The Pentagon last year paid the Office of Personnel Management $787 million for some 788,000 investigations. That accounted for almost three-quarters of the revenue received by OPM's Federal Investigative Services. (File photo / Air Force)
For the Office of Personnel Management, handling background investigations for other agencies is a billion-dollar-a-year enterprise. As costs balloon, however, some agencies are asking whether they are getting a fair shake and are looking at other options.
From 2005 to 2011, the average cost per investigation rose from about $521 to $882, according to figures in a Government Accountability Office report released last week. The spike was particularly pronounced in 2010, when that cost jumped to $897, up from $576 in 2009.
Despite more use of automation and other money-saving steps to carry out the investigations, "OPM has failed to pass those cost savings to any of its customers," Thomas Ferguson, the Pentagon's principal deputy undersecretary for intelligence, wrote in the GAO report.
The Defense Department is by far OPM's largest customer: Last year, it paid $787 million for some 788,000 investigations. That accounted for almost three-quarters of the revenue received by OPM's Federal Investigative Services.
From 2005 through last year, OPM's annual expenses for conducting the investigations soared almost 79 percent, from about $602 million to almost $1.1 billion in inflation-adjusted dollars, according to the GAO review. Those expenses, which show up in the prices that OPM charges agencies for conducting the investigations for security clearances and suitability determinations, kept climbing even though the number of investigations dropped to 1.2 million last year, down 30 percent from a peak of approximately 1.7 million in 2008.
In an interview, Merton Miller, who heads OPM's Federal Investigative Services office, said GAO's figures do not tell the whole story. OPM's prices for conducting various types of background checks this year range from $125 for a low-level suitability determination investigation to about $4,000 for a top-secret security clearance. Since 2005, the number of top-secret clearance investigations sought by the Pentagon has increased 55 percent, he said.
"DoD's buying steak and not hamburger," Miller said. "We have to charge the price it costs us to deliver the product."
In addition, OPM does other research to help agencies bring new employees on board that does not count as an investigation, yet still brings in revenue.
One reason for the 2010 spike, Miller said, was that OPM developed a new "special access check" for federal employees and contractors to gain access to federal buildings and information technology systems. Several hundred thousand applicants went through the screenings, he said, but since the GAO report didn't list them as investigations, the report "left a great deal of our work right out of the equation."
OPM pays for the background-check program using a revolving fund. Revenue collected from agencies is used to pay investigators — both in-house and contractors — and cover other operating costs. To set prices, OPM officials estimate their investigation workload for the upcoming year and decide what they need to charge to cover costs.
From 2007 through 2010, however, the investigation program ran a cumulative $241 million surplus, before slipping more than $13 million into the red last year, according to GAO. The auditors added that OPM's revolving fund has never been audited so they cannot assess the reliability of OPM's cost figures.
In the report, OPM officials attributed rising costs to several factors, including higher FBI fees, wider-ranging subject interviews, and the need to meet investigation deadlines.
But while OPM lists its prices before the start of each fiscal year, it doesn't explain how those rates are linked to costs, leaving managers at other agencies in the dark.
As a result, some agencies say they are looking at alternatives, such as seeking approval from the Office of the Director of National Intelligence to do their own background investigations with the help of contractors, GAO said. ODNI gained that authority in 2008.
Some agencies — including the CIA, FBI and State Department — already have authority to do their own background checks. Officials at some of those agencies told GAO they can save as much as $1,500 on OPM's price for a top-secret clearance inquiry by hiring a contractor directly. OPM's price has risen by one-third since 2005, according to the report.
GAO auditors urged OPM Director John Berry to provide customer agencies with more information on OPM's costs and look at specific steps to save money when carrying out investigations. In a six-page response, Berry agreed with those recommendations, but said GAO auditors failed to balance their criticisms with recognition of "incredible improvements," such as cutting the average investigation time from 145 days in 2005 to 40 days now.
The report was requested by Sen. Daniel Akaka, D-Hawaii, chairman of the Senate Homeland Security and Governmental Affairs subcommittee on government management and the federal workforce.
In an email, Akaka cited "great progress" in the timeliness and quality of security clearance investigations in recent years. The new report "highlights the next critical phase of reform efforts: cost savings," he said.
In his comments in the GAO report, the Defense Department's Ferguson said OPM failed to pass on savings resulting from delivering case files electronically instead of via UPS and recently reducing the amount it pays contractors to do investigative field work.
Another Pentagon official agreed. "I think there are opportunities for cost reduction," Beth McGrath, the Defense Department's deputy chief management officer, said in an interview last week.
OPM's Miller endorsed GAO's recommendation that OPM be more transparent in explaining its costs to customer agencies. Prices this year for investigative work are unchanged from 2011, he noted. Starting this month, OPM will provide agencies with quarterly reports on receipts and revenues. Savings from electronic delivery of case files have already been passed on to agencies, he said, and the same could be true next year for contractor costs on field work.
OPM has not lost any customers in recent years, he said. In fact, other agencies have asked OPM for help on background investigative work they are not able to do.
"I think they look at us as a great service provider," Miller said.