The costs reported by the Office of Personnel Management to conduct background investigations and security-clearance checks for federal agencies have skyrocketed in the past six years, according to a Feb. 28 Government Accountability Office report released Wednesday.

And agency customers are growing dissatisfied with the lack of transparency surrounding price increases and are starting to looking elsewhere, GAO auditors said in the report.

OPM’s Federal Investigative Services (FIS), which conducts most of the federal government’s background investigations, received $1 billion to conduct more than 2 million investigations in fiscal year 2011. These include checks to determine the suitability of applicants for employment as well as investigations into those applying for security clearances.

The reported costs have risen dramatically in recent years.

From 2005 to 2011, the costs OPM reported to conduct background investigations increased by 79 percent — from $602 million to nearly $1.1 billion.

However, GAO said OPM’s cost data is often unreliable because the agency’s revolving fund has not been audited.

Three factors have driven up the cost of OPM’s program, GAO found: support contracts for investigation fieldwork, the cost of pay and benefits for OPM’s investigation workforce and the agency’s IT investments, which have increased dramatically — 682 percent in 2011 dollars since 2005.

For its part, OPM said cost increases are due to more comprehensive interviews, increased fees charged by the FBI and having to comply with tighter investigation deadlines.

Agencies face lack of transparency in price hikes

GAO found agencies often don’t understand the reason for price hikes because OPM isn’t always upfront about how prices are linked to costs.

FIS uses an average-cost pricing model to ensure it can cover the overall costs of running its background investigations each year. Prices for the agency’s services are based in part upon estimated costs and anticipated revenue for the coming year.

But FIS fails to provide agencies with “transparent information underlying its prices and price increases,” GAO said.

Agencies have grown dissastisfied with that lack of transparency, GAO reported.

“OPM presents only very broad reasons for price increases and has never provided customer agencies with detailed explanations of why it needs to increase prices in most years, but not in some others,” auditors wrote in the report.

Many agencies believe they’re being overcharged by OPM and have begun looking elsewhere for investigation services.

For example, officials at the Homeland Security Department told GAO they have considered conducting their own investigations.

GAO recommended OPM provide better information linking its prices with the costs it incurs.

“The risk of agency distrust of OPM’s prices may be reduced if OPM clearly reports its methods for price setting, including an accounting of operating costs and the assumptions used to project future program costs and revenue,” the report stated.

GAO also recommended the Office of Management and Budget develop guidance to constrain the rapidly increasing costs of conducting investigations.

OPM response

Overall, OPM agreed with GAO’s recommendations to improve transparency and identify efficiencies in the process but disagreed with GAO’s findings on what has led the cost of the investigation process to balloon.

In a separate release, the associate director of FIS, Merton Miller, said the agency has undertaken “aggressive cost avoidance and process efficiencies” that were omitted from the GAO report.

“Our efforts to root out additional efficiencies must continue and OPM concurs with GAO’s recommendations to increase transparency and seek additional cost savings, and has already begun implementation,” Miller said in the release.

Miller also said FIS has begun providing agencies with more information about pricing, by briefing members of the Background Investigations Stakeholder Group at its monthly meetings.

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