Pentagon Halts Contractor Clearances

By Renae Merle
Washington Post Staff Writer
Saturday, April 29, 2006

The Pentagon stopped processing security clearances for government contractors this week, potentially exacerbating a shortage of employees authorized to work on the government's most secret programs.

The Defense Security Service blamed overwhelming demand and a budget shortfall for the halt, which caught the government contracting community by surprise. Already, 3,000 applications have been put on hold, said Cindy McGovern, a DSS spokeswoman.

"We're holding them [the applications] now to see if we can resolve the issue. The more drastic step would be not accepting them" at all, McGovern said, a step the agency considered but dropped for now.

The demand for security clearances among private companies has grown dramatically since the Sept. 11, 2001, terrorist attacks as the government increasingly relies on contractors to do intelligence gathering and work on classified programs. There has been growing frustration with the wait time, which some companies have described as up to a year, to obtain clearances for new employees. Some firms have reverted to gimmicks and large bonuses to attract employees with pre-existing clearances, and industry officials worry that this week's action will increase competition and salary demands.

The move affects not only defense contractors, but also those who work on projects for more than 20 other agencies, including NASA and the Department of Homeland Security.

"We have companies right now that have positions that are funded that they can't find people for," said Stan Soloway, president of the Professional Services Council. "This could completely shut the system down."

The Defense Security Service blames, in part, the sheer volume of requests. Between October and March, more than 100,000 security-clearance applications were submitted.

The service is also struggling with a budget shortfall, McGovern said, noting that its funding was cut by $20 million this year. McGovern said she did not know how much of a shortfall the agency faces.

Last year, the Office of Personnel Management took over the job of conducting background investigations. But the Defense Security Service picks up the tab, which can be as much as $3,700 for a top-secret clearance.

The Office of Personnel Management can also charge a premium of 19 to 25 percent for the work, which was not factored into the DSS budget, said David Marin, staff director for the House Government Reform Committee. Marin estimates the agency's shortfall at between $75 million and $100 million.

The agency's efforts to cut costs began earlier this month when it alerted contractors that it would no longer offer a more expensive expedited application process.

On Tuesday, the agency stopped forwarding new applications to the OPM altogether.

The decision is "both baffling and disturbing," Rep. Thomas M. Davis III (R-Va.), chairman of the Government Reform Committee, said in a letter to the agency yesterday.

Davis expects to hold a hearing on the issue, according to his office.

"It sure could get to be a real problem really fast," said John Douglas, president of the Aerospace Industries Association, a lobby group that represents companies including Lockheed Martin Corp. and Boeing Co., the Pentagon's largest contractors. "There doesn't seem to be any exceptions, and you would think that if you were working on a classified project to stop IEDs [improvised explosive devices], there would be."

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