They will conduct a records check for criminal activity or prior investigations, a credit check, a police check, and in person interviews with people who have worked with you and your supervisors, and neighbors or friends. You will supply the names of the people to be interviewed, but they will ask those people to give them names of others to interview as well.
"Most positions at the State Department are designated as sensitive and require a full-field background investigation and an update investigation every 5 years. DS investigators conduct personnel security investigations of all employees, applicants, contractors, and others seeking access to Department of State information and facilities."
There are three basic levels of investigation, NAC (National Agency Check), BI (Background Investigation) and SBI (Special Background Investigation). Minimum will be a BI and possibly an SBI for some jobs. Primary difference is SBI covers a longer period of time...
Here is a link to explain all the things that go into the various levels of checks, including a BI.
For this(State Dept) BI level investigation you do a NAC plus the added steps for a BI so
NAC: As a minimum, three agencies are included in each complete NAC; however, an NAC may also include a check of any or all of a number of other agencies. Defense Central Index of Investigations (DCII) -- subJects, co-subJects, or cross-referenced incidental subjects, in investigative documents held by the criminal, counterintelligence, fraud, and personnel security investigative activities of the three military departments, the National Security Agency, the Defense Criminal Investigative Service, and DIS.
A Federal Bureau of Investigation Identification Division (FBI ID) check is a technical fingerprint search, which consists of a classification of the SUBJECT's fingerprints and comparison with fingerprint cards submitted by law enforcement agencies concerning persons arrested, charged, or convicted of criminal activity. If the fingerprint card is not classifiable, a "name check only" of these files is automatically conducted.
BI: The traditional BI was a combination of record checks and interviews in the public community where the SUBJECT was employed, educated or resided. The period of investigation covers the last 5 years of the SUBJECT's life or from the date of the SUBJECT's 18th birthday, whichever was the shorter period, provided it covers the last 2 full years of SUBJECT's life, but does not precede the 16th birthday.
In addition to a valid NAC, the following elements represent the minimum BI requirements: birth, citizenship, education, employment, credit, and local agency checks.
Interviews a minimum of three developed character references whose combined association with SUBJECT covers the entire period of the investigation. References from places of education will only be interviewed when there was unfavorable information to resolve or letter of inquiry provides insufficient information. In those Instances, the special agent conducts a minimum of two education references interviews.
The special agent conducts employment reference interviews of the SUBJECT's supervisor and a co-worker at each place of employment, during the period of investigation. The SUBJECT was normally interviewed only when an investigation raises an issue.