Chapter 1

Table of Contents

CHAPTER 1

General Provisions And Requirements

Section 1. Introduction

1-100. Purpose.

This Manual is issued in accordance with the National Industrial

Security Program (NISP). The Manual prescribes requirements,

restrictions, and other safeguards that are necessary to prevent

unauthorized disclosure of classified information and to control

authorized disclosure of classified information released by U.S.

Government Executive Branch Departments and Agencies to their

contractors. The Manual also prescribes requirements, restrictions,

and other safeguards that are necessary to protect special classes

of classified information, including Restricted Data, Formerly

Restricted Data, intelligence sources and methods information,

Sensitive Compartmented Information, and Special Access Program

information. These procedures are applicable to licensees,

grantees, and certificate holders to the extent legally and

practically possible within the constraints of applicable law and

the Code of Federal Regulations.

1-101. Authority.

a. The NISP was established by Executive Order 12829, 6 January

1993, "National Industrial Security Program" for the protection of

information classified pursuant to Executive Order 12356, April 2,

1982, "National Security Information," or its successor or

predecessor orders, and the Atomic Energy Act of 1954, as amended.

The National Security Council is responsible for providing overall

policy direction for the NISP. The Secretary of Defense has been

designated Executive Agent for the NISP by the President. The

Director, Information Security Oversight Office (ISOO) is

responsible for implementing and monitoring the NISP and for

issuing implementing directives that shall be binding on agencies.

b. The Secretary of Defense, in consultation with all affected

agencies and with the concurrence of the Secretary of Energy, the

Chairman of the Nuclear Regulatory Commission and the Director of

Central Intelligence is responsible for issuance and maintenance of

this Manual. The Secretary of Energy and the Nuclear Regulatory

Commission shall prescribe that portion of the Manual that pertains

to information classified under the Atomic Energy Act of 1954, as

amended. The Director of Central Intelligence shall prescribe that

portion of the Manual that pertains to intelligence sources and

methods, including Sensitive Compartmented Information. The

Director of Central Intelligence retains authority over access to

intelligence sources and methods, including Sensitive Compartmented

Information. The Director of Central Intelligence may inspect and

monitor contractor, licensee, and grantee programs and facilities

that involve access to such information. The Secretary of Energy

and the Nuclear Regulatory Commission retain authority over access

to information under their respective programs classified under the

Atomic Energy Act of 1954, as amended. The Secretary or the

Commission may inspect and monitor contractor, licensee, grantee,

and certificate holder programs and facilities that involve access

to such information.

c. The Secretary of Defense serves as Executive Agent for

inspecting and monitoring contractors, licensees, grantees, and

certificate holders who require or will require access to, or who

store or will store classified information; and for determining the

eligibility for access to classified information of contractors,

licensees, certificate holders, and grantees and their respective

employees. The Heads of agencies shall enter into agreements with

the Secretary of Defense that establish the terms of the

Secretary's responsibilities on their behalf.

d. The Director, ISOO, will consider and take action on

complaints and suggestions from persons within or outside the

Government with respect to the administration of the NISP.

e. Nothing in this Manual shall be construed to supersede the

authority of the Secretary of Energy or the Chairman of the Nuclear

Regulatory Commission under the Atomic Energy Act of 1954, as

amended; or detract from the authority of installation Commanders

under the Internal Security Act of 1950; the authority of the

Director of Central Intelligence under the National Security Act of

1947, as amended, or Executive Order No. 12333 of December 8, 1981;

or the authority of any other federal department or agency Head

granted pursuant to U.S. statute or Presidential decree.

1-102. Scope.

a. The NISP applies to all executive branch departments and

agencies and to all cleared contractor facilities located within

the United States, its Trust Territories and Possessions.

b. This Manual applies to and shall be used by contractors to

safeguard classified information released during all phases of the

contracting, licensing, and grant process, including bidding,

negotiation, award, performance, and termination. This Manual also

applies to classified information not released under a contract,

license, certificate or grant, and to foreign government

information furnished to contractors that requires protection in

the interest of national security. The Manual implements applicable

Federal Statutes, Executive orders, National Directives,

international treaties, and certain government-to- government

agreements.

c. If a contractor determines that implementation of any

provision of this Manual is more costly than provisions imposed

under previous U.S. Government policies, standards or requirements,

the contractor shall notify the Cognizant Security Agency (CSA).

The notification shall indicate the prior policy, standard or

requirement and explain how the NISPOM requirement is more costly

to implement. Contractors shall, however, implement any such

provision within three years from the date of this Manual, unless

a written exception is granted by the CSA. When implementation is

determined to be cost neutral, or where cost savings or cost

avoidance can be achieved, implementation by contractors shall be

effected no later than 6 months from the date of this Manual.

d. This Manual does not contain protection requirements for

Special Nuclear Material.

1-103. Agency Agreements.

a. E.O.12829 requires the heads of agencies to enter into

agreements with the Secretary of Defense that establish the terms

of the Secretary's responsibilities on behalf of these agency

heads.

b. The Secretary of Defense has entered into agreements with the

departments and agencies listed below for the purpose of rendering

industrial security services. This delegation of authority is

contained in an exchange of letters between the Secretary of

Defense and: (1) The Administrator, National Aeronautics and Space

Administration (NASA); (2) The Secretary of Commerce; (3) The

Administrator, General Services Administration (GSA); (4) The

Secretary of State; (5) The Administrator, Small Business

Administration (SBA); (6) The Director, National Science Foundation

(NSF); (7) The Secretary of the Treasury; (8) The Secretary of

Transportation; (9) The Secretary of the Interior; (10) The

Secretary of Agriculture; (11) The Director, United States

Information Agency (USIA); (12) The Secretary of Labor; (13) The

Administrator, Environmental Protection Agency (EPA); (14) The

Attorney General, Department of Justice; (15) The Director, U.S.

Arms Control and Disarmament Agency (ACDA); (16) The Director,

Federal Emergency Management Agency (FEMA); (17) The Chairman,

Board of Governors, Federal Reserve System (FRS); (18) The

Comptroller General of the United States, General Accounting Office

(GAO); (19) The Director of Administrative Services, United States

Trade Representative (USTR); and (20) The Director of

Administration, United States International Trade Commission

(USITC). NOTE: Appropriate interagency agreements have not yet been

effected with the Department of Defense by the Department of

Energy, the Nuclear Regulatory Commission and the Central

Intelligence Agency.

1-104. Security Cognizance.

a. Consistent with 1-101e, above, security cognizance remains

with each federal department or agency unless lawfully delegated.

The term "Cognizant Security Agency" (CSA) denotes the Department

of Defense (DoD), the Department of Energy, the Nuclear Regulatory

Commission, and the Central Intelligence Agency. The Secretary of

Defense, the Secretary of Energy, the Director of Central

Intelligence and the Chairman, Nuclear Regulatory Commission may

delegate any aspect of security administration regarding classified

activities and contracts under their purview within the CSA or to

another CSA. Responsibility for security administration may be

further delegated by a CSA to one or more "Cognizant Security

Offices (CSO)." It is the obligation of each CSA to inform industry

of the applicable CSO.

b. The designation of a CSO does not relieve any Government

Contracting Activity (GCA) of the responsibility to protect and

safeguard the classified information necessary for its classified

contracts, or from visiting the contractor to review the security

aspects of such contracts.

c. Nothing in this Manual affects the authority of the Head of an

Agency to limit, deny, or revoke access to classified information

under its statutory, regulatory, or contract jurisdiction if that

Agency Head determines that the security of the nation so requires.

The term "agency head" has the meaning provided in 5 U.S.C. 552(f).

1-105. Composition of Manual.

This Manual is comprised of a "baseline" portion (Chapters 1

through 11). That portion of the Manual that prescribes

requirements, restrictions, and safeguards that exceed the baseline

standards, such as those necessary to protect special classes of

information, are included in the NISPOM Supplement (NISPOMSUP).

Until officially revised or canceled, the existing COMSEC, Carrier,

and Marking Supplements to the former "Industrial Security Manual

for Safeguarding Classified Information" will continue to be

applicable to DoD-cleared facilities only.

1-106. Manual Interpretations.

All contractor re-quests for interpretations of this Manual shall

be forwarded to the Cognizant Security Agency (CSA) through its

designated Cognizant Security Office (CSO). Requests for

interpretation by contractors located on any U.S. Government

installation shall be forwarded to the CSA through the Commander or

Head of the host installation. Requests for interpretation of DCIDs

referenced in the NISPOM Supplement shall be forwarded to the DCI

through approved channels.

1-107. Waivers and Exceptions to this Manual.

Requests shall be submitted by industry through government channels

approved by the CSA. When submitting a request for waiver, the

contractor shall specify, in writing, the reasons why it is

impractical or unreasonable to comply with the requirement. Waivers

and exceptions will not be granted to impose more stringent

protection requirements than this Manual provides for CONFIDENTIAL,

SECRET, or TOP SECRET information.

Section 2. General Requirements

1-200. General.

Contractors shall protect all classified information to which they

have access or custody. A contractor performing work within the

confines of a Federal installation shall safeguard classified

information in accordance with provisions of this Manual and/or

with the procedures of the host installation or agency.

1-201. Facility Security Officer (FSO).

The contractor shall appoint a U.S. citizen employee, who is

cleared as part of the facility clearance (FCL), to be the FSO. The

FSO will supervise and direct security measures necessary for

implementing this Manual and related Federal requirements for

classified information. The FSO, or those otherwise performing

security duties, shall complete security training as specified in

Chapter 3 and as deemed appropriate by the CSA.

1-202. Standard Practice Procedures.

The contractor shall implement all terms of this Manual applicable

to each of its cleared facilities. Written procedures shall be

prepared when the FSO believes them to be necessary for effective

implementation of this Manual or when the cognizant security office

(CSO) determines them to be necessary to reasonably foreclose the

possibility of loss or compromise of classified information.

1-203. One-Person Facilities.

A facility at which only one person is assigned shall establish

procedures for CSA notification after death or incapacitation of

that person. The current combination of the facility's security

container shall be provided to the CSA, or in the case of a

multiple facility organization, to the home office.

1-204. Cooperation with Federal Agencies.

Contractors shall cooperate with Federal agencies during official

inspections, investigations concerning the protection of classified

information, and during the conduct of personnel security

investigations of present or former employees and others. This

includes providing suitable arrangements within the facility for

conducting private interviews with employees during normal working

hours, providing relevant employment and security records for

review, when requested, and rendering other necessary assistance.

1-205. Agreements with Foreign Interests.

Contractors shall establish procedures to ensure compliance with

governing export control laws before executing any agreement with

a foreign interest that involves access to U.S. classified

information by a foreign national. Contractors must also comply

with the foreign ownership, control or influence requirements in

this Manual. Prior to the execution of such agreements, review and

approval are required by the State Department and release of the

classified information must be approved by the U.S. Government.

Failure to comply with Federal licensing requirements may render a

contractor ineligible for a facility clearance.

1-206. Security Training and Briefings.

Contractors are responsible for advising all cleared employees,

including those outside the United States, of their individual

responsibility for safeguarding classified information. In this

regard, contractors shall provide security training as appropriate,

and in accordance with Chapter 3, to cleared employees by initial

briefings, refresher briefings, and debriefings.

1-207. Security Reviews.

a. Government Reviews. Aperiodic security reviews of all cleared

contractor facilities will be conducted to ensure that safeguards

employed by contractors are adequate for the protection of

classified information.

(1) Review Cycle. The CSA will determine the frequency of

security reviews, which may be increased or decreased for

sufficient reason, consistent with risk management principals.

Security reviews may be conducted no more often than once every 12

months unless special circumstances exist.

(2) Procedures. Contractors will normally be provided notice

of a forthcoming review. Unannounced reviews may be conducted at

the discretion of the CSA. Security reviews necessarily subject all

contractor employees and all areas and receptacles under the

control of the contractor to examination. However, every effort

will be made to avoid unnecessary intrusion into the personal

effects of contractor personnel. The physical examination of the

interior space of equipment not authorized to secure classified

material will always be accomplished in the presence of a

representative of the contractor.

(3) Reciprocity. Each CSA is responsible for ensuring that

redundant and duplicative security review, and audit activity of

its contractors is held to a minimum, including such activity

conducted at common facilities by other CSA's. Appropriate intra

and/or inter-agency agreements shall be executed to fulfill this

cost-sensitive imperative. Instances of redundant and duplicative

security review and audit activity shall be reported to the

Director, Information Security Oversight Office (ISOO) for

resolution.

b. Contractor Reviews. Contractors shall review their security

system on a continuing basis and shall also conduct a formal

self-inspection at intervals consistent with risk management

principals.

1-208. Hotlines.

Federal agencies maintain hotlines to provide an unconstrained

avenue for government and contractor employees to report, without

fear of reprisal, known or suspected instances of serious security

irregularities and infractions concerning contracts, programs, or

projects. These hotlines do not supplant contractor responsibility

to facilitate reporting and timely investigation of security

matters concerning its operations or personnel, and contractor

personnel are encouraged to furnish information through established

company channels. However, the hotline may be used as an alternate

means to report this type of information when considered prudent or

necessary. Contractors shall inform all employees that the hotlines

may be used, if necessary, for reporting matters of national

security significance. CSA hotline addresses and telephone numbers

are as follows:

Defense Hotline

The Pentagon

Washington, DC 20301-1900

(800) 424-9098

(703) 693-5080

NRC Hotline

U.S. Nuclear Regulatory Commission

Office of the Inspector General

Mail StopTSD 28

Washington, D.C. 20555-0001

(800) 233-3497

CIA Hotline

Office of the Inspector General

Central Intelligence Agency

Washington, D.C. 20505

(703) 874-2600

DOE Hotline

Department of Energy

Office of the Inspector General

1000 Independence Avenue, S.W.

Room 5A235

Washington, D.C. 20585

(202) 586-4073

(800) 541-1625

1-209. Classified Information Procedures Act (CIPA).

(P.L. 96-456, 94 STAT. 2025)

The provisions of this Manual do not apply to proceedings in

criminal cases involving classified information, and appeals

therefrom, before the United States District Courts, the Courts of

Appeal, and the Supreme Court. Contractors and their employees are

not authorized to afford defendants, or persons acting for the

defendant, regardless of their personnel security clearance status,

access to classified information except as otherwise authorized by

a protective order issued pursuant to the CIPA.

SECTION 3. REPORTING REQUIREMENTS

1-300. General

Contractors are required to report certain events that have an

impact on the status of the facility clearance (FCL), that impact

on the status of an employee's personnel clearance (PCL), that

affect proper safegarding of classified information, or that

indicate classified information has been lost or compromised.

Contractors shall establish such internal procedures as are

necessary to ensure that cleared employees are aware of their

responsibilities for reporting pertinent information to the FSO,

the Federal Bureau of Investigation (FBI), or other Federal

authorities as required by this Manual, the terms of a classified

contract, and U.S. law. Contractors shall provide complete

information to enable the CSA to ascertain whether classified

information is adequately protected. Contractors shall submit

reports to the FBI, and to their CSA, as specified in this Section.

a. When the reports are classified or offered in confidence

and so marked by the contractor, the information will be reviewed

by the CSA to determine whether it may be withheld from public

disclosure under applicable exemptions of the Freedom of

Information Act (5 U.S.C. 552).

b. When the reports are unclassified and contain information

pertaining to an individual, the Privacy Act of 1974 (5 U.S.C.

552a) permits withholding of that infomation from the individual

only to the extent that the disclosure of the information would

reveal the identity of a source who furnished the information to

the U.S. Government under an expressed promise that the identity of

the source would be held in confidence. The fact that a report is

submitted in confidence must be clearly marked on the report.

1-301 Reports to be Submitted to the FBI.

The contractor shall promptly submit a written report to the

nearest field office of the FBI, regarding information coming to

the contractor's attention concerning actual, probable or possible

espionage, or subversive activities at any of its locations. An

initial report may be made by phone, but it must be followed in

writing, regardless of the disposition made of the report by the

FBI. A copy of the written report shall be provided to the CSA.

1-302 Reports to be Submitted to the CSA.

a. Adverse Information. Contractors shall report adverse

information coming to their attention concerning any of their

cleared employees. Reports based on rumor or innuendo should not

be made. The subsequent termination of employment of an employee

does not obviate the requirement to submit this report. The report

shall include the name and telephone number of the individual to

contact for further information regarding the matter and the

signature, typed name and title of the individual submitting the

report. If the individual is employed on a Federal installation,

a copy of the report and its final disposition shall be furnished

by the contractor to the Commander or Head of the installation.

NOTE: In two court cases, Becker vs. Philco and Taglia vs. Philco

(389 U.S. 979), the U.S. Court of Appeals for the 4th Circuit

decided on February 6, 1967, that a contractor is not liable for

defamation of an employee because of reports made to the Government

pursuant to the requirements of this Manual.

b. Suspicious Contacts. Contractors shall report efforts by

any individual, regardless of nationality, to obtain illegal or

unauthorized access to classified information or to compromise a

cleared employee. In addition, all contacts by cleared employees

with known or suspected intelligence officers from any country, or

any contact which suggests the employee concerned may be the target

of an attempted exploitation by the intelligence services of

another country shall be reported.

c. Change in Cleared Employee Status. Contractors shall

report (1) The death; (2) A change in name; (3) The termination of

employment; (4) Change in marital status; (5) Change in

citizenship; and (6) When the possibility of access to classified

information in the future has been reasonably foreclosed. Such

changes shall be reported by submission of a CSA designated form.

d. Representative of a Foreign Interest. Any cleared

employee, who becomes a representative of a foreign interest (RFI)

or whose status as an RFI is materially changed.

e. Citizenship by Naturalization. A. non-U.S. citizen

granted a Limited Access Authorization (LAA) who becomes a citizen

through naturalization. Submission of this report shall be made on

a CSA designated form, and include the (1) city, county, and state

where naturalized; (2) date naturalized; (3) court; and (4)

certificate number.

f. Employees Desiring Not to Perform on Classified Work.

Evidence that an employee no longer wishes to be processed for a

clearance or to continue an existing clearance.

g. Standard Form (SF) 312. Refusal by an employee to

execute the "Classified Information Nondisclosure Agreement"

(SF 312).

h. Change Conditions Affecting the Facility Clearance.

(1) Any change of ownership, including stock transfers

that effect control of the company.

(2) Any change of operating name or address of the

company or any of its cleared locations.

(3) Any change to the information previously submitted

for key management personnel including, as appropriate,

the names of the individuals they are replacing. In

addition, a statement shall be made indicating: (a)

Whether the new key management personnel are cleared,

and if so, to what level and when, their dates and

places of birth, social security numbers, and their

citizenship; (b) Whether they have been excluded from

access; or (c) Whether they have been temporarily

excluded from access pending the granting of their

clearance. A new complete listing of key management

personnel need only be submitted at the discretion of

the contractor and/or when requested in writing by the

CSA.

(4) Action to terminate business or operations for any

reason, imminent adjudication or reorganization in

bankruptcy, or any change that might affect the

validity of the FCL.

(5) Any material change concerning the information

previously reported by the contractor concerning

foreign ownership, control or influence (FOCI). This

report shall be made by the submission of a CSA-

designated form. When submitting this form, it is not

necessary to repeat answers that have not changed.

When entering into discussions, consultations or

agreements that may reasonably lead to effective

ownership or control by a foreign interest, the

contractor shall report the details by letter. If the

contractor has received a Schedule 13D from the

investor, a copy shall be forwarded with the report. A

new CSA-designated form regarding FOCI shall also be

executed every 5 years.

i. Changes in Storage Capability. Any change in the storage

capability that would raise or lower the level of classified

information the facility is approved to safeguard.

j. Inability to Safeguard Classified Material. Any emergency

situation that renders the facility incapable of safeguarding

classified material.

k. Security Equipment Vulnerabilities. Significant

vulnerabilities identified in security equipment, intrusion

detection systems (IDS), access control systems, communications

security (COMSEC) equipment or systems, and automated information

system (AIS) security hardware and software used to protect

classified material.

l. Unauthorized Receipt of Classified Material. The receipt

or discovery of any classified material that the contractor is not

authorized to have. The report should identify the source of the

material, originator, quantity, subject or title, date, and

classification level.

m. Employee Information in Compromise Cases. When requested

by the CSA, information concerning an employee when the information

is needed in connection with the loss, compromise, or suspected

compromise of classified information.

n. Disposition of Classified Material Terminated From

Accountability. When the whereabouts or disposition of classified

material previously terminated from accountability is subsequently

determined.

o. Foreign Classified Contracts. Any precontract

negotiation or award not placed through a GCA that involves, or may

involve, (1) The release or disclosure of U.S. classified

information to a foreign interest, or (2) Access to classified

information furnished by a foreign interest.

1-303. Reports of Loss, Compromise, or Suspected Compromise.

Any loss, compromise or suspected compromise of classified

information, foreign or domestic, shall be reported to the CSA.

Classified material that cannot be located within a reasonable

period of time shall be presumed to be lost until an investigation

determines otherwise. If the facility is located on a Government

installation, the report shall be furnished to the CSA through the

Commander or Head of the host installation.

a. Preliminary Inquiry. Immediately on receipt of a report

of loss, compromise, or suspected compromise of classified

information, the contractor shall initiate a preliminary inquiry to

ascertain all of the circumstances surrounding the reported loss,

compromise or suspected compromise.

b. Initial Report. If the contractor's preliminary inquiry

confirms that a loss, compromise, or suspected compromise of any

classified information occurred, the contractor shall promptly

submit an initial report of the incident unless otherwise notified

by the CSA. Submission of the initial report shall not be deferred

pending completion of the entire investigation.

c. Final Report. When the investigation has been completed,

a final report shall be submitted to the CSA. The report should

include:

(1) Material and relevant information that was not

included in the initial report;

(2) The name, position, social security number, date

and place of birth, and date of the clearance of

the individual(s) who was primarily responsible

for the incident, including a record of prior

loss, compromise, or suspected compromise for

which the individual had been determined

responsible;

(3) A statement of the corrective action taken to

preclude a recurrence and the disciplinary action

taken against the responsible individual(s), if

any; and

(4) Specific reasons for reaching the conclusion that

loss, compromise, or suspected compromise occurred

or did not occur.

1-304. Individual Culpability Reports.

Contractors shall establish and enforce policies that provide for

appropriate administrative actions taken against employees who

violate requirements of this Manual. They shall establish and

apply a graduated scale of disciplinary actions in the event of

employee violations or negligence. A statement of the

administrative actions taken against an employee shall be included

in a report to the CSA when individual responsibility for a

security violation can be determined and one or more of the

following factors are evident:

a. The violation involved a deliberate disregard of security

requirements.

b. The violation involved gross negligence in the handling

of classified material.

c. The violation involved was not deliberate in nature but

involves a pattern of negligence or carelessness.

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