DOD’s  Office of the Under Secretary of Defense for Intelligence has overall  responsibility for DOD clearances, and its responsibilities also extend  beyond DOD. 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 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. 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. The dispute stems from the February 2005 transfer of  DOD’s personnel security 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. 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 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. 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. 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. 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. 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 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. 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, and  OMB promulgated criteria in December 2005 for federal agencies to follow  in determining whether to accept security clearances from other  government agencies.
Why GAO Did This Study

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.

What GAO Found

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.