: September 15, 1981.

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Highlights of GAO-06-747T , a statement for the record to the Committee on
Government Reform, House of Representatives

May 17, 2006

DOD PERSONNEL CLEARANCES

Funding Challenges and Other Impediments Slow Clearances for Industry
Personnel

The Department of Defense (DOD) is responsible for about 2 million active
personnel security clearances. About one-third of the clearances are for
industry personnel working on contracts for DOD and more than 20 other
executive agencies. Delays in determining eligibility for a clearance can
heighten the risk that classified information will be disclosed to
unauthorized sources and increase contract costs and problems attracting
and retaining qualified personnel. On April 28, 2006, DOD announced it had
stopped processing security clearance applications for industry personnel
because of an overwhelming volume of requests and funding constraints. GAO
has reported problems with DOD's security clearance processes since 1981.
In January 2005, GAO designated DOD's program a high-risk area because of
longstanding delays in completing clearance requests and an inability to
accurately estimate and eliminate its clearance backlog.

For this statement GAO addresses: (1) key points in the billing dispute
between DOD and OPM and (2) some of the major impediments affecting
clearances for industry personnel.

The costs underlying a billing dispute between DOD and OPM are
contributing to further delays in the processing of new security clearance
requests for industry personnel. The dispute stems from the February 2005
transfer of DOD's personnel security investigations function to OPM and
associated costs for which DOD agreed to reimburse OPM. Among other
things, the two agencies' memorandum of agreement for the transfer allows
OPM to charge DOD annual price adjustments plus a 25 percent premium, in
addition to the rates OPM charges to other federal government agencies. A
January 20, 2006, memorandum from the Under Secretary of Defense for
Intelligence to the Office of Management and Budget (OMB) questioned the
continued need for the premiums and requested mediation from OMB.
According to DOD and OPM, OMB has directed the two agencies to continue to
work together to resolve the matter. The inspectors general for both DOD
and OPM are expected to report on the results of their investigations into
the dispute this summer.

Other impediments, if not effectively addressed, could negatively affect
the timeliness of clearance-eligibility determinations for one or more of
the following employee groups: industry personnel, servicemembers, and
civilian government employees. All three groups are affected by DOD's
longstanding inability to accurately estimate the size of its security
clearance workload. Inaccurate estimates of the volume of clearances
needed make it difficult to determine clearance-related budgets and
staffing requirements. Similarly, the July 1, 2006, expiration of
Executive Order 13381, which delegated responsibility for improving the
clearance process to OMB, could potentially slow improvements in personnel
security clearance processes DOD-wide as well as governmentwide. GAO has
been encouraged by OMB's high level of commitment to activities such as
the development of a government plan to improve personnel security
clearance processes governmentwide but is concerned about whether such
progress will continue after the executive order expires. In contrast,
demand for top secret clearances for industry personnel and the lack of
reciprocity (the acceptance of a clearance and access granted by another
department, agency, or military service) are impediments that mainly
affect industry personnel. A previously identified increase in the demand
for top secret clearances for industry personnel has workload and
budgetary implications for DOD and OPM if such requests continue to occur.
Finally, the lack of reciprocity has a negative effect on employees and
employers, and increases the workload for already overburdened
investigative and adjudicative staff. Reciprocity problems have occurred
despite the issuance of governmentwide investigative standards and
adjudicative guidelines in 1997.
*** End of document. ***