Defense Security Service

Industrial Security Field Operations

FCL Orientation Handbook

October 2018

FCL Orientation Handbook

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Contents

Welcome Message ........................................................................................................................................................ 3

1.0 Overview of the National Industrial Security Program (NISP) ............................................................................... 4

2.0 FSO Responsibilities and Deadlines in the FCL Process ......................................................................................... 5

3.0 FCL Roadmap ........................................................................................................................................................... 6

4.0 Telephonic and FCL Orientation Meeting Preparation .......................................................................................... 7

4.1 Telephonic Survey .............................................................................................................................................. 7

4.2 FCL Initial Orientation Meeting .......................................................................................................................... 7

5.0 Business Structure and Excluded Tier Entities ....................................................................................................... 8

5.1 Business Structure Required Documents ........................................................................................................... 8

5.2 Required Forms................................................................................................................................................. 10

6.0 Specific Business Structure Guidance ................................................................................................................... 11

6.1 Corporation: ...................................................................................................................................................... 11

6.2 LLC: .................................................................................................................................................................... 12

6.3 Partnership: ...................................................................................................................................................... 13

6.4 Educational Institute: ....................................................................................................................................... 14

6.5 Sole Proprietorship: .......................................................................................................................................... 14

6.6 Branch Or Division Office: ................................................................................................................................ 15

6.7 Joint Venture: ................................................................................................................................................... 15

7.0 Excluded Tier Entity Process ................................................................................................................................. 17

7.1 Excluded Tier Entity Requirements .................................................................................................................. 17

7.2 Entity Roles and Responsibilities ..................................................................................................................... 18

8.0 Highest Cleared Tier Entity ................................................................................................................................... 19

8.1 Process Flow ..................................................................................................................................................... 19

8.2 Entity Roles and Responsibilities ..................................................................................................................... 19

9.0 Accounts and Systems .......................................................................................................................................... 20

10.0 Training................................................................................................................................................................ 21

10.1 FSO Training .................................................................................................................................................... 21

10.2 Insider Threat Program Training .................................................................................................................... 21

Appendix A: Defining KMP Authorities of Position ................................................................................................... 22

Appendix B: Exclusion Resolutions ............................................................................................................................. 24

B.1 Highest Cleared Entity Noting Excluded Entity’s Exclusion and Resolution to Exclude Parent Organization

................................................................................................................................................................................. 24

B.2 Exclusion Resolution of Corporate Organization ............................................................................................. 25

B.3 Exclusion Resolution for LLC Member (Organization) ..................................................................................... 26

B.4 Exclusion Resolution for Certain Directors, Officers, and LLC Member (if Person) ........................................ 27

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FCL Orientation Handbook

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Welcome Message

On behalf of the Defense Security Service (DSS), welcome to the first step in the Facility Clearance (FCL)

process. We recently received a request from a Government Contracting Activity (GCA) or cleared

contractor to sponsor your facility for a FCL under the National Industrial Security Program (NISP) for

performance on a classified government contract.

DSS is delegated security administration responsibilities and is the Cognizant Security Office (CSO) on

behalf of the Department of Defense (DoD). As the CSO, DSS will advise and assist your facility during

the FCL process and while you are under our cognizance in the NISP. The requirements, restrictions, and

other safeguards that cleared companies must put in place are outlined in the National Industrial

Security Program Operating Manual, referred to as the NISPOM. The NISPOM can be located on the DSS

website, at www.dss.mil in the most requested links section. You are encouraged to review the chapters

that are applicable to your security program at this time in order to understand the requirements of the

agreement you are about to enter into. The NISPOM defines a Facility Clearance as an administrative

determination that, from a national security standpoint, a company is eligible for access to classified

information at the same or lower classification level as the clearance being granted.

In order to obtain a Facility Clearance, a company must meet the eligibility requirements listed in the

NISPOM 2-102, and meet personnel security clearance requirements for certain Key Management

Personnel, or KMPs, also discussed in NISPOM chapter 2, section 1. It is important to understand that in

order to be eligible for a Facility Clearance, an organization’s employees must need access to

information that is classified at the Facility Clearance level requested. A requirement to have

background investigations to meet position or contract requirements or for access to a physical spaces is

not the same as a requirement to access classified information and does not meet the eligibility

requirement for a Facility Clearance. Please ensure you understand this requirement and how your

company meets it as verification of this will be a point of emphasis throughout the Facility Clearance

process.

The below chart represents the first 45 days of the FCL process as well as the follow up after your FCL is

issued. Day 1 of this process starts when you receive the Welcome Email identifying specific deadlines

for your company and guiding you to register for an account with the National Industrial Security System

(NISS).

FCL Roadmap

FCL Orientation

Handbook

Day 1- Day 5

Telephonic

Survey

Day 5 – Day 10

Complete

Document Upload

Day 10 – Day 20

FCL Initial Review

Day 20 - 45

Post FCL Outreach

First Year Under NISP

DSS to provide

FSOs an

educational, user

friendly, and

informative guide

to navigate

the FCL

process.

FCB personnel to

guide FSOs through

FCL process, NISS

system, explain

eadlines, and help

identify documents

and

forms required

per company’s

business structure

FSOs to upload all

documents and

forms per its

company’s

usiness structure

into NISS

ISRs to review

company’s FCL

package and prepare

for Initial FCL

Orientation meeting

FSOs

to submit

KMP e-QIPs and

fingerprints and

prepare for

meeting

DSS reaches out to facilities

residing in

NISP under a year to

determine compliance

with

NISPOM implementation of a facility

security program, and assess the facility’s

potential

risk to National Security.

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1.0 Overview of the National Industrial Security Program (NISP)

The NISP was established by Executive Order 12829, as amended, in January of 1993 for the protection

of classified information. The NISP applies to all executive branch departments and agencies, and to all

cleared contractor facilities located within the United States, its territories and possessions.

Participation is voluntary, but access to classified information will not be permitted otherwise. When

your facility receives its FCL, it will be subject to provisions of the NISPOM. You will find a link for

downloading the NISPOM at the DSS web site (http://www.dss.mil) under the Industrial Security tab.

You are expected to review and become familiar with the NISPOM. The FCL Orientation Handbook is not

intended to replace the NISPOM.

The classification levels in the NISP are CONFIDENTIAL, SECRET, and TOP SECRET. The FCL level your

facility receives is based upon the classified contract you have been awarded and its requirements. DSS

may be able to issue an interim FCL prior to issuance of the final FCL. In order to be issued an interim

FCL, DSS must first validate that there is no unmitigated foreign ownership, control, or influence (FOCI),

KMPs have personnel clearances at the interim level or higher, and the initial orientation meeting has

been completed.

A final FCL cannot be issued until required KMP are cleared at the final level of the requested FCL, there

are no open changed conditions that would impact the FCL, and the initial orientation meeting has been

completed.

If your company has other companies in its legal structure, such as parent or member companies, a

decision will be made to either clear or exclude them. The assigned DSS Industrial Security

Representative (ISR) will decide course of action during their review of the documentation in NISS.

Please note: Facilities where KMP do not already possess the level of personnel security clearance

required for the FCL may significantly impact the amount of time it takes to issue an FCL since KMP

required to be cleared in connection with the FCL will have to go through the investigation and

clearance adjudication process.

A facility where Foreign Ownership, Control, or Influence (FOCI) is present will also take a longer time to

clear because these facilities must undergo satisfactory FOCI mitigation.

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2.0 FSO Responsibilities and Deadlines in the FCL Process

Over the course of the next 45 days it is your responsibility to identify your company’s business

structure and provide required documentation and forms. To make this process transparent, the FCL

Orientation Handbook provides a roadmap to guide you along the FCL process. In addition to the FCL

Orientation Handbook, a DSS Industrial Security Representative will contact you shortly to assist in

obtaining your facility’s FCL.

There are three deadlines during the FCL process:

1. Required legal documentation and DSS forms must be submitted in NISS within 20 days of

receiving the Welcome E-mail (Day 1)

2. KMP Electronic Questionnaire for Investigations Processing (e-QIPs) must be submitted

within 45 days of receiving the Welcome E-mail (Day 1)

3. KMP fingerprints should be submitted at the same time as the e-QIP submission or within 14

days after submitting KMP e-QIPs

Essential KMP(s) who do not have personnel security clearance eligibility, have not held a personnel

security clearance in more than 24 months, or whose background investigations are out of scope will

need to complete a Standard Form 86 (SF 86) and submit electronic fingerprints. You will not have

access to e‐QIP until you receive instructions to do so. However, it is strongly encouraged that you

obtain a copy of the SF 86 and begin to gather the data that will need to be entered in e‐QIP. Please

note that the PDF or paper version of the SF 86 cannot be submitted. You must enter this information in

e‐QIP. However, the questions are the same and the PDF version can be used to assist you in gathering

the necessary data.

Electronic fingerprints must be submitted to the Office of Personnel Management, or OPM, via the

Secure Web Fingerprint Transmission (SWFT). There are numerous methods for submitting electronic

fingerprints. Most companies that are new to the NISP either receive assistance with this from their

prime contractor or another cleared company or they use the services of a third party service provider.

A list of third party service providers can be found on DMDC’s website. Please note that the locations

listed are headquarters offices and do not indicate this is the only area the provider serves. Many

providers have nationwide locations or provide fingerprint card conversion services, in which a hard

copy fingerprint card can be mailed to them for conversion to the proper electronic format and

uploading to SWFT. Whatever method you use, you should verify that the fingerprints are being

submitted to OPM via SWFT as many organizations submit fingerprints to other agencies via other

systems.

First Year Post FCL Responsibilities:

Once the Facility Clearance Branch (FCB) issues an FCL, you are required to comply with the DoD

5220.22-M “National Industrial Security Program Operation Manual (NISPOM)” and implement a

security program. Your company’s assigned ISR will reach out 120 days after the FCL is issued to conduct

a brief assessment of your facility’s compliance with NISPOM requirements and implementation of its

facility security program and additionally, per NISPOM Change 2, effective May 2016, an insider threat

program.

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3.0 FCL Roadmap

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4.0 Telephonic and FCL Orientation Meeting Preparation

4.1 Telephonic Survey

A telephonic survey will be conducted by a DSS representative within 10 days of the facility being

placed in process. You will need to familiarize yourself with this handbook in preparation for the call.

Please be prepared to discuss and ask questions on the following topics:



Reason the company is being processed for a facility clearance and the need for classified access



Company business structure



KMPs requiring PCLs and Excluded KMPs



Tier Entity/Excluded Parent process and required documentation



NISS submission process



e-QIP submission process

4.2 FCL Initial Orientation Meeting

The FCL initial orientation meeting is conducted by an ISR assigned from the local field office. Please

be prepared to discuss the following topics with the ISR during their on-site visit to the facility:



Company’s NISPOM requirements



Facility’s Security Program



Facility’s Insider Threat Program



Provide KMP U.S. citizenship verification (current or expired passport or a birth certificate, and government

issued photo ID)

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5.0 Business Structure and Excluded Tier Entities

The following section details the required business structure and excluded tier entity forms and

documents to submit in your company’s FCL Package in NISS.

Please note: In accordance with ISL 2006-02, #12 when only one person within an organization requires

access to classified information and that person and members of their immediate family are the sole

owners of the organization, that person should work as a consultant and would not require a Facility

Clearance.

5.1 Business Structure Required Documents

Business Structure

Business Records Required

PCLs for KMPs

Sole Proprietorship

 Business License

 Fictitious Name Certificate

 Recent changes to company

structure

 Owner of sole proprietorship

 Senior Management Official

(SMO)

 FSO

General Partnership

 Business License

 Fictitious Name Certificate

 Partnership Agreement

 Legal Organization Chart

 Board/Company Meeting

 Meetings*

 Recent changes to company

structure

 SMO

 FSO

 All General Partners, except:

Single Partner (must be cleared)

Management Committee (all

committee members must be

cleared)

Limited Partnership

 Business License

 Fictitious Name Certificate

 Partnership Agreement

 Certificate of Limited Partnership

 Legal Organization Chart

 Board/Company Meeting

Meetings*

 Recent changes to company

structure

 SMO

 FSO

 All General Partners, except:

Single Partner (must be cleared)

Management Committee (all

committee members must be

cleared)

 Limited Partners need PCL if they

work on classified contracts or

need access to classified

information

Joint Venture (JV)

 Business License

 Fictitious Name Certificate

 JV Agreement

 Legal Organization Chart

 Board/Company Meeting

Meetings*

 Recent changes to company

structure

 SMO

 FSO

 JV Partners must be excluded or

cleared if their duties require

access to classified information

 Officials working on JV are

cleared if their duties require

access to classified information

Privately Held Corporation

 Business License

 Fictitious Name Certificate

 Articles of Incorporation

 By-Laws

 Stock Ledger

 Legal Organization Chart

 Board/Company Meeting

Meetings*

 Recent changes to company

structure

 SMO

 FSO

 Chairman of the Board

 Vice Chair of Board, if provisions

for rotating or Pro Tem duties

 Corporate Officials are cleared if

their duties require access to

classified information

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Business Structure

Business Records Required

PCLs for KMPs

Publicly Held Corporation

 Business License

 Fictitious Name Certificate

 Articles of Incorporation

 By-Laws

 Most recent SEC filings

 Legal Organization Chart

 Board/Company Meeting

Meetings*

 Recent changes to company

structure

 SMO

 FSO

 Chairman of the Board

 Vice Chair of Board, if provisions

for rotating or Pro Tem duties

Corporate Officials are cleared if

their duties require access to

classified information classified

information

Limited Liability Company

 Business License

 Fictitious Name Certificate

 Certificate of Formation or

Articles of Organization

 Legal Organization Chart

 Operating Agreement

 LLC Meeting Meetings*

 Recent changes to company

structure

 SMO

 FSO

 LLC Members are cleared if their

duties require access to classified

information

 Managers

College/University

 Charter

 Board/University Meeting

Meetings*

 Legal Organization Chart

 Recent changes to university

structure

 SMO

 FSO

 President

 Regents/Trustees/Directors are

cleared if their duties require

access to classified information

*Include the most recent Meeting Minutes and any Meeting Minutes to reflect changes to a company’s

address, name, KMPs, etc.

** If Business Structure is not identified, discuss with ISR during Telephonic Survey

Legal Organization Chart must be submitted in the FCL Package when the sponsored facility is owned by

another legal entity. It shall reflect all U.S. and foreign parent companies including their affiliates. The

Legal Organization Chart shall identify the associations between the cleared facilities and the ultimate

parents, including the percentages of ownership, FCL status, CAGE codes and other helpful information

explaining the relationship among the companies in the chain of ownership.

Excluded KMPs: DSS will determine which Officers and Directors of the company not accessing classified

information are considered excluded, and do not need a PCL. The company must submit exclusion

resolutions for these Officers and Directors (see Appendix B).

If Key Management Personnel are cleared for contractual performance reasons and not in connection

with the FCL then this difference needs to be identified.

**FOR MORE INFORMATION ON KMP ROLES SEE APPENDIX A

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5.2 Required Forms

Forms

To Include on Forms

SF 328; Certificate Pertaining to

Foreign Interests

 Certificate pertaining to a company’s foreign interests

 Execute two original SF 328 forms for DSS and contractor retention

 SF 328 must be signed by an employee or representative of the

company who has actual authority to execute agreements with the

U.S. Government on behalf of the company

 One witness signature is required

 Upload signed SF 328 into NISS

 Provide all supplemental responses to affirmative SF 328 questions

 SF 328

Key Management Personnel

(KMP) Form

 Spell out entire KMP names

 Social Security Number not required for excluded KMPs

 KMPs must match the Articles of Organization, by-laws or

amendments

Proof of Citizenship

If applicable

 Citizenship verification in the form of a U.S. Passport, Birth

Certificate, or Certificate of Naturalization for all KMP(s) requiring

personnel security clearance processing.

DD Form 441

 Agreement between your organization and the United States

Government that details the security responsibilities of both the

cleared organization and the United States Government

 Execute two original DD 441 forms for DSS and contractor

retention.

 DD 441 must be signed by an employee or representative of the

company who has actual authority to execute agreements with the

U.S. Government on behalf of the company.

 One witness signature is required

 Upload signed DD 441 into NISS

 The date on page 1 and the Government Representative section

on page 2 should be left blank.

 DD Form 441

DD Form 441-1

If applicable

 Attachment to the DD Form 441 listing cleared divisions or branch

offices that are included in and covered by the provisions of the

organization's Security Agreement and Certificate Pertaining to

Foreign Interest.

 DD Form 441-1

 As a general note for all business types, organizations must register their business with a

physical address. The physical address is the actual address where the organization is located

and does not have to be in the state of incorporation/organization. This is the address DSS uses

for the Facility Clearance and is considered the home office. The CAGE code registration must

also match this address. Organization may also have a registered agent address, which typically

must be in the state of incorporation/organization and is usually the address documents and

notices, such as annual report filings, are mailed to by the Secretary of State.

 Some states and jurisdiction do not require certain types of organizations to have all documents

referenced. In these cases, it may be very difficult for DSS to determine if and when the

organization meets NISPOM requirements. Some documentation outlining the governance and

structure of the organization and the roles and responsibilities of the organization’s officials will

be required to determine eligibility for a Facility Clearance.

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6.0 Specific Business Structure Guidance

6.1 Corporation:

The business documents required for a privately or publicly held corporation include the Certificate or

Articles of Incorporation, which are filed with the Secretary of State’s office in the state or jurisdiction

where the corporation is incorporated, Corporate Bylaws describing the rules governing the regulation

of a corporation’s internal affairs, initial and most recent Shareholder and Board of Directors Meeting

Minutes, as well as those approving any significant changes to the Corporation, a stock ledger listing the

individuals and organizations that hold stock in or shares of the corporation or SEC filings for publicly-

held corporations, and a legal organization chart showing the corporation’s ownership and its

connections to other business entities. You may also wish to include a legal organization chart showing

the internal management structure of the company.

The KMP list for a corporation must include all shareholders, if they are people, directors, and officers.

Shares or stock of a corporation may be held by either people or other organizations. If held by people,

these people are called share or stock holders and must be listed on the KMP list with their ownership

percentages. If organizations, they are considered “tiered parents” and should be listed in “Package

Summary Comments for DSS” under the “Industry-DSS Package Comments” section of the FCL package

in NISS. Shareholder control and authority varies. Shareholders, either people or organizations, are not

typically required to be cleared simply because they are shareholders. However, if they have significant

control or authority over the cleared corporation, they may require a clearance.

Directors, not including the Chairman of the Board, typically do not hold authority that would prevent

them from being effectively excluded but this may vary from corporation to corporation. The Chairman

of the Board must always be cleared. If a corporation has a rotating Chairman, those who may hold this

position must be cleared to the appropriate level prior to filling the role and should be processed for

clearances accordingly.

In most corporations, those holding the titles of Chief Executive Officer and President typically hold the

highest day‐to‐day management authority, and must be cleared. Most corporations also have a

Secretary and Treasurer and possibly a Vice President or Vice Presidents. Traditional authority

associated with these roles would allow them to be effectively excluded. Other officer titles designated

in the bylaws must also be listed on the KMP list. Typically, these officers report to the CEO or President

and can be effectively excluded.

For all shareholders, directors, and officers, each corporation should review the authorities and roles

and compare these to the exclusion criteria in NISPOM 2‐106 and the typical responsibilities associated

with each role described in the Facility Clearance Orientation Handbook to make a preliminary

determination about whether or not they can be effectively excluded. The assigned Industrial Security

Representative will make the final decision regarding exclusion upon analyzing the corporation as a

whole.

Finally, the FSO and ITPSO must be listed on the KMP list and must be cleared or processed for a

personnel security clearance at the level of the facility clearance requested.

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6.2 LLC:

The business documents required for a Limited Liability Company, or LLC, include the Certificate or

Articles of Organization, which are filed with the Secretary of State’s office in the state or jurisdiction

where the company is organized, an Operating Agreement, which describes the governance of the LLC's

business and financial and managerial rights and duties, initial and most recent Member or Manager

Meeting Minutes, as well as those approving any significant changes to the Company, a membership

ledger that lists the individuals and organizations that hold membership interest in the company, and a

legal organization chart showing the company’s ownership and its connections to other business

entities. You may also wish to include a legal organization chart showing the internal management

structure of the company.

The KMP list for an LLC must include all members, if people, and managers, as well as officers, if they are

described in the company’s Operating Agreement.

LLCs are a relatively new type of business structure that allows for greater flexibility than the traditional

business structures. As a result, their setup can vary widely. The legal requirements for an LLC also vary

widely by state and jurisdiction.

Members of an LLC are the owners of the company, similar to shareholders of a corporation, and may

be people or other organizations. In an LLC, the management of the company is either automatically

vested in the members by virtue of their being members (called “member‐managed”) or vested in a

separately designated manager, managers, or board of managers (manager‐managed). Members are

not generally required to be cleared simply because of their ownership interest. However, this will vary

depending on their specific authority to control or influence the business.

Managers of an LLC are generally required to be cleared as it is extremely rare that they have a level of

authority that would allow them to be effectively excluded. In an LLC with multiple managers with

varying levels of interest or a Board of Managers or similar executive body, this may vary. However, the

chairman or manager with majority interest will almost definitely be required to be cleared.

Because of the flexibility of an LLC, LLCs may create corporate‐style officer positions but this is relatively

rare. Often, members and managers refer to themselves using corporate‐style titles, such as CEO and

President, because they are more recognizable in the business world, without outlining these in the

business documents. For the purpose of the KMP list for DSS, companies should enter any and all titles

that are outlined in business documents and refrain from including titles that are only used in practice.

Whether or not the individuals in these positions require a clearance will depend on their role as

described in the business documents. These titles vary from being essentially “in name only” titles to

holding responsibility similar to that of a corporation so they can be difficult to assess.

Please note that because of the flexibility of LLCs, it is possible to have an LLC that is owned by another

organization and member‐managed, making the owning organization the manager. Most organizations

that are set up this way did this by default without fully explaining how the owning organization would

“manage” the day‐to‐day operations of the LLC. In most cases, the way these LLCs are operating does

not align with the description in their business documents. It can be extremely difficult for DSS to

determine if and when these LLCs meet NISPOM requirements for a facility clearance.

The FSO and ITPSO must be listed on the KMP list and must be cleared or processed for a personnel

security clearance at the level of the facility clearance requested.

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6.3 Partnership:

There are three common types of partnership: General Partnerships, Limited Partnerships, and Limited

Liability Partnerships although other types may exist in some states or jurisdictions. A General

Partnership consists of all General Partners. A Limited Partnership consists of one or more General

Partners and one or more Limited Partners.

Limited Liability Partnerships are more similar to LLCs, with Partners being similar to Members, and are

formed through Articles of Organization. For the purpose of this section, we will focus on General

Partnerships and Limited Partnerships

For Limited Partnerships, a Certificate of Limited Partnership is filed with the Secretary of State’s office.

General Partnerships are typically formed without official registration with a Secretary of State, although

some jurisdictions may require a Business License, a Fictitious/Trade Name Registration, or other similar

documentation. Regardless, General Partnerships must provide documentation to DSS that

demonstrates their legal existence as a General Partnership, the name they are doing business under,

and the jurisdiction whose laws they are organized and operating under.

Note that organizations that use General Partnership, General Partners, or GP in the name are rarely

actually General Partnerships. Most often, they register as another business type such as an LLC. For

example, ABC General Partners, LLC is an LLC and not a General Partnership for the purpose of NISP

participation and you should refer to the section of this Orientation on LLCs for the business document

and KMP requirements. However, if there is a Partnership Agreement in addition to an Operating

Agreement in this scenario, both should be provided to DSS.

A partnership agreement is a contract between two or more business partners that establishes the

responsibilities of each partner and general rules about the partnership. Partnership Agreements may

not be required for all partnership types in all states. However, DSS will need to be provided with some

documentation that outlines the responsibilities of the partners and the basic rules and structure of the

partnership in order to determine if or when it meets the eligibility requirements for a Facility Clearance.

You must provide a legal organization chart showing the partnership’s ownership and any connections

to other business entities. You may also wish to include a legal organization chart showing the internal

management structure of the company.

The KMP list for a General or Limited Partnership should include all General and Limited Partners who

are people. General or limited partners that are organizations must alternatively be listed in “Package

Summary Comments for DSS” under the “Industry-DSS Package Comments” section of the FCL package

in NISS.

General partner is the name given to partners that have active involvement in managing the

partnership. As such, General Partners must be cleared. Both General Partnerships and Limited

Partnerships have at least one General Partner.

Limited partner is the name given to a partner that does not participate in management of the business.

As such, Limited Partners can generally be effectively excluded. General Partnerships do not have any

Limited Partners. Limited Partnerships may have one or more Limited Partners in addition to their

General Partner(s). Like Members of an LLC and Shareholders of a Corporation, Partners may be people

or other organizations. If a General Partner is an organization, it must be clear in business documents

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what person or people are managing the business and how they are doing so. If this is not clear in

business documents, it may be difficult or impossible for DSS to determine when or if the Partnership

meets eligibility requirements for a Facility Clearance.

The FSO and ITPSO must be listed on the KMP list and must be cleared or processed for a personnel

security clearance at the level of the facility clearance requested.

6.4 Educational Institute:

Educational institutions vary widely in how they are established and governed, which may change the

required business documents and KMP identification significantly. Each institution should review its

record thoroughly and compare its structure to that of other business types, if applicable.

In general, a charter is given by provincial, state, regional, and sometimes national governments to

legitimize the university's existence. If the charter does not describe how the organization is run and

who has authority to manage the organization, a separate document, such as bylaws or a constitution,

must be provided.

Board Meeting Minutes from a Board of Regents/Trustees/Directors/Managers or other executive or

governing board must be provided if they are needed to support existence of or significant changes to

the organization or the designation or elections of members of the board or officers.

A legal organization chart must be provided to show the organization’s ownership, if applicable, and any

connections to other business entities. You may also wish to include a legal organization chart showing

the internal management structure of the organization.

The KMP list for colleges and universities varies. However, in general, it must include all officials

described as having a role in the governance of the organization in governance documents.

Typically, the President of a University or College is the highest management authority and must be

cleared. The management of the business affairs of the organization may be accomplished through a

Board of Regents/Trustees/Directors/Managers or other type of executive or governing body.

Depending on their level of authority, all or some may be able to be effectively excluded. However, a

chairman or quorum may need to be cleared. In a college or university, another official, such as a

program manager or director, may be responsible for classified contracts. This person must be cleared.

The FSO and ITPSO must be listed on the KMP list and must be cleared or processed for a personnel

security clearance at the level of the facility clearance requested.

6.5 Sole Proprietorship:

The requirements for legal registration of a sole proprietorship vary by state and jurisdiction and there

are often multiple options. DSS requires documentation demonstrating that the sole proprietorship is

legally organized and existing as a sole proprietorship and identifying the jurisdiction whose laws it is

operating under. Depending on the state, this may be a business license, a fictitious name certificate, a

certificate of sole proprietorship or another similar document.

The KMP list for a sole proprietorship must include the sole proprietor. The sole proprietor is the owner

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of a sole proprietorship and must always be cleared to the level of the Facility Clearance.

Additionally, the FSO and ITPSO must be listed on the KMP list and must be cleared or processed for a

personnel security clearance at the level of the facility clearance requested.

6.6 Branch Or Division Office:

A branch office or division is a separate location of an existing legal entity, referred to as a multiple

facility organization (MFO). Because a branch office is part of the same legal entity as its home office,

they must have the same legal name. In most cases, only the home office requires a facility clearance. A

branch office or division only requires a separate Facility Clearance issued by DSS if it will need to be

able to safeguard collateral classified information within that office. If it will need to exclusively

safeguard classified information that is not under DSS cognizance, a Facility Clearance issued by DSS is

not required, but other requirements will need to be met as determined by the organization that does

have cognizance. If no safeguarding is needed at the branch office, administrative security

requirements, such as personnel security clearance processing and training, are handled by the home

office via its security program.

For branch offices that do require a Facility Clearance, the home office must always be cleared to the

same or a higher level as the branch office. If you are a branch office or division and your home office is

not cleared or in-process for a facility clearance, please contact the DSS Knowledge Center immediately.

Because the majority of the legal business documents and forms required are provided by the home

office, the FCL package requirements for a branch office or division are minimal. The required

documents include any business records of the legal entity that apply specifically to the branch office,

such as meeting minutes establishing a new office location, a KMP list, a DD Form 441‐1, which is signed

by home office, and a legal organization chart.

The KMP list for a branch office is the only type of KMP list in which the individuals listed are not

required to be designated in legal business documents. The KMP list for a branch office should include a

SMO specific to the site, which is the person who has senior management authority at that office, the

branch office FSO and the ITPSO. The ITPSO must be listed on the branch office KMP list even if this is a

corporate‐wide ITPSO.

6.7 Joint Venture:

Joint Ventures are becoming more and more popular. Joint Ventures, or JVs, can be formed in a couple

of ways.

A JV by Contract is generally a team of two or more legal business entities that has entered into a

contract together to work on a specific project. They do not form a separate legal operating entity, but

have a contract that outlines the terms of their arrangement.

Alternatively, a JV can be formed following a similar agreement between two or more organizations to

form a legal operating entity, such as a Corporation, an LLC, or a Partnership to serve as the JV.

There are 2 key points to consider with JVs:

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First, in accordance with NISPOM 2‐102b, in order to be eligible for a Facility Clearance, an organization

must be legally organized and existing in the United States. Therefore, JVs by contract that have not

formed a legal registered operating entity are not eligible for a Facility Clearance.

Second, JVs may be either populated or unpopulated. This means that the JV entity either itself has

employees or does not have employees, in which case the employees remain employees of the

organizations that make up the JV. In accordance with NISPOM 1‐201, 1‐202b, 2‐104, the FSO, the

ITPSO, and the SMO must be employees of the organization holding the Facility Clearance. Therefore,

the JV must have an employee(s) who hold these positions. There may be regulations that provide that a

JV may not be populated with individuals intended to perform on contracts awarded to the JV. That is,

the JV may have its own separate employees to perform administrative functions, but may not have its

own separate employees to perform on contracts awarded to the JV. Note that this scenario does not

conflict with the NISPOM requirements to have employees performing administrative security functions.

If a classified contract is awarded to the JV, the JV needs a Facility Clearance. If the contracts is

exclusively awarded to one or both JV partners, those organizations require Facility Clearances.

Business records and KMP requirements are determined by the type of legal entity. For example, many

JVs organize as LLCs. This organization should have Articles of Organization, and an Operating

Agreement. Although, it may also have a JV Agreement or it may cover the operation of the organization

as both an LLC and a JV in one or the other. Both the Operating agreement and the JV Agreement should

be provided to DSS, if both exist.

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7.0 Excluded Tier Entity Process

The objective of this process is to clear the sponsored facility and identify tiered companies to exclude

from access to classified information. A tiered company, also known as a parent company, is defined as

a company owning at least a majority of another company’s voting securities. DSS determines if tiered

companies are required to obtain an FCL or can be excluded from access to classified information. If a

tiered company needs to be cleared, it will also be placed in process and cleared concurrently with the

company that was awarded the contract.

NOTE: Parent companies should be identified in “Package Summary Comments for DSS” under the

“Industry-DSS Package Comments” section of the FCL package in NISS. Please include the parent

company’s legal name, CAGE Code, address, and a designated Point of Contact’s name, email address

and phone number.

7.1 Excluded Tier Entity Requirements

The process flow below outlines the required documents the sponsored facility must provide to DSS on

behalf of any intermediate excluded entities and the ultimate excluded entity. In this process neither the

ultimate excluded entity nor any of the intermediate tiered entities hold a FCL.

Sponsored Facility

 Submits all required NISS Forms and

Documents per its Business

Structure

 Submits Subsidiary Acknowledgement of

Exclusion Resolution

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9.0 Accounts and Systems

The table below outlines the Accounts and Systems the FSO must activate or leverage to submit

additional documents for its Facility to receive its FCL and to maintain a compliant security program

after obtaining the FCL.

Accounts

Reason for Account

Description

Commercial and

Government Entity

(CAGE) Code

Provides a standardized

method to identify your

Specific facility

The CAGE Code is a five-character ID

number used extensively within the federal

government, assigned by the Department of

Defense’s Defense Logistics Agency (DLA). If

your company does not already have a

CAGE Code for the facility requiring

clearance, one may be obtained by visiting

System for Award Management (SAM).

SAM LINK

Joint Personnel

Adjudication

System (JPAS)

System to serve as the record to perform

comprehensive personnel security,

suitability, and credential eligibility

management.

*Account MUST be established within 30

days of the FCL being issued.

JPAS is the system of record for personnel

security clearances. All PCL eligibility and

access records for KMPs and those requiring

access to classified information must be

kept up-to-date in JPAS. Because a person

cannot view or take action on their own

JPAS record, cleared companies must have

at least two (2) JPAS account holders to

comply with NISPOM requirements. The

Defense Manpower Data Center (DMDC) is

the functional manager of JPAS. Full JPAS

Account Request procedures are available

on their website.

JPAS LINK

The Defense Information System for

Security (DISS)

System to serve as the record to perform

comprehensive personnel security,

suitability, and credential eligibility

management.

Once fully deployed, DISS will replace JPAS.

DISS provides secure communications

between Adjudicators, Security Officers, and

Component Adjudicators in support of

eligibility and access management.

DISS LINK

Electronic Questionnaires for Investigations

Processing(e-QIP)

Submit KMP information through this

system as part of the PCL process

e-QIP allows the user to electronically enter,

update and transmit their personal

investigative data over a secure internet

connection to a requesting agency.

E-QIP LINK

National Industrial Security System (NISS)

System of Record for Facility Clearances

*NISS is behind a system called the NISP

Central Access Information Security System

(NCAISS). This web‐based application

provides PKI‐based authentication for DSS

applications. You will need a PKI certificate

to obtain access to NCAISS and NISS.

NISS replaces and expands upon capabilities

of two legacy systems, ISFD, and e-FCL, and

automates the Initial Facility Clearance

process. This system also expands access

and transparency to security professionals’

facility information.

NISS LINK

Secure Web Fingerprint Transmission

(SWFT)

Submit KMP fingerprints through SWFT or

third party vendor to complete KMP’s PCL

process

*Account created after Facility is issued its

FCL.

SWFT allows the submission of fingerprints

to be uploaded electronically through its

system. (All fingerprint images that are

provided in support of background

investigations must be captured and

submitted electronically)

For SWFT access, submit DMDC’s new

Personnel Security System Access Request

(PSSAR) form to the DMDC Contact Center

for processing

SWFT LINK

Security Training, Education, and

Professionalization Portal (STEPP)

Provides courses for Contractor’s security

professionals

Program maintaining the list of courses DSS

provides to security professionals. The

courses are intended for use by Department

of Defense and other U.S. Government

personnel and contractors within the NISP.

STEPP LINK

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10.0 Training

Training Classes

Link

Center for Development of Security Excellence (CDSE)

Toolkits

https://www.cdse.edu/toolkits/index.html

FSO Toolkit

https://www.cdse.edu/toolkits/fsos/index.php

ITPSO Toolkit

https://www.cdse.edu/toolkits/insider/index.php

The CDSE Toolkits are a repository of role-based resources that serve as a one-stop shop for security

essentials. Each toolkit points you to the resources you need to help perform your role. The FSO Toolkit

and Insider Threat Toolkit will be one of your most important resources while you are participating in

the NISP.

10.1 FSO Training

A list of the required FSO Training is available in the FSO Toolkit. FSO’s of companies that will require

safeguarding should sign up for the FSO Program Management for Possessing Facilities. FSO’s of

companies that do not require safeguarding should sign up for FSO Orientation for Non‐Possessing

Facilities. Both courses are offered on the Security Training, Education and Professionalization Portal, or

STEPP, which is available on the DSS website under Information Systems. You will need to take each

course as well as the corresponding exam. The sooner you take this training, the easier it will be to set

up your security program and understand your requirements under the NISP.

10.2 Insider Threat Program Training

The requirements for your Insider Threat Program can be found in NISPOM 1‐202 and ISL 2016-02. You

are required to nominate an Insider Threat Program Senior Official (ITPSO). This person will be

considered a KMP along with the FSO, SMO, and other KMP(s). The ITPSO can be the same individual as

the FSO, or it can be a different person. Corporate families are able to nominate a corporate ITPSO.

The ITPSO MUST take training within 30 days of being formally appointed ITPSO. The ITPSO may choose

to use an existing training course to meet this requirement called Establishing an Insider Threat Program

for your Organization. This course is offered on STEPP, which is available on the DSS website under

Information Systems.

The ITPSO must also certify that a written Insider Threat Program is in place. Your ISR will talk to you

more about this when they are onsite for the Initial Orientation Meeting. Additional information,

including a plan template and job aid, is available at the Industry Insider Threat and Resources link in the

most requested links section of the DSS website.

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Appendix A: Defining KMP Authorities of Position

KMP Role

Authorities of the Position

CEO

 Highest ranking executive manager in a corporation or organization’s by-laws or

organizational documents

 Responsible for the overall success/management of the organization

 Ultimate authority to make final decisions for an organization

 Responsibility for creating, planning, implementing, and integrating the strategic

direction/vision of an organization

 Reports to a Board of Directors and serves at the discretion of the

 Board of Directors

President

 Creates, communicates, and implements the organization's vision, mission, and

overall direction

 Leads, guides, directs, and evaluates the work of other executive leaders including

senior vice presidents, vice presidents and directors

 Formulates and implements the strategic plan that guides the direction of the

business

 Oversees the organization in accordance with the direction established in the

strategic plans

Chairman of the Board

 Trusted with the responsibility of chairing a board or organization

 Governs the board according to the bylaws of the organization. The chairman must

attend the board meetings and committees regularly.

 Committed to board duties and has vast knowledge of the organization itself

 Evaluates annual performance of the organization

 Chairman rarely involves themselves in the company's day-to-day operations,

instead concentrating on the bigger picture and various strategies to increase the

company's bottom line

 Institutes company policies and guidelines, and make certain that they are carried

out via upper management

 Recruits, interviews, and hires the CEO

 Votes on key issues surrounding the company; when board is at a standstill on an

issue, the chair makes the final decision

Manager

 For an LLC, only a manager or authorized officer can bind the LLC as specified in the

Operating Agreement or when there is no operating agreement, State Law where

LLC is formed

 Elected by the members

 Decision authority on key policies, transactions, and establishment of guidelines for

how the LLC will operate

 Can appoint officers to serve at the pleasure of the manager

General Partner

 Full management control and also accepts full personal responsibility for

partnership liabilities as specified by state law where the partnership was formed

and the partnership agreement

 Right to manage the business, conduct transactions on the behalf of the business,

and are liable for the business’ debts

 Commonly is active in the day-to-day operations of the business

 May be an individual or company

Shareholder

 Makes a financial investment in the corporation, which entitles those with voting

shares to elect the directors as specified in the Shareholders agreement and/or

state law

 Does not normally have any rights to be involved directly in company management

 Connection to company management is typically via the Board of Directors

 If shareholder is not satisfied with the performance of the directors,

 they may remove the directors or refuse to re-elect them

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KMP Role

Authorities of the Position

Board of Director

 Protects shareholders’ assets and ensure they receive a decent return on

investment

 Provides oversight and strategic direction on behalf of the shareholders as

authorized in the by-laws or State law

 Monitors corporate governance within an organization

 Approves financial statements

 Selects and evaluates CEO; approves appropriate compensation for CEO

 Evaluates attractiveness of and pay dividends

 Oversees share repurchase programs, recommend stock splits, etc.

 Recommends or discourages mergers and acquisitions

Vice President

 Second in command in an organization and has specific responsibilities

depending on the needs of his or her organization as directed by the by- laws

 Assists in formulating and implementing the strategic plan that guides the

direction of the business or their area of responsibility

 Leads, guides, directs, and evaluates the work of other executive leaders

including assistant vice presidents, directors, and managers

 Achieves the organization's overall strategic goals and profitability

requirements as determined by the strategic plans

 Assists creating, communicating, and implementing the organization’s vision,

mission, and overall direction

 In the President’s absence, the Vice President acts in the role

Chief Operating Officer (COO)

 Responsible for the daily operations.

 Provides communication, leadership, and guides management as necessary to

ensure that company has the proper operational controls, administrative and

reporting procedures in place to effectively grow the organization

 Ensures effective communication with the President/CEO by keeping him/her

informed of daily operations

 Ensures that operating objectives and standards of performance are

understood by management and employees

 Ensures that Company complies with all applicable legal and regulatory

requirements and, where appropriate, best practice to maximize the financial

integrity of Company

 Ensures appropriate and satisfactory systems are in place for monitoring

Company performance against planned and budgeted expectations

Limited Partner

 Generally does not have any kind of management responsibility.

 They are not material participants, strictly investors

 Share in profits and losses based on share of ownership

Member

 Similar to a stockholder in a corporation. Responsible for formation of the LLC

and/or having owning interest in the LLC as designated in the Operating

Agreement and/or State Law when there is no Operating Agreement

 Chooses a manager to manage the LLC

 Can also be the manager

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Appendix B: Exclusion Resolutions

B.1 Highest Cleared Entity Noting Excluded Entity’s Exclusion and Resolution to Exclude

Parent Organization

I, (Insert Full Name), the duly elected Secretary of (Insert Name of Highest Cleared Entity), a corporation in the

State of (Insert Name of State), do hereby certify that the following is a true and complete copy of a resolution

passed at a meeting of the Board of Directors of said Corporation, at which a quorum was present, duly called, and

held

(Insert Month Day, Year).

BE IT RESOLVED that officials of (Insert Name of Highest Tier Excluded Entity and any Intermediate

Entities), the ultimate tier entity organization, or any of the intermediate tier entities of (Insert Name and Address

of Highest Cleared Entity), shall not require and shall not have access to classified information in the custody of

(Insert Name of Highest Cleared Entity), a subsidiary organization or any other facilities reporting to (Insert Name

of Highest Cleared Entity) that require access to classified information.

BE IT FURTHER RESOLVED that (Insert Name of Highest Cleared Entity) hereby acknowledges the

execution of a resolution by (Insert Name and Address of Highest Excluded Entity) whereby the Corporation, its

officers and directors, as such, and intermediate entities will not require and will not have access to classified

information in the custody of (Insert Name of Highest Cleared Entity), a subsidiary corporation, and further that

this action will not affect adversely the policies of said subsidiary involving the security and safeguarding of

classified information or performance of classified contracts.

BE IT FURTHER RESOLVED that these actions of the Board of Directors of the (Insert Name of Highest

Cleared Entity) are taken for the purpose of exempting the (Insert Name of Highest Tier Excluded Entity and

Intermediate Tiers) from the necessity of being processed for a Facility Security Clearance equivalent to that held

by the (Insert Name of Highest Cleared Entity) in conformity with the “National Industrial Security Program

Operating Manual.”

IN WITNESS WHEREOF I have hereunto set my hand and affixed the seal of (Insert Name of Highest

Cleared Entity) this (Insert Date).

_______________________________________Signature

Note: Two copies shall be furnished to the local DSS Industrial Security field office with an original signature and

corporate seal on each. One copy shall be furnished to the subsidiary. Both the highest tiered excluded entity and

the highest cleared subsidiary must execute a “Certificate Pertaining to Foreign Interest” (SF 328).

If the parent is to be excluded from a higher category of classified information, the next to last paragraph should

read “… from the necessity of having to be processed for a Facility Security Clearance equivalent to that held by

the (Name of Subsidiary).”

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B.2 Exclusion Resolution of Corporate Organization

I, (Insert Full Name), the duly elected Secretary of (Insert Name of Highest Tier Excluded Entity), a corporation

organized in the State of (Insert Name of State), located at (Insert Address of Highest Tier Excluded Entity) do

hereby certify that the following is a true and complete copy of a resolution passed at a meeting of the Board of

Directors of said Corporation, at which a quorum was present, duly called and held (Insert Month Day, Year).

BE IT RESOLVED that (Insert Name and Address of Highest Tier Excluded Entity and Intermediate Entities),

its officers and directors, as such, will not require and will not have access to classified information in the custody

of (Insert Name of Highest Cleared Entity), or any other facilities reporting to (Insert Name of Highest Cleared

Entity) that require access to classified information, and further that (Insert Name of Highest Cleared Entity), has

been delegated full authority to act completely independent of (Insert Name of Highest Tier Excluded Entity and

intermediate tiers) in all matters that involve or relate to (Insert Highest Cleared Entity’s) responsibility to perform

on classified contracts, to include safeguarding classified information.

BE IT FURTHER RESOLVED that this action is taken for the purpose of exempting (Insert Name of Highest

Tier Excluded Entity and Intermediate Tiers) from the necessity of being processed for a Facility Security Clearance

(FCL) in conformity with the “National Industrial Security Program Operating Manual (NISPOM).” In lieu of a

Facility Security Clearance, (Insert Name of Highest Tier Excluded Entity) will report any changed conditions, as

defined in NISPOM 2-102, within the complete organizational structure that may impact the FCL eligibility of

(Insert Name of Highest Cleared Facility). Any changes that may impact FCL eligibility of (Insert Name of Highest

Cleared Facility) will be disclosed to the Facility Security Officer at (Insert Name of Highest Cleared Facility) or in

special circumstances, directly to the Defense Security Service.

IN WITNESS WHEREOF I have hereunto set my hand and affixed the seal of (Insert Name of Company) this

(Insert Date).

_______________________________________Signature

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B.3 Exclusion Resolution for LLC Member (Organization)

I, (Insert Full Name), the duly elected (Management Official Title) of (Insert Name of LLC Member), a (Type of

Organization) organized in the State of (Insert Name of State), located at (Insert Address of LLC Member) do hereby

certify that the following is a true and complete copy of a resolution passed at a meeting of the (Type of

Management Board) of (Management Officials) of said (Type of Organization), at which a quorum was present,

duly called and held (Insert Month Day, Year).

BE IT RESOLVED that (Insert Name and Address of LLC Member), its management officials, as such, will not require,

shall not have, and can be effectively and formally excluded from access to classified information disclosed to

(Insert Name of subject LLC), a Limited Liability Company, and further that (Insert Name of subject LLC), has been

delegated full authority to act completely independent of (Insert Name of LLC Member) in all matters that involve

or relate to (Insert Name of subject LLC)’s responsibility to safeguard information.

BE IT FURTHER RESOLVED that (Insert Name and Address of LLC Member), is taken for the purpose of exempting

the (Insert Name of LLC Member) from the necessity of being processed for a Facility Security Clearance in

conformity with the “National Industrial Security Program Operating Manual.”

Signature

Date

(Senior Management Official of LLC Member)

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B.4 Exclusion Resolution for Certain Directors, Officers, and LLC Member (if Person)

I, (Insert Full Name), do hereby certify that I am (Identify eligible KMP officer/position title) of (Insert Name of

Corporation), a (Insert Corporation, Company) organized and existing under the laws of the State of (Insert Name of

State), and that the following is a true and correct copy of a resolution adopted by the Board of Directors,

management board, or a similar type of executive body of the said (Insert Corporation, Company) at a meeting

held at (Insert Location) on (Insert Month, Day, Year) at which time a quorum was present.

WHEREAS, current Department of Defense Regulations contain a provision making it mandatory that the

Chairman of the Board, Senior Management Official and Facility Security Officer meet the requirements for

eligibility for access to classified information established for a contractor facility security clearance; and

WHEREAS, said Department of Defense Regulations permit the exclusion from the personnel of the

requirements for access to classified information of certain members of the Board of Directors and other officers,

provided that this action is recorded in the corporate minutes.

NOW THEREFORE BE IT DECLARED that the Chairman of the Board, Senior Management Official and

Facility Security Officer at the present time do possess, or will be processed for, the required eligibility for access to

classified information; and

BE IT RESOLVED that in the future, when any individual enters upon any duties as Chairman of the Board,

Senior Management Official and Facility Security Officer, such individual shall immediately make application for the

required eligibility for access to classified information; and

BE IT RESOLVED AND DIRECTED that the following members of the Board of Directors and other officers

or members shall not require, shall not have, and can be effectively and formally excluded from access to all

CLASSIFIED information disclosed to the corporation/company and shall not affect adversely corporate/company

policies or practices in the performance of classified contracts for the Department of Defense or the Government

contracting activities (User Agencies) of the National Industrial Security Program.

NAME

TITLE

IN WITNESS WHEREOF I have hereunto set my hand and affixed the seal of (Insert Name of Company) this

(Insert Day/Month of Year).

_______________________________________

Signature

Note: Two copies shall be furnished to the local DSS Industrial Security field office with an original signature and

corporate seal on each. One copy shall be furnished to the subsidiary. Both the highest excluded entity parent

and highest cleared subsidiary must execute a “Certificate Pertaining to Foreign Interest” (SF 328).