Clearing private contractors to do work on some of the nation's most important homeland and national security projects is taking way too much time and ultimately putting the country at risk, lawmakers and experts said Thursday.

"There's a lot of bureaucracy and paper shuffling so the system almost defeats itself by its own process," said Gary Nakamoto, CEO of Base Technologies, a federal contractor that operates data centers for the Customs and Border Protection Agency (search), among other things.

"As our needs grow, which clearly they have after 9/11, it's even more broken now because of the sheer volume [of clearances]. We're at a point in this country where our security process has imploded."

"Too often new, innovative firms that can provide invaluable services to the federal government are 'benched' due to the wait time of up to a year to be cleared," Rep. Jim Moran (search), D-Va., said during a House Government Reform Committee hearing on the issue. 

"The enormous delays in granting security clearances have resulted in cost overruns and inefficiencies that ultimately have compromised our national security."

After the Sept. 11, 2001, terror attacks, the federal government began looking for new and improved homeland security technologies, such as systems used to track foreign visitors, to combat current threats and identify emerging risks. The demand for security clearances for both government employees and private contractors skyrocketed, but federal investigators have not been able to keep up with the pace.

The Office of Personnel Management (search) conducts background investigations for most civilian agencies as well as some for the Defense Department. Following Sept. 11, investigation requests spiked by almost 1 million names, said Stephen Benowitz, associate director for human resources at OPM. About 340,000 cases are waiting to be finished now.

And there aren't enough bodies to barrel through the caseload.

"Simply put, the demand for recent background checks currently exceeds capacity of the private-sector companies that provide these services," Benowitz said, noting that OPM has asked for more investigative contractors and government investigative staffs should be boosted by 50 percent.

In the private sector, companies and their employees are processed for clearances as part of the National Industrial Security Program (search). All federal agencies participate in the NISP; most leave it up to the Defense Department to oversee contractors that require access to classified information.

The Defense Security Service (search) conducts personnel security investigations for the Defense Department. Only the CIA (search), Department of Energy and Nuclear Regulatory Commission (search) oversee their own investigations.

As of March, the Pentagon identified about 188,000 backlogged cases where industry personnel are waiting for clearances before they can start work.

Committee Chairman Tom Davis, R-Va., said the Pentagon set for itself a timeline for completing security clearance processes of 75 days for an initial secret clearance, 120 days for an initial top-secret clearance and 180 days for reinvestigating top-secret clearance. In fiscal year 2003, however, it took on average 375 days for a security clearance to get through the whole process.

Doug Wagoner, chairman of the Information Technology Association of America's Intelligence/Security Clearance Task Force and vice president of Data Systems Analysts (search) in Fairfax, Va., said that if a polygraph is required for a "top secret" Defense clearance, it could take up to 16 months.

"Let me be blunt: 375 days for a security clearance is unacceptable," Davis said. On Thursday, he sent a letter to Defense Secretary Donald H. Rumsfeld saying many of the weakness in the clearance process were identified more than two decades ago, and urged Rumsfeld to speed up the clearance process or face legislative "solutions."

Any improvement in the speed of clearances would help private contractors, said ITAA. The group conducted a survey recently that found that 54 percent of companies surveyed consistently recruit workers with clearances from other contractors. It also found that 22 percent of those surveyed have 500 or more open positions that require some level of clearance — which means jobs are available but bureaucratic red tape is leaving them unfilled and the nation vulnerable.

ITAA members say current delays in obtaining security clearances consistently ranks No. 1 or No. 2 among their top concerns.

"A company is not going to pay someone indefinitely while they mark time waiting for a clearance to come through," said ITAA President Harris Miller. "In essence, this means skilled employees are losing out on good paying job opportunities while work on important government contracts goes undone."

The government needs to utilize better technologies to speed up the clearance process, experts said, such as constant monitoring of employee activity through databases to check for arrests or bankruptcy activity while on the job, to speed things up.

"There are projects that have to be completed in a very short time frame and many of these have clearance requirements on them and if you're waiting on them to start the project, obviously the delay that is caused is going to affect national security," Sudhaker Shenoy, chairman of the Northern Virginia Technology Council (search) and CEO of Information Management Consultants (search), told Foxnews.com after the hearing.

"You just can't be waiting to do a project … some of these systems ought to have been done yesterday," he said. About 70 percent of NVTC members say they will only hire cleared workers.

Heather Anderson, acting director for the security office of the deputy undersecretary of defense, counterintelligence and security, said the Defense Department has made "great strides" in eliminating its backlog.

Anderson said DSS has pinpointed "bottlenecks" in investigations, such as pursuing overseas leads. DSS is in the process of hiring 200 more investigators and hopes to get them on board within 90-120 days.

DSS issued a prediction that all work prior to fiscal year 2004 will be completed by the end of September and that no cases will be more than one-year-old with the exception of some investigations on deployed workers.

Anderson said DSS also gave additional resources to the FBI, which has the largest backlog of record checks, so it can get rid of its backlog "within the next few weeks."

Although agencies are supposed to accept the clearances by other agencies — otherwise known as "reciprocity" — they often don't acknowledge them and conduct their own investigation.

Davis said that agencies denying transfer of clearances just because of turf issues is "inexcusable."

"I know of no empirical basis to support a claim that reciprocity reduces security or increases risk; instead, I contend that the failure to achieve full reciprocity can actually increase the overall security risk for the nation," said J. William Leonard, director of the Information Security Oversight Office at the National Archives and Records Administration (search) whose job it is to ensure compliance with NISP.

Leonard said there has been a recent, renewed effort by NISP members to solve the reciprocity problem so that industry can hold government accountable.

But "this declaration is not a silver bullet," he said.