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Before the Subcommittee on Oversight of Government Management, the 
Federal Workforce, and the District of Columbia, Committee on 
Governmental Affairs:

For Release on Delivery Expected at 9:30 a.m. EST Tuesday, September 
14, 2004:


Human Capital Considerations Critical to 9/11 Commission's Proposed 

J. Christoper Mihm, Managing Director: 
Strategic Issues:


GAO Highlights:

Highlights of GAO-04-1084T, a testimony to Subcommittee on Oversight of 
Government Management, the Federal Workforce, and the District of 
Columbia, Committee on Governmental Affairs

Why GAO Did This Study:

GAO has performed extensive work and gained experience on government 
transformation and the critical role that human capital management can 
play in driving this change. Valuable lessons from these efforts could 
help guide the proposed reforms in the intelligence community 
envisioned by the 9/11 Commission. 

At the request of this subcommittee, this statement focuses on (1) the 
lessons GAO has learned from successful mergers and organizational 
transformations; particularly the need for committed and sustained 
leadership and the role of performance management systems in these 
changes; (2) human capital flexibilities that can be used as essential 
tools to help achieve these reforms; (3) how the Federal Bureau of 
Investigation (FBI) is using these lessons and human capital 
flexibilities to transform to meet its evolving mission in the post 
9/11 environment, and (4) GAO’s findings to date on the factors that 
must be considered in the approach to the government’s security 
clearance process, as a means to accelerate the process for national 
security appointments. 

What GAO Found:

Recognizing that people are the critical element in transformation 
initiatives is key to a successful transformation of the intelligence 
community and related homeland security organizations. GAO’s work in 
successful mergers and transformations shows that incorporating 
strategic human capital management approaches will help sustain any 
reforms in the intelligence community. Successful major change 
management initiatives in large public and private sector organizations 
can often take at least 5 to 7 years to create the accountability 
needed to ensure this success. As a result, committed and sustained 
leadership is indispensable to making lasting changes in the 
intelligence community. Accordingly, the Congress may want to consider 
lengthening the terms served by the directors of the intelligence 
agencies, similar to the FBI Director’s 10-year term. One of the major 
challenges facing the intelligence community is moving from a culture 
of a “need to know” to a “need to share” intelligence information. The 
experience of leading organizations suggests that performance 
management systems—that define, align, and integrate institutional, 
unit, and individual performance with organizational outcomes—can 
provide incentives and accountability for sharing information to help 
facilitate this shift.

Significant changes have been underway in the last 3 years regarding 
how the federal workforce is managed. The Congress passed legislation 
providing certain governmentwide human capital flexibilities, such as 
direct hire authority. While many federal agencies have received human 
capital flexibilities, others may be both needed and appropriate for 
intelligence agencies, such as providing these agencies with the 
authority to hire a limited number of term-appointed positions on a 
noncompetitive basis.

Human capital challenges are especially significant for the 
intelligence organizations, such as the FBI, that are undergoing a 
fundamental transformation in the aftermath of September 11, 2001. For 
the last 3 years, we have been using the lessons learned from 
successful transformations to monitor the FBI’s progress as it 
transforms itself from its traditional crime enforcement mission to 
its post 9/11 homeland security priorities—counterterrorism, 
counterintelligence and cyber crimes. For example, the FBI has 
undertaken a variety of human capital related initiatives, including 
major changes in realigning, retraining, and hiring special agents and 
analysts with critical skills to address its top priorities.

The 9/11 Commission recommended that a single federal security 
clearance agency should be created to accelerate the government’s 
security clearance process. Several factors must be considered in 
determining the approach to this process. The large number of requests 
for security clearances for service members, government employees, and 
others taxes a process that already is experiencing backlogs and 
delays. Existing impediments—such as the lack of a governmentwide 
database of clearance information, a large clearance workload, and too 
few investigators—hinder efforts to provide timely, high-quality 
clearance determinations.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact J. Christopher Mihm 
(202) 512-6806 or

[End of section]

Chairman Voinovich, Senator Durbin, and Members of the Subcommittee:

I am pleased to be here today to discuss how strategic human capital 
management can drive the transformational challenges of the 
intelligence community. The work of the 9/11 Commission has clearly 
demonstrated the need to fundamentally change the organization and 
culture of the intelligence community to enhance its ability to 
collect, analyze, share, and use critical intelligence information--a 
crucial mission of the community. In a knowledge-based federal 
government, including the intelligence community, people--human 
capital--are the most valuable asset. How these people are organized, 
incentivized, enabled, empowered, and managed are key to the reform and 
ultimate effectiveness of the intelligence community and other 
organizations involved with homeland security.

To this end, we have conducted extensive work on government 
transformation, and the critical role that human capital management 
plays in driving this change over the past several years. In August 
2004, Comptroller General David M. Walker testified before the 
Committee on Government Reform, U.S. House of Representatives, on how 
the valuable lessons we learned from this work can be applied to 
address the challenges of reform in the intelligence 
community.[Footnote 1] He stated that while the intelligence community 
has historically been addressed separately from the remainder of the 
federal government, and while it undoubtedly performs some unique 
missions that present unique issues (e.g. the protection of sources and 
methods), many of its major transformational challenges are similar, or 
identical to those that face most government agencies, such as changing 
their cultures to fit evolving missions. Experience has shown that 
strategic human capital management must be the centerpiece of any 
serious change management initiative. As the Comptroller General also 
recently noted, many of the challenges facing the intelligence 
community as knowledge-based organizations, are similar to those he 
faced when he began his tenure at GAO. As a result, GAO has gained 
valuable experience and knowledge in government transformation that can 
be shared with the intelligence community. We also stand ready to use 
the experience and knowledge we have gained to offer GAO's assistance 
in support of the Congress' legislative and oversight activities for 
the intelligence community.

As I recently testified before your subcommittee, more progress in 
addressing human capital challenges has been made in the last 3 years 
than in the last 20 years; nevertheless, much more needs to be 
done.[Footnote 2] Federal human capital strategies are not yet 
appropriately constituted to meet current and emerging challenges or to 
drive the needed transformation across the federal government. The 
basic problem has been the long-standing lack of a consistent approach 
to marshaling, managing, and maintaining the human capital needed to 
maximize government performance and ensure accountability because 
people define the organization's culture, drive its performance, and 
embody its knowledge base. Human capital (or people) strategy is the 
critical element to maximizing performance and ensuring accountability. 
Thus, federal agencies, including our intelligence and homeland 
security communities, will need the most effective human capital 
systems to address these challenges and succeed in their transformation 
efforts during a period of sustained budget constraints.

Under the leadership of this subcommittee and others in Congress, we 
have seen major efforts to address the human capital challenges 
involved in transforming these communities, such as the transformation 
of the Federal Bureau of Investigation (FBI) and the creation of the 
Department of Homeland Security (DHS). Nevertheless, as the 9/11 
Commission and our work indicate, much more needs to be done to ensure 
that agencies' cultures are results-oriented, customer-focused, and 
collaborative in nature--characteristics critical to high performing 
organizations.[Footnote 3] As agreed, my statement today will cover 
four major points. First, I will discuss how we can use the lessons we 
have learned to date from successful private and public sector mergers 
and transformations to guide the intelligence community's human capital 
reforms; particularly the need for committed and sustained leadership, 
and the use of performance management systems to help achieve the 
necessary change. Second, I will discuss several human capital 
flexibilities that could be used as essential tools to help achieve 
these reforms, such as providing agencies with the authority to hire a 
limited number of term-appointed positions. Third, I will also discuss 
GAO's prior work on FBI's efforts to use these lessons and human 
capital flexibilities as it transforms to meet its evolving mission in 
the post 9/11 environment. Finally, I will summarize our findings to 
date on the factors that must be considered in the approach to the 
government security clearance process, as a means to accelerate the 
process for national security appointments.

My comments are based on our completed GAO work and our institutional 
knowledge on organizational transformation and human capital issues, as 
well as on homeland security. We conducted our work in accordance with 
generally accepted government auditing standards.

Key Mergers and Transformation Practices Can Be Used to Guide 
Intelligence Community Reforms:

Experience shows that failure to adequately address--and often even 
consider--a wide variety of people and cultural issues are at the heart 
of unsuccessful organizational transformations. Recognizing the people 
element in these initiatives and implementing strategies to help 
individuals maximize their full potential in the new environment are 
key to a successful transformation of the intelligence community and 
related homeland security organizations. Mergers and transformations 
require more than just changing organizational charts. They require 
fundamental changes in strategic human capital management approaches, 
particularly in defining, aligning, and integrating key institutional, 
unit, and individual performance management and reward systems to 
achieve desired outcomes.

The 9/11 Commission has recommended several transformational changes, 
such as the establishment of a National Counterterrorism Center for 
joint operational planning and intelligence, and the creation of a 
National Intelligence Director position to oversee national 
intelligence centers across the federal government. The Director would 
manage the national intelligence program, oversee agencies that 
contribute to it, and establish important aspects of a human capital 
system. Specifically, the Director would be able to set common 
personnel and information technology policies across the intelligence 
community. In addition, the Director would have the authority to 
evaluate the performance of the people assigned to the Center.

The creation of a National Counterterrorism Center and a National 
Intelligence Director would clearly represent major changes for the 
intelligence community. Recent structural and management changes have 
occurred and are continuing to occur in government that provide lessons 
for the intelligence community's transformation. For example, in 
anticipation of the creation of DHS, in September 2002, the Comptroller 
General convened a forum of private and public sector experts to help 
identify useful practices and lessons learned from mergers, 
acquisitions, and transformations that DHS and other federal agencies 
could use to successfully transform their cultures.[Footnote 4] In a 
follow-up report, we also identified specific steps that organizations 
can adopt to help implement these practices, as seen in table 
1.[Footnote 5] These practices and steps also provide guidance on what 
must occur to effectively transform the intelligence community.

Table 1: Key Practices and Implementation Steps for Mergers and 

Practice: Ensure top leadership drives the transformation; 
Implementation Steps: 
* Define and articulate a succinct and compelling reason for change; 
* Balance continued delivery of services with merger and 
transformation activities.

Practice: Establish a coherent mission and integrated strategic goals 
to guide the transformation; 
Implementation Steps: 
* Adopt leading practices for results-oriented strategic planning and 

Practice: Focus on a key set of principles and priorities at the 
outset of the transformation; 
Implementation Steps: 
* Embed core values in every aspect of the organization to reinforce 
the new culture.

Practice: Set implementation goals and a timeline to build momentum 
and show progress from day one; 
Implementation Steps: 
* Make public implementation goals and timeline; 
* Seek and monitor employee attitudes and take appropriate follow-up 
* Identify cultural features of merging organizations to increase 
understanding of former work environments; 
* Attract and retain key talent; 
* Establish an organizationwide knowledge and skills inventory to 
exchange knowledge among merging organizations.

Practice: Dedicate an implementation team to manage the transformation 
Implementation Steps: 
* Establish networks to support implementation team; 
* Select high-performing team members.

Practice: Use the performance management system to define the 
responsibility and assure accountability for change; 
Implementation Steps: 
* Adopt leading practices to implement effective performance management 
systems with adequate safeguards.

Practice: Establish a communication strategy to create shared 
expectations and report related progress; 
Implementation Steps: 
* Communicate early and often to build trust; 
* Ensure consistency of message; 
* Encourage two-way communication; 
* Provide information to meet specific needs of employees.

Practice: Involve employees to obtain their ideas and gain ownership 
for the transformation; 
Implementation Steps: 
* Use employee teams; 
* Involve employees in planning and sharing performance information; 
* Incorporate employee feedback into new policies and procedures; 
* Delegate authority to appropriate organizational levels.

Practice: Build a world-class organization; 
Implementation Steps: 
* Adopt leading practices to build a world-class organization. 

Source: GAO.

[End of table]

I would now like to discuss how two of these key practices, providing 
leadership commitment and using performance management systems, can 
help guide the intelligence community reforms.

Ensuring Committed and Sustained Leadership Is a Key Practice to Drive 
Transformation in the Intelligence Community:

Committed, sustained, highly qualified, and inspired leadership, and 
persistent attention by all key parties in the successful 
implementation of organizational transformations are indispensable to 
making lasting changes in the intelligence community. Experience shows 
that successful major change management initiatives in large public and 
private sector organizations can often take at least 5 to 7 years to 
help to create the accountability needed to ensure that long-term 
management and transformation initiatives are successfully completed. 
This length of time and the frequent turnover of political leadership 
in the federal government have often made it difficult to obtain the 
sustained and inspired attention to make the needed changes. For 
example, while the FBI Director has a 10-year term appointment, most of 
the intelligence agency heads have shorter term appointments. In his 
August 2004 testimony on the proposed 9/11 Commission reforms, the 
Comptroller General suggested that the Congress may want to place 
attention on lengthening the period of time served by the directors of 
the other intelligence agencies to provide the continuity and 
management needed to make the tremendous changes that occur during 
organizational transformations.

We have also reported that the appointment of agency chief operating 
officers is one mechanism that should be considered to provide 
continuity by elevating attention on management issues and 
transformation, integrating these various initiatives, and 
institutionalizing accountability for addressing them.[Footnote 6] We 
believe that to provide such leadership continuity during reform of the 
intelligence community, one option that the Congress could consider is 
for the National Intelligence Director to appoint a Chief Operating 
Officer. This executive could serve under a term appointment to 
institutionalize accountability over extended periods and to help 
ensure that the long-term management and organizational initiatives of 
the National Counterterrorism Center and the Director are successfully 
completed. In general, the Chief Operating Officer could be responsible 
to the National Intelligence Director for the overall direction, 
operation, and management within the intelligence community to improve 
its performance. These responsibilities include implementing strategic 
goals, and assisting the National Intelligence Director in promoting 
reform, measuring results, and other responsibilities.

Finally, there are also leadership continuity challenges that occur 
during transitions between administrations, and in the Presidential 
appointment process. For example, the 9/11 Commission noted that recent 
administrations did not have their full leadership teams in place for 
at least 6 months after the transitions occurred. The Commission 
recommended that the disruption of national security policymaking 
during a change of administrations be minimized as much as possible. 
The Comptroller General suggests that one way to avoid disruption and 
to provide continuity during transitions is that if the Congress 
creates Deputy or Assistant National Intelligence Directors, to 
designate one of them as the Principal Deputy, such as the Director of 
the Central Intelligence Agency (CIA), whose term appointment, as 
previously discussed, would not coincide with the term of the National 
Intelligence Director.

Using Performance Management Systems Is Another Key Practice to Help 
Transform the Intelligence Community:

A central theme of the 9/11 Commission report was that one of the major 
challenges facing the intelligence community is moving from a culture 
of a "need to know" to a "need to share." The Congress and the 
President are separately considering a series of important structural 
and policy changes that would facilitate this shift. The experiences of 
leading organizations suggest that a performance management system can 
also be a part of the solution. Senator Voinovich, at your request and 
others, we previously identified leading performance management 
practices that should prove helpful for intelligence agencies seeking 
to move to a culture of "need to share" and thus improve their 
performance.[Footnote 7] The key practices are as follows:

Figure 1: Key Practices for Effective Performance Management:

1. Align individual performance expectations with organizational goals. 
An explicit alignment helps individuals see the connection between 
their daily activities and organizational goals.

2. Connect performance expectations to crosscutting goals. Placing an 
emphasis on collaboration, interaction, and teamwork across 
organizational boundaries helps strengthen accountability for 

3. Provide and routinely use performance information to track 
organizational priorities. Individuals use performance information to 
manage during the year, identify performance gaps, and pinpoint 
improvement opportunities.

4. Require follow-up actions to address organizational priorities. By 
requiring and tracking follow-up actions on performance gaps, 
organizations underscore the importance of holding individuals 
accountable for making progress on their priorities.

5. Use competencies to provide a fuller assessment of performance. 
Competencies define the skills and supporting behaviors that 
individuals need to effectively contribute to organizational results.

6. Link pay to individual and organizational performance. Pay, 
incentive, and reward systems that link employee knowledge, skills, and 
contributions to organizational results are based on valid, reliable, 
and transparent performance management systems with adequate 

7. Make meaningful distinctions in performance. Effective performance 
management systems strive to provide candid and constructive feedback 
and the necessary objective information and documentation to reward top 
performers and deal with poor performers.

8. Involve employees and stakeholders to gain ownership of performance 
management systems. Early and direct involvement helps increase 
employees' and stakeholders' understanding and ownership of the system 
and belief in its fairness.

9. Maintain continuity during transitions. Because cultural 
transformations take time, performance management systems reinforce 
accountability for change management and other organizational goals.

Source: GAO.

[End of figure]

An effective performance management system is a vital tool for aligning 
the organization with desired results and creating a "line of sight" 
showing how team, unit, and individual performance can contribute to 
overall organizational results. In addition, to be successful, 
transformation efforts, such as the one envisioned for the intelligence 
community, must have leaders, managers, and employees who are capable 
of integrating and creating synergy among the multiple organizations 
involved. A performance management system can help send unmistakable 
messages about the behavior that the organization values and that 
support the organization's mission and goals, as well as provide a 
consistent message to employees about how they are expected to achieve 
results. Thus, as transformation efforts are implemented, individual 
performance and contributions are evaluated on competencies such as 
change management, cultural sensitivity, teamwork, collaboration, and 
information sharing. Leaders, managers, and employees who demonstrate 
these competencies are rewarded for their successful contributions to 
the achievement of the transformation process.

Human Capital Flexibilities Are Also Essential Tools for Intelligence 
Community Transformation:

Significant changes have been underway in the last 3 years regarding 
how the federal workforce is managed. For example, the Congress passed 
legislation providing certain governmentwide human capital 
flexibilities, such as direct hire authority.[Footnote 8] In addition, 
individual agencies--such as the National Aeronautical and Space 
Administration, the Department of Defense (DOD), and DHS--received 
flexibilities intended to help them manage their human capital 
strategically to achieve results. While many federal agencies have 
received additional human capital flexibilities, others may be both 
needed and appropriate for the intelligence and other selected 
agencies. For example, the 9/11 Commission recommends rebuilding CIA's 
analytical capabilities, enhancing the agency's human intelligence 
capabilities, and developing a stronger language program. Human capital 
flexibilities can help agencies like the CIA meet these critical human 
capital needs.

Therefore, to further enable the intelligence agencies to rapidly meet 
their critical human capital needs and workforce plans, the Comptroller 
General suggests that Congress could consider, as necessary, 
legislation granting selected agency heads the authority to hire a 
limited number of positions for a stated period of time (e.g., up to 3 
years) on a noncompetitive basis. The Congress has passed legislation 
granting this authority to the Comptroller General of the United States 
and it has helped GAO address a range of critical needs in a timely, 
effective, and prudent manner over many years. The Comptroller General 
was also provided the authority to carry out early retirement offers 
which may be made to any employee or group of employees based on a 
number of factors including (1) geographic area, organizational unit, 
or occupational series or level; or (2) skills, knowledge, or 
performance, which he suggests would further assist intelligence 
agencies in planning and shaping their future workforces. For GAO, the 
Comptroller General can deny any requests for early retirement if he 
determines that granting them would jeopardize GAO's ability to achieve 
its mission.

As the Congress considers reforms to the intelligence community's human 
capital policies and practices, it should also consider whether 
agencies have the necessary institutional infrastructure to effect 
these changes. At a minimum, this infrastructure includes a human 
capital planning process that integrates the agency's human capital 
policies, strategies, and programs with its program goals, mission and 
desired outcomes; the capabilities to effectively develop and implement 
a new human capital system; and importantly, a performance management 
system with a set of appropriate principles and safeguards--including 
reasonable transparency and appropriate accountability mechanisms--to 
ensure the fair, effective, credible, nondiscriminatory implementation 
and application of a new system.

FBI Is Using Strategic Human Capital Management to Transform and Meet 
Post 9/11 Challenges:

Human capital challenges are especially significant for the 
intelligence organizations, such as the FBI, that are undergoing a 
fundamental transformation in the aftermath of September 11, 2001. For 
the last 3 years, we have been monitoring the FBI's progress as it 
transforms itself from its traditional crime enforcement mission to its 
post September 11 homeland security priorities--counterterrorism, 
counterintelligence, and cyber crimes. In terms of human capital, this 
has meant major changes in recruiting, training, and deploying FBI's 
staff resources. Specifically, the 9/11 Commission recommends that the 
FBI create a specialized and integrated national security workforce, 
consisting of agents, analysts, linguists, and surveillance specialists 
who are recruited, trained, rewarded, and retained to ensure the 
development of an institutional culture with expertise in intelligence 
and national security. While the FBI has made admirable progress on a 
number of these human capital fronts, substantial challenges 
remain.[Footnote 9]

Linchpins of any successful transformation are (1) a strategic plan to 
guide an organization's mission, vision, and the steps necessary to 
achieve its long-term goals; and (2) a strategic human capital plan 
linked to the strategic plan that guides recruitment, hiring, training, 
and retention decisions for staff with skills critical to the 
organization's mission and goals. In March 2004, we reported that the 
FBI had completed both of these plans.[Footnote 10] With respect to 
strategic human capital planning, FBI has developed a strategic human 
capital plan that contains many of the principles that we have laid 
out for an effective human capital system.[Footnote 11] For example, 
it highlights the need for the FBI to fill identified skill gaps, in 
such areas as language specialists and intelligence analysts, by using 
various personnel flexibilities including recruiting and retention 
bonuses.[Footnote 12]

In addition, in the immediate aftermath of September 11, 2001, the FBI 
undertook a variety of human capital-related initiatives to align with 
its transformation efforts. These initiatives included realigning, 
retraining, and hiring special agents and analysts with critical skills 
to address its top priorities, and taking initial steps to revamp its 
performance management system.

In relation to realigning resources to fit the new agency priorities, 
the FBI has transferred agents from its drug, white-collar crime, and 
violent crime programs to focus on counterterrorism and 
counterintelligence priorities. This realignment of resources has 
permanently shifted 674 field agent positions from drug, white-collar, 
and violent crime program areas to counterterrorism and 
counterintelligence since September 11, 2001. About 550 of these 
positions were drawn from the drug crime area. Yet because of demands 
in the counterterrorism and counterintelligence programs, the FBI has 
had a continuing need to temporarily redirect special agent resources 
from traditional criminal investigative programs to address its top 
priorities.[Footnote 13]

In terms of retraining its existing staff, the FBI also revamped its 
special agent training curriculum to enhance skills in counterterrorism 
investigation techniques. The revised training for new agents was 
instituted in April 2003 and by the end of that calendar year, it was 
expected that agents transferring from more traditional crime areas to 
work in the priority areas would have received specialized training. To 
enhance the skills and abilities of FBI analysts, the FBI created the 
College of Analytic Studies at the Quantico training facility in 
October 2001. This program, with assistance from CIA personnel, 
provides training to both new and in-service analysts in tools and 
techniques for both strategic and technical analysis.

The FBI set ambitious goals for hiring in many specialty areas over the 
last few years. While it has achieved success in some areas, such as 
increasing the number of special agents hired with intelligence and 
foreign language proficiency, achieving other hiring goals has been 
more challenging. Specifically, the FBI has had some difficulty in 
retaining and competing with other government agencies and the private 
sector for intelligence analysts. These problems may be related to the 
truncated career ladder for intelligence analysts at the FBI compared 
to the career ladders for the same types of positions at other federal 
agencies. For example, both the CIA and the National Security Agency 
(NSA) maintain a career ladder for intelligence staff that includes 
both senior executive (managerial) and senior level (nonmanagerial) 
positions. Although, the FBI has actively moved towards establishing a 
GS-15 senior managerial level position for its intelligence staff, this 
would still not create a level playing field with the rest of the 
intelligence community that has the authority to provide positions at 
the Senior Executive Service (SES) level. Should the FBI decide to 
adopt senior managerial and SES positions for its intelligence staff, 
the agency will need to develop and implement a carefully crafted plan 
that includes specific details on how such an intelligence career 
service would integrate into its strategic plan as well as its 
strategic human capital plan, the expectations and qualifications for 
the positions, and how performance would be measured.

As discussed previously, an effective performance management system is 
a vital tool for aligning the organization with desired results and 
showing how team, unit, and individual performance can contribute to 
overall organizational results. As we have previously reported, the 
current FBI system for rating agents and analysts--a pass/fail system-
-is inadequate to achieve that needed linkage. A successful performance 
management system should make meaningful distinctions in performance so 
that staff can understand their role in relation to agency objectives. 
It should also map a course of progress to improve performance so that 
it more closely aligns with agency goals. The FBI has made progress in 
adjusting its performance management system for senior executives to 
conform to the performance management principles that I previously 
discussed. Although FBI's human capital plan indicates that it is also 
moving in the direction of changing the performance management system 
for agents and analysts, a major effort will be needed before it is 

As we have highlighted, in recent years, the FBI has used a variety of 
available human capital flexibilities, such as recruitment bonuses and 
retention allowances, to help recruit and retain valuable staff 
resources. As with any organization undergoing transformation and 
considering the use of additional human capital strategies, the FBI 
would have to weigh all options that are available to it before 
implementing a successful human capital strategy, including using 
existing administrative flexibilities and requesting new legislative 
alternatives. The FBI would also need to ensure that it has the 
institutional infrastructure in place so that any human capital 
flexibilities are used appropriately.

Many Factors Must Be Considered in Approach to Government Security 
Clearance Process:

The 9/11 Commission also raised concerns about minimizing national 
security policymaking disruptions during the change of administrations 
by accelerating the process for national security appointments. The 
Commission recommended that a single federal agency should be 
responsible for providing and maintaining security clearances and for 
ensuring uniform security clearance standards, including maintaining a 
single governmentwide database of clearance information, as a way to 
address this concern. In prior work, we have found that many factors 
must be considered in addressing the government security clearance 
process. These factors include the personnel security clearance 
criteria and process, recent actions that DOD has taken to consolidate 
investigative and adjudicative functions, and existing impediments and 
internal control concerns for security clearance programs.

All Security Clearances Are Already Governed by the Same Criteria and 
General Process:

In considering ways in which to approach the government's security 
clearance process, it is helpful to note that since 1997, all agencies 
have been subject to a common set of personnel security investigative 
standards and adjudicative guidelines for determining whether service 
members, government employees, industry personnel, and others are 
eligible to receive a security clearance.[Footnote 14] Classified 
information is categorized into three levels--top secret, secret, and 
confidential.[Footnote 15] The expected damage to national defense or 
foreign relations that unauthorized disclosure could reasonably be 
expected to cause is "exceptionally grave damage" for top secret 
information, "serious damage" for secret information, and "damage" for 
confidential information.

In addition, all agencies generally follow a similar clearance process. 
DOD's process for determining eligibility is used here to illustrate 
the stages required in making such a determination for federal 
agencies. We are highlighting DOD's process because, as of September 
30, 2003, DOD was responsible for the clearances issued to 
approximately 2 million personnel, including nearly 700,000 industry 
personnel who work on contracts issued by DOD and 22 other federal 
agencies[Footnote 16] as well as staff in the legislative branch of the 
federal government. (see fig. 2).

Figure 2: DOD's Personnel Security Clearance Process:

[See PDF for image] 

[End of figure] 

Recent Attempts to Consolidate Some Investigative and Adjudicative 

In terms of centralizing personnel investigations, The National Defense 
Authorization Act for Fiscal Year 2004 authorized an action that, if 
taken, would result in the Office of Personnel Management (OPM) being 
responsible for an estimated 80 percent of the personnel investigations 
conducted for the federal government.[Footnote 17] The Act authorized 
the transfer of DOD's personnel security investigative functions and 
1,855 investigative employees to OPM. OPM indicated that it will not 
accept the transfer at least during fiscal year 2004 because of 
concerns about the financial risk associated with the authorized 
transfer. DOD and OPM have, however, signed a memorandum of 
understanding that, among other things, results in OPM providing DOD 
investigative staff with training on OPM's investigative procedures as 
well as training on and access to OPM's case management system.

As for centralizing the adjudication steps in the clearance process, in 
May 2004, we reported that DOD's Senior Executive Council was 
considering the consolidation of the clearance adjudicative functions 
that two of DOD's 10 central adjudication facilities perform.[Footnote 
18] A DOD official told us that the consolidation would provide greater 
flexibility in using adjudicators to meet changes in the clearance 
approval workload and could eliminate some of the time required to 
transfer cases between adjudication facilities. A wider-ranging 
adjudicative initiative is also being undertaken in DOD. When fully 
implemented, the Joint Personnel Adjudication System (JPAS) is supposed 
to enhance DOD's adjudicative capabilities by--among other things--
consolidating information into a DOD-wide security clearance data 
system (instead of maintaining the data on 10 adjudication facility-
specific systems), providing near real-time input and retrieval of 
clearance-related information, and improving the ability to monitor 
overdue reinvestigations and estimate the size of that portion of 
delayed clearances. JPAS, identified as mission critical by the DOD 
Chief Information Officer, was supposed to be implemented in fiscal 
year 2001 and is now projected for full implementation sometime in 
fiscal year 2004. Even though JPAS may consolidate adjudicative data on 
the approximately 2 million clearances that DOD had on September 30, 
2003, other agencies, such as the FBI, maintain their own databases 
with adjudicative information.

Addressing Existing Impediments and Internal Control Concerns is 
Important to Any Consolidation Decision:

Regardless of the decision about whether or not to consolidate 
investigative and adjudicative functions governmentwide, existing 
impediments--such as the lack of a governmentwide database of clearance 
information--hinder efforts to provide timely, high-quality clearance 
determinations. I will discuss two of those major impediments--large 
workloads and too few investigators, and two internal control issues. 
The remainder of this section relies heavily on work that we conducted 
on DOD's investigative and adjudicative functions because there is a 
dearth of reports available on these functions in other federal 
departments and agencies.

The large number of requests for security clearances for service 
members, government employees, and industry personnel taxes a process 
that already is experiencing backlogs and delays. In fiscal year 2004, 
GAO published reports documenting the numbers of clearance requests and 
delays in completing investigations by DOD (for service members, 
government employees and industry personnel), OPM (for DOD and the 
Federal Air Marshal Service), and the FBI (for state and local law 
enforcement officials).[Footnote 19] In fiscal year 2003, DOD submitted 
over 775,000 requests for investigations. The large number of 
investigative and adjudicative workload requirements is also found in 
the form of a growing portion of the requests requiring top secret 
clearances, in at least one segment of the population. 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 DOD, top secret clearances take 8 times more 
investigative effort to complete and 3 times more adjudicative effort 
to review than do secret clearances. In addition, a top secret 
clearance must be renewed twice as often as a secret clearance--every 5 
years instead of every 10 years. The full effect of requesting a top 
secret, rather than a secret clearance, thus is 16 times the 
investigative effort and 6 times the adjudicative effort.

The limited number of investigative staff available to process requests 
hinders efforts to issue timely clearances. According to a senior 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. However, in our 
February report, GAO estimated that DOD and OPM have around 4,200 full-
time-equivalent investigative staff who are either federal employees or 
contract investigators, slightly more than half as many as 
needed.[Footnote 20]

Internal control concerns are also present with regard to personnel 
security clearances. A 1999 GAO report documented problems with the 
quality of DOD personnel security clearance investigations. The 
severity of these problems led DOD to declare its investigations 
program a systemic weakness under the Federal Managers' Financial 
Integrity Act.[Footnote 21] That declaration has continued to be made 
each year in DOD's annual statement of assurance. We continued to track 
these issues and in 2001, we recommended DOD establish detailed 
documentation requirements to support adjudicative decisions as a way 
to strengthen internal controls.[Footnote 22] Three years earlier, the 
DOD Office of the Inspector General stated that no DOD office is 
assigned the responsibility to ensure that the various adjudication 
facilities consistently implement adjudicative policies and 

When OPM was privatizing its investigative function in 1996 to create 
the company that still conducts the vast majority of OPM's 
investigations for the federal government, we raised an internal 
control concern, namely that OPM's contract with the newly created 
company would require the contractor to conduct personnel security 
clearance investigations on its own employees.[Footnote 23] This 
remains one area of concern because OPM officials told us in April 2003 
that its contractors were still conducting the investigations on its 
own personnel.


The 9/11 Commission recognized that fundamental changes in the 
management of human capital in the intelligence and homeland security 
communities will improve the efforts of these communities to 
effectively carry out its fundamental mission--to gather and share 
intelligence that will ultimately help to protect the American people.

Human capital considerations, such as the recruitment and retention of 
key skills and competencies, performance incentives to share 
information, and more flexible approaches to the management of human 
capital, are crucial to the success of the intelligence community 
reforms envisioned by the 9/11 Commission, and agencies involved with 
the intelligence community will need the most effective human capital 
systems to succeed in their transformation efforts. Thus, strategic 
management of human capital is one such reform critical to maximizing 
the performance of the intelligence community.

Committed, sustained, highly qualified, and inspired leadership, and 
persistent attention by all key parties to the successful 
implementation of these reforms and organizational transformations will 
be essential, if lasting changes are to be made and the challenges we 
are discussing today are to be effectively addressed.

Chairman Voinovich and Members of the Subcommittee, this concludes my 
prepared statement. I would be pleased to answer any questions you may 

Contacts and Acknowledgments:

For further information regarding this statement, please contact J. 
Christopher Mihm, Managing Director, Strategic Issues, on (202) 512-
6806 or at [Hyperlink,] or Eileen Larence, Acting 
Director, Strategic Issues, at [Hyperlink,]. 
Individuals making key contributions to this statement included Carole 
Cimitile, Dewi Djunaidy, Jack Edwards, Laurie Ekstrand, Charles 
Johnson, Lisa Shames, Derek Stewart, and Sarah Veale.



[1] GAO, 9/11 Commission Report: Reorganization, Transformation, and 
Information Sharing, GAO-04-1033T (Washington, D.C.: Aug. 3, 2004).

[2] GAO, Human Capital: Building on the Current Momentum to Transform 
the Federal Government, GAO-04-976T (Washington, D.C.: July 20, 2004).

[3] GAO, Comptroller General's Forum: High-Performing Organizations: 
Metrics, Means and Mechanisms for Achieving High Performance in the 
21ST Century Public Management Environment, GAO-03-343SP (Washington, 
D.C.: Feb. 13, 2004).

[4] GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons 
Learned for a Department of Homeland Security and Other Federal 
Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002).

[5] GAO, Results-Oriented Cultures: Implementation Steps to Assist 
Mergers and Organizational Transformations, GAO-03-669 (Washington, 
D.C.: July 2, 2003).

[6] GAO, Highlights of a GAO Roundtable: The Chief Operating Officer 
Concept: A Potential Strategy to Address Federal Governance Challenges, 
GAO-03-192SP (Washington, D.C.: Oct. 4, 2002).

[7] GAO, Results-Oriented Cultures: Creating a Clear Linkage Between 
Individual Performance and Organizational Success, GAO-03-488 
(Washington, D.C.: Mar. 14, 2003).

[8] GAO, Human Capital: Increasing Agencies' Use of New Hiring 
Flexibilities, GAO-04-959T (Washington, D.C.: July 13, 2004).

[9] GAO, FBI Transformation: Human Capital Strategies May Assist the 
FBI in Its Commitment to Address Its Top Priorities, GAO-04-817T 
(Washington, D.C.: June 3, 2004).

[10] GAO, FBI Transformation: FBI Continues to Make Progress in Its 
Efforts to Transform and Address Priorities, GAO-04-578T (Washington, 
D.C.: Mar. 23, 2004).

[11] GAO, A Model of Strategic Human Capital Management, GAO-02-373SP 
(Washington, D.C.: March 2002).

[12] GAO, Human Capital: Effective Use of Flexibilities Can Assist 
Agencies in Managing Their Workforces, GAO-03-2 (Washington, D.C.: Dec. 
6, 2002).

[13] GAO, FBI Transformation: Data Inconclusive on Effects of Shift to 
Counterterrorism-Related Priorities on Traditional Crime Enforcement, 
GAO-04-1036 (Washington, D.C.: Aug. 31, 2004).

[14] The White House, "Implementation of Executive Order 12968," 
Memorandum, (Washington, D.C.: Mar. 24, 1997). This memorandum approves 
the adjudication guidelines, temporary eligibility standards, and 
investigative standards required by Executive Order 12968, Access to 
Classified Information, (Aug. 2, 1995).

[15] Classification of National Security Information, 5 C.F. R. §1312.4 

[16] 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) for a listing of the 22 agencies. DOD Regulation 5200.2-R, 
DOD Personnel Security Program (Feb. 23, 1996) describes the clearance 
process for legislative staff.

[17] Pub. L. 108-136 § 906 (Nov. 24, 2003).

[18] GAO-04-632; 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) lists DOD's current 10 central 
adjudication facilities and the roles that each plays in awarding 

[19] GAO-04-344; GAO-04-632; 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); GAO, Aviation Security: Federal Air Marshal Service 
Is Addressing Challenges of Its Expanded Mission and Workforce, but 
Additional Actions Needed, GAO-04-242 (Washington, D.C.: Nov. 19, 
2003); and GAO, Security Clearances: FBI Has Enhanced Its Process for 
State and Local Law Enforcement Officials, GAO-04-596 (Washington, 
D.C.: Apr. 30, 2004).

[20] GAO-04-344.

[21] GAO, DOD Personnel: Inadequate Personnel Security Investigations 
Pose National Security Risks, GAO/NSIAD-00-12 (Washington, D.C.: Oct. 
27, 1999).

[22] GAO, DOD Personnel: More Consistency Needed in Determining 
Eligibility for Top Secret Security Clearances, GAO-01-465 (Washington, 
D.C.: Apr. 18, 2001).

[23] GAO, Privatization of OPM's Investigations Service, GAO/GGD-96-97R 
(Washington, D.C.: Aug. 22, 1996).