Buy lines: Clearance crisis gnaws at contracting process

Stan Soloway

The sudden decision by the Defense Security Service to halt processing of new and periodic renewals of security clearances for contractor employees further exacerbated an already troubled process.

For nearly a decade, the method for granting security clearances for both contractor and government employees has been broken. Despite changes mandated by the 2004 National Intelligence Reform Act, real improvements have been minimal, and the problems have continued unabated. DSS' announcement is simply the latest, most dramatic indication of just how broken the process is. This crisis could ? and should ? have been avoided.

DSS said it took action after recognizing that it lacked adequate financial resources to meet the continuing demand. That may be true, but it is still troubling. This is not a new issue, and the clearances demand in this fiscal year should have been reasonably predictable.

Even if DSS' resources were strained unexpectedly by the new requirements of complying with Homeland Security Presidential Directive-12, it is still fair to ask how an agency could take such a sudden, draconian step without at least discussing or coordinating it with those inside and outside government most affected by the moratorium.

The blame does not lie solely with DSS, however. Many have suggested solutions to the security clearance backlog. Some have recommended that the relevant companies, instead of DSS, pay directly for the cost of clearance investigations, and that those costs be added to the companies' overhead rates.

Those concerned that such an approach might create a disadvantage for smaller businesses have gone so far as to suggest that smaller companies not be charged at all.

Others have suggested making Defense Department components individually responsible for covering the fees. If the Army requires a certain number of cleared personnel, why shouldn't the Army pay for those clearances? Without endorsing any single answer, the question remains why none of the proposed solutions were pursued.

It is also disturbing that some senior Defense Department leaders are apparently under the mistaken impression that the backlog has been created by contractors that overload the system with excessive security clearance requests so as to build a "bench" of cleared people. Although many in industry have argued for some time that contractors should have some limited ability to do that, they simply are not allowed.

The security process and resulting shortage of cleared people has many effects, not the least of which is an expensive, debilitating churn in the personnel market. Specifically, the process delays drive up personnel costs and create an unhealthy competitive market for talent.

Those factors significantly increase program and company costs. Recent surveys have demonstrated that the compensation premium for cleared people versus those with no clearance is at least 25 percent. DSS' moratorium immediately drove that differential higher. The customer agencies and the taxpayer are absorbing a large part of those costs, which greatly exceed what it would cost to fully fund and upgrade the clearance program.

By the time this column is published, DSS may have announced an end to the clearance moratorium. That should not be taken as a sign that the problem has been solved, because it hasn't. But if it is true that real change first requires a compelling emotional event, maybe the DSS crisis will be the catalyst for meaningful funding and process improvements. Maybe. Hope does spring eternal.

Stan Soloway is president of the Professional Services Council. His e-mail address is

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