July 15, 2005

Pentagon faulted on U.S. industrial security

By Jim Wolf

WASHINGTON (Reuters) - The United States should do more to
prevent unauthorized foreign access to secret information
through defense contractors, congressional investigators said
in a report issued on Friday.

The Defense Security Service (DSS) "does not systematically
ask for, collect or analyze data in a manner that helps it
properly oversee contractors entrusted with U.S. classified
information," the Government Accountability Office (GAO) said.

The DSS is meant to keep tabs on contractors for the
Defense Department and 23 other federal departments. It was set
up to make sure that contractors safeguard classified
information in their possession while doing work for the U.S.

It oversees more than 11,000 facilities run by U.S.
contractors and cleared for classified information to develop
and produce military technologies such as those used in
warplanes and spy satellites.

Among these are a growing number of contractors under
foreign ownership, control or influence.

In such cases, a foreign interest has the potential to sway
operations in a way that could compromise U.S. secrets or
affect performance on classified contracts, said the GAO
report, which was requested by the Senate Armed Services

The Pentagon, in a response to the report, brushed off the
criticism of the DSS.

"The report demonstrates a lack of understanding of the
national policy governing access to classified information by
our contractor population and the evaluation process used by
DSS," Carol Haave, deputy undersecretary of defense for
counterintelligence and security, wrote.

U.S. policy is to allow foreign investments in U.S.
contractors as long as they are not known to threaten U.S.
national-security interests. Such programs as Lockheed Martin
Corp.'s next-generation $200 billion-plus F-35 Joint Strike
Fighter, the biggest warplane project ever, hinge on complex
multi-nation cooperation and co-financing.

The GAO said DSS does not know if contractors are reporting
foreign business transactions as they occur.

Unless DSS improves its collection, analysis and other
skills, it "will continue to operate without knowing how
effective its oversight is at reducing the risk of foreign
interests gaining unauthorized access," GAO said.