GAO, Defense Trade Blows over Classified Data

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ACCUSED BY the Government Accountability Office (GAO) of not being able to ensure that its oversight of contractors under foreign ownership, control, or influence is adequate, the Department of Defense has responded by blasting the GAO for a “lack of understanding" of national policy on contractor access to classified data.

The report says that "DSS does not systematically ask for, collect, or analyze information on foreign business transactions in a manner that helps it properly oversee contractors entrusted with U.S. information.”

Deputy Under Secretary of Defense (Counterintelligence and Security) Carol A. Haave has fired back in DSS’s official comments to the report, saying that “the report never made the nexus between collecting and analyzing data and protection of classified information or the effectiveness of DSS oversight.”

The GAO's Ann Calvaresi-Barr, who authored the report, faults DSS for not centrally collecting and analyzing information to determine what corrective actions are needed to improve oversight of contractors under foreign ownership, control, or influence (FOCI). DSS staff members, she continues, also "lack the research tools and training to fully understand the significance of corporate structures, legal ownership, and complex financial relationships when foreign entities are involved."

The GAO issued eight recommendations to the Secretary of Defense, such as directing DSS to clarify when contractors need to report foreign business transactions to DSS.

In its response to the GAO’s critique, DSS flatly rejects seven of the recommendations, saying that there is “little in this report that would improve the FOCI process or justify the cost of implementation.”

In response to the recommendation that the director of DSS clarify when contractors need to report foreign business transactions to DSS, Haave writes that DSS adheres to the strictures of the National Industrial Security Program Operating Manual, which does not mandate reporting foreign business transactions. "[N]or is there any utility in contractors reporting every transaction with a foreign source," she continues.

Responding to the DSS’s comments, Calvaresi retorts that DSS was “shortsighted” and complacent in its approach to contractors under foreign ownership, control, or influence. GAO stands by its report.