OPM plans to end contract with USIS after cyberattack hit major security clearance contractor

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The federal Office of Personnel Management plans to terminate its massive contracts with USIS, the major security clearance contractor that was targeted last month by a cyberattack, agency, congressional and company officials said Tuesday. The computer network intrusion compromised the personal files of as many as 25,000 government workers.

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An OPM official said Tuesday that agency officials decided not to renew USIS' background investigations and support contracts "following a careful and comprehensive review." The OPM oversees background investigation contracting for most federal agencies, but the official said that the move would not immediately preclude some other agencies from still working with the firm.

The early August cyberattack against USIS' computer network compromised the files of 25,000 Homeland Security Department workers and is under investigation by the FBI. The OPM official spoke on condition of anonymity because the matter remains a criminal investigation. USIS has said it was targeted by what it described as a "state-sponsored attack."

Marnee Banks, spokeswoman for Sen. Jon Tester, D-Mont., said OPM officials notified Tester's office earlier in the day that the agency had decided to sever its relationship with USIS by the end of September. Tester also confirmed the move, saying: "This news is a welcome sign that the federal government is finally beginning to hold contractors accountable for taking millions in federal money and then failing to get the job done for the taxpayer."

USIS also acknowledged the OPM move late Tuesday, saying it was notified by the agency that OPM "is declining to exercise its remaining options on USIS' background investigation fieldwork and background investigation support services" expiring on Sept. 30.

"We are deeply disappointed with OPM's decision, particularly given the excellent work our 3,000 employees have delivered on these contracts," the firm said through a spokeswoman, Ellen Davis. "While we disagree with the decision and are reviewing it we intend to fulfill our obligations to ensure an orderly transition."

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The agency temporarily halted all of USIS' fieldwork last month after the cyberattack in early August from an unidentified foreign nation that exposed thousands of personal and financial records belonging to DHS workers. DHS officials also issued "stop-work orders halting the provision of additional sensitive information" to USIS in August. That order was to remain in place until the agency regained confidence that the contractor could protect its sensitive material, DHS officials said.

The OPM move to sever its relationship with USIS was a stunning development for a company that itself started out as a branch of OPM and then went private as the federal government relied increasingly on contractors to assess the backgrounds of its growing cadre national security officials.

At its height, the Virginia-based USIS performed background investigations on almost half of 5 million government workers who require national security clearances. The firm also provides office and logistics support for numerous federal agencies.

The firm has been repeatedly on the defensive in recent months. The Justice Department filed a civil complaint in January against USIS alleging that the firm defrauded the government by submitting at least 665,000 security clearance investigations that had not been properly completed and then tried to cover up its actions. USIS replied in a statement at the time that the allegations dealt with a small group of employees and that the company had appointed a new leadership team and enhanced oversight and was cooperating with the Justice probe.

The firm has also been criticized in Congress for its handling of the background investigations into NSA systems analyst Edward Snowden and Aaron Alexis, the military contract employee who killed 12 people during a mass shooting spree at the Washington Navy Yard in September 2013.

The company responded earlier this week on its website that its investigations of Snowden and Alexis were conducted properly and tied the company's previous problems to company officers no longer with the firm. USIS also emphasized that it had "self-reported" the cyber strike to federal officials and hired a forensics computer firm to investigate the attack.

USIS also claimed that other contractors were taking advantage of its recent problems to take over its government work. FCi Federal, which had previously performed security checks for the U.S. Citizen and Immigration Services, filed a protest against the immigration agency's decision earlier this year to switch to USIS.

Tester noted in his statement that "as OPM shifts this workload to federal employees and other contractors, the agency must ensure high-quality and timely investigations."