[Senate Hearing 112-391]
[From the U.S. Government Printing Office]
S. Hrg. 112-391
INTELLIGENCE COMMUNITY CONTRACTORS: ARE WE STRIKING THE RIGHT BALANCE
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HEARING
before the
OVERSIGHT OF GOVERNMENT MANAGEMENT,
THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 20, 2011
__________
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Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska JERRY MORAN, Kansas
Michael L. Alexander, Staff Director
Nicholas A. Rossi, Minority Staff Director
Trina Driessnack Tyrer, Chief Clerk
Joyce Ward, Publications Clerk and GPO Detailee
OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan RON JOHNSON, Wisconsin
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
MARK BEGICH, Alaska JERRY MORAN, Kansas
Lisa M. Powell, Majority Staff Director
Eric Tamarkin, Counsel
Rachel R. Weaver, Minority Staff Director
Jena N. McNeill, Professional Staff Member
Aaron H. Woolf, Chief Clerk
C O N T E N T S
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Opening statement:
Page
Senator Akaka................................................ 1, 29
Prepared statement:
Senator Akaka................................................ 39
WITNESSES
Tuesday, September 20, 2011
Hon. Daniel I. Gordon, Administrator, Federal Procurement Policy,
Office of Management and Budget................................ 3
Hon. Charles E. Allen, Senior Intelligence Advisor, Intelligence
and National Security Alliance................................. 9
Mark W. Lowenthal, Ph.D., President and CEO, The Intelligence and
Security Academy, LLC.......................................... 11
Scott H. Amey, General Counsel, Project on Government Oversight.. 13
Joshua Foust, Fellow, American Security Project.................. 15
Classified Secret Session
Edward L. Haugland, Assistant Inspector General for Inspections,
Officer of Inspector General, Office of the Director of
National Intelligence, accompanied by George D. Bremer, Jr..... 30
Paula J. Roberts, Associate Director of National Intelligence for
Human Capital and Intelligence Community Chief Human Capital
Officer, Office of the Director of National Intelligence,
accompanied by Alex Manganaris and Sharon Flowers.............. 31
Alphabetical List of Witnesses
Allen, Hon. Charles E.:
Testimony.................................................... 9
Prepared statement........................................... 47
Amey, Scott H.:
Testimony.................................................... 13
Prepared statement........................................... 59
Foust, Joshua:
Testimony.................................................... 15
Prepared statement........................................... 65
Gordon, Hon Daniel I.:
Testimony.................................................... 3
Prepared statement........................................... 41
Haugland, Edward L.:
Testimony.................................................... 30
Lowenthal, Mark W., Ph.D.:
Testimony.................................................... 11
Prepared statement........................................... 52
Roberts, Paula J.:
Testimony.................................................... 31
Questions and responses for the Record 72
APPENDIX
Background....................................................... 74
Policy letter referenced by Mr. Gordon........................... 83
INTELLIGENCE COMMUNITY CONTRACTORS: ARE WE STRIKING THE RIGHT BALANCE?
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TUESDAY SEPTEMBER 20, 2011
U.S. Senate,
Subcommittee on Oversight of Government
Management, the Federal Workforce,
and the District of Columbia,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:32 a.m., in
Room SD-342, Dirksen Senate Office Building, Hon. Daniel K.
Akaka, Chairman of the Subcommittee, presiding.
Present: Senators Akaka, Levin, Landrieu, Begich, Johnson,
Coburn and Moran.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. I call this meeting and hearing of the
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia to order.
I want to welcome our guests and our witnesses. Aloha and
thank you so much for being here.
Today, the Subcommittee will examine the Intelligence
Community's (IC) reliance on contractors and whether the IC has
rebalanced its workforce in the decade since the September 11,
2001 attacks.
After the attacks, intelligence agencies had to rapidly
surge their workforces and turned to private contractors to
fill gaps. While I understand the initial need to rely on the
contractors, I am concerned that 10 years later the IC remains
too heavily dependent on contractors. According to an
investigation by the Washington Post, close to 30 percent of
the current IC workforce are contractors.
Although contractors undoubtedly have contributed greatly
to keeping this country safe over the last decade, our
overreliance on contractors raises a number of concerns.
Federal workforce challenges contribute to the heavy reliance
on contractors. The IC has gaps in language, technical and
certain other skills. IC contracting firms often pay more,
increasing the challenge of recruiting and retaining Federal
employees instead of contracting for the work.
Despite these challenges, the Office of the Director of
National Intelligence (DNI), which oversees the 16 elements of
the IC, last published an IC Strategic Human Capital Plan in
2006. The IC must invest in the strategic planning and training
needed to address its long-term workforce needs, and Congress
must make sure the IC has the tools required to recruit and
retain the best.
Additionally, I am concerned that contractors are
improperly performing inherently governmental functions that
are reserved for Federal employees. The IC must exercise
sufficient oversight to make sure those tasks are completed by
a Federal worker.
The acquisition workforce is critical for proper contractor
oversight and management, but there are significant shortfalls
governmentwide, including within the IC. We must ensure that
the IC acquisition workforce has the staff and training needed
to promote the efficient, effective, and appropriate use of
contractors.
Given the current budget pressures, I am also concerned
about the high cost of IC contractors. Several estimates show
that contract employees cost significantly more than Federal
employees in the IC. A recent study by the Project on
Government Oversight (POGO) on governmentwide contracting found
that Federal employees were less expensive than contractors in
33 out of 35 occupational categories. In the decade since
September 11, 2001, intelligence contracting firms have reaped
huge profits paid for by the American taxpayer.
Finally, the movement between government and contracting
firms raises a risk that decisions made within the IC could be
influenced by conflicts of interest. Former Central
Intelligence Agency (CIA) Director Michael Hayden instituted a
cooling off period at the CIA, but there is no IC-wide
approach. I would like to hear from our witnesses on how
conflicts can be prevented.
As part of its effort to rebalance the workforce, the
Administration announced plans to insource core governmental
functions that should be reserved for Federal employees. I hope
to learn today whether these efforts have been effective and
what additional steps are needed.
I look forward to the testimony and to a productive
discussion with our witnesses.
I want to welcome our witness for the first panel, Daniel
I. Gordon, who is the Administrator of the Office of Federal
Procurement Policy (OFPP) at the Office of Management and
Budget (OMB).
As you know, it is the custom of the Subcommittee to swear
in all witnesses, and I would ask you to stand and raise your
right hand.
Do you solemnly swear that the testimony you are about to
give the Subcommittee is the truth, the whole truth, nothing
but the truth, so help you, God?
Mr. Gordon. I do, sir.
Senator Akaka. Thank you very much.
Let it be noted for the record that the witness answered in
the affirmative.
Before we start, I want you to know that your full written
statement will be made a part of the record, and I would also
like to remind you to please limit your oral remarks to 5
minutes.
Administrator Gordon, please proceed with your statement.
TESTIMONY OF HON. DANIEL I. GORDON,\1\ ADMINISTRATOR, FEDERAL
PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET
Mr. Gordon. Thank you, Chairman Akaka. Good morning.
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\1\ The prepared statement of Mr. Gordon appears in the appendix on
page 41.
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Senator Akaka. Good morning.
Mr. Gordon. I very much appreciate the opportunity to
appear before you this morning to discuss the rebalancing of
the mix of work performed by Federal employees and contractors.
As you know, last week, our office issued the final version
of the policy letter\2\ on the Performance of Inherently
Governmental and Critical Functions. That policy letter, and
its issuance, is an important milestone. It clarifies for the
Federal agencies and for the public how we are going to balance
the capabilities and capacity of Federal employees and the
contractors who support us in our work.
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\2\ The policy letter referenced by Mr. Gordon appears in the
appendix on page 83.
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This has been a long process, a very public and transparent
process, in which we received many comments, and the final
issuance of this policy letter fulfills the commitment by the
President in March 2009, in his Memorandum on Government
contracting that we need to clarify the line that has become
blurred over the years between work that can be contracted out
and work, as you say, Mr. Chairman, that needs to be reserved
for performance by Federal employees.
I cannot say that the new guidance dramatically changes the
current policy landscape, and in fact, the final version of our
policy letter largely tracks the draft, but there are several
improvements and changes that I would like to briefly highlight
this morning because we think that those improvements should
help the agencies understand the proper role for Federal
employees and for contractors in today's world, which I should
say is notably more complex than when we last issued a policy
letter almost 20 years.
I appreciate that this morning you are particularly
interested in the application of these policies to the
Intelligence Community. As I explained in my written statement,
our work in the Office of Federal Procurement Policy is
governmentwide procurement policy, and consistent with that the
policy letter takes a governmentwide approach. That said, I
will point out in my statement, now and in response to
questions, particular issues related to the Intelligence
Community. And, of course, we talked with agencies in the
Intelligence Community throughout the development of the policy
letter.
We do think that the policy letter will serve the
Intelligence Community well as they work to strike the right
balance between the use of Federal employees and contractors.
That said, three points in brief:
First, the policy letter establishes a single standard
definition of what inherently governmental functions are. It
adopts the statutory definition from the Federal Activities
Inventory Reform Act (FAIR Act). We appreciate having that
single definition will require changes to the Federal
Acquisition Regulation (FAR) and other documents, and we plan
to proceed to do that expeditiously.
The policy letter goes beyond the definition though. It
provides criteria and tests and examples for agencies, not
exhaustive lists because we appreciate that when we identify
something as an inherently governmental activity it does not
mean that things not on the list can be performed by
contractors. That is why we provide the criteria and the tests.
We preserve in the policy letter what has been long
established, and that is that the direction and control of
intelligence and counterintelligence operations continues to be
viewed as an inherently governmental function.
The final version does address some other areas of
particular importance overseas, such as the use of contractors
in security operations connected with combat, or potential
combat.
Second, and perhaps most important, in the area of
definitions, the policy letter calls on agencies to identify
their critical functions and to assess whether they are unduly
dependent on contractors in those critical functions. We
emphasize that agencies need to maintain control by Federal
employees, of their mission and operations, of particular
relevance in the intelligence area.
And third, the policy letter lays out management
responsibility that agencies have to follow to ensure that the
rebalancing is happening and that they are not unduly dependent
on contractors. That is important in the area of closely
associated functions; that is, functions closely associated
with inherently governmental ones, an important area in the
Intelligence Community.
It is also important in the area of insourcing. We are very
concerned that insourcing not be taken, done, in a way that
unduly harms small businesses, and we provide guidance in that
area.
I should say, Mr. Chairman, that we have worked with
agencies, including in the Intelligence Community, in my almost
2 years in this position, and I think it is fair to say that
the agencies, particularly in the Intelligence Community, are
already following the core elements of the policy letter. We do
not expect to see a widespread shift away from contractors
because of the issuance of the policy letter. We do think that
the policy letter will help agencies do a better job in
identifying if, and when, rebalancing is needed and to take
action if action is needed.
As I said, we will be working to implement areas of the
policy letter in the Federal Acquisition Regulation, and other
documents as we assess what training is needed and we help the
agencies establish training, to be sure that the message gets
out that we need to be careful that we respect the line between
work that can be contracted out and work that needs to be
reserved for performance by Federal employees.
I very much appreciate your interest and the Subcommittee's
interest, Mr. Chairman, in this important topic. We look
forward to working with the Subcommittee and with other Members
of Congress as we move forward.
This concludes my brief opening remarks. I would be honored
to answer any questions the Chairman may have.
Senator Akaka. Thank you very much.
Administrator Gordon, as you know, part of the President's
plan for economic growth and deficit reduction seeks to end the
overpayment of Federal contract executives. Of course, that is
the latest word.
In justifying this proposal, he indicates that it is
inappropriate for taxpayers to fund Federal contractor salaries
that are--and he uses the word--multiples of what Federal
employees are paid. The proposal is expected to save $300
million annually.
Would you elaborate on this proposal and why the
Administration supports it?
Mr. Gordon. With pleasure, Mr. Chairman.
As you know, in most cases, when the Federal Government
buys the way Americans buy in general; that is to say we pay
fixed prices.
However, in the government contractor arena, in a minority
of our purchases, we have a different arrangement and one that
is somewhat riskier for the government. In that minority of
cases, we reimburse contractors for their costs and then on top
of reimbursement we pay them a fee for their profit. In those
cases, there is concern about how much we are paying those
contractors because, obviously, if we reimburse someone their
costs, just like if I were to tell a plumber in my home, I will
reimburse whatever your costs are, they have no incentive to
limit their costs.
And as a result, we have a number of statutory and
regulatory limits on how much we will reimburse. The general
rule of thumb, if you will, is reimbursement should not go
beyond what is reasonable. That is a general limit.
In the area of reimbursement for executives' compensation,
we are usually talking about indirect costs pools. And without
getting into too many details, the bottom line is that
Congress, a number of years ago, established a cap on how much
the government should reimburse contractors for their executive
compensation for their five most highly paid executives.
Those caps used to be on the order of $200,000 or $300,000
a year in terms of the compensation that we would be willing to
compensate, that we would be willing to pay the contractors
for. Over the years, the statutory formula that Congress
crafted in the 1990s has worked in a way that I do not think
anybody anticipated so that the cap has gone up dramatically by
hundreds of thousands of dollars and is now well over $600,000
a year.
It is that payment that strikes us as excessive. I do not
think anybody anticipated that the cap would go up so fast. And
what we are saying is in a time when we are limiting Federal
employees' salaries, and in fact, freezing Federal employees'
salaries, it seems unreasonable to continue to dramatically
increase the amount that we compensate through the
reimbursement process to contractors.
If the contractors want to pay their executives millions of
dollars, they are free to do that. We are saying we will only
reimburse up to this cap.
Senator Akaka. Thank you, Administrator Gordon.
OFPP invited public comment on its draft policy guidance in
March 2010. A number of respondents, including 30,000 who
signed a form letter, argued that the list of examples of
inherently governmental functions was too narrow and should
include more functions, particularly involving intelligence.
The final guidance contains only one intelligence example,
which is unchanged from the draft.
How did OFPP determine which functions to include and why
did you not expand examples related to intelligence?
Mr. Gordon. Thank you, Mr. Chairman.
As you say, we received a good number of comment letters.
Many of them were form letters, but we received 110 comment
letters that were not form letters. They addressed various
issues from different aspects because, of course, this was a
very public process.
In the area of intelligence, we actually received fairly
few comments. It is true that a few called for an expansion of
the list of inherently governmental functions. One area that
they noted in particular was interrogations, and we considered
adding something to the list of inherently governmental
functions. Let me explain why we decided not to add
interrogation as an inherently governmental function.
The fact is that Congress enacted legislation that
generally bars, in particular the Department of Defense (DOD),
from using contractors in certain interrogation functions. So
to a certain extent, the problem did not need to be addressed.
But in addition, in that prohibition Congress allowed the
Secretary of Defense to waive the restriction.
In our view, the very fact that the Secretary is allowed by
statute to waive the restriction suggests that Congress did not
view the function as inherently governmental per se because, of
course, you do not want to have a member of the Cabinet
allowing inherently governmental functions to be contracted
out. As a result, we thought it was wiser to leave the
statutory scheme in place and not change the list.
I will tell you, as I mentioned in my opening statement, we
worked very carefully and closely with both the intelligence
agencies and with the Department of Defense more generally, and
I think it is fair to say that they were very comfortable with
the guidance that we developed. I think that the management
guidance and the guidance in the area with respect to critical
functions is going to be particularly helpful in the
Intelligence Community.
Senator Akaka. Thank you.
Administrator Gordon, I am pleased that the Administration
issued the final policy guidance last week. How will you go
about educating both Federal employees and contractors about
its contents? And I am particularly interested about your
outreach and education efforts for the IC workforce.
Mr. Gordon. In everything that we do in the Office of
Federal Procurement Policy, Mr. Chairman, we work very closely
with the agencies across the Executive Branch, both in the
Intelligence Community and outside.
We have explicitly stated in the policy letter that every
agency, except for the very small ones, needs to identify one
or more senior officials who are going to be accountable for
the implementation of the policy letter, to us in the Office of
Management and Budget.
We direct the agencies that they need to develop and
maintain internal procedures to be sure that the policy letter
is implemented.
We require them to review the guidance that they have at
least once every 2 years to be sure that they are acting
appropriately.
We tell the agencies that they need to ensure that their
employees understand their responsibilities under the policy
letter.
We require training no less than every 2 years to improve
agency employee's awareness of their responsibilities.
And, we require management controls.
I should say that we will be working with the Defense
Acquisition University and the Federal Acquisition Institute to
be sure that appropriate materials for training are developed
governmentwide.
I would add, Mr. Chairman, that I think that the
Intelligence Community has been really ahead of the curve in
these past several years in being focused on the need to
address rebalancing and concern about excessive reliance on
contractors so that in many ways I think the Intelligence
Community has been a role model in terms of its sensitivity to
the need to address overreliance on contractors.
There is a limit to what I can say here in this open
session, but I know that you will have the opportunity later
this morning to hear from the leadership in the Intelligence
Community, and you will hear much more by way of specifics than
I can disclose here, about the progress that they are making.
Senator Akaka. Thank you very much.
Administrator Gordon, as you know, the final policy
guidance defines critical functions as those functions
necessary to an agency being able to effectively perform and
maintain control of its mission and operations. What process
should the IC use to determine whether specific functions are
critical as defined in the policy letter?
Mr. Gordon. Mr. Chairman, again, I think in this area the
Intelligence Community has actually shown leadership that other
agencies can learn from. In particular, the Intelligence
Community has focused on the need to have an inventory of
contractors, what the contractors do, and the many other
agencies across the Department of Defense and in the civilian
agencies actually are struggling to put together an inventory
of their service contractors that is as comprehensive and as
thoughtful as what has been created within the Intelligence
Community.
The term, ``critical function'', may be a relatively new
term for the Intelligence Community, but I think that what they
have been looking at, when they look at core contract
personnel, very much overlaps the idea of critical functions
and the idea of functions that are closely associated with
inherently governmental ones.
So I think that the agencies in the Intelligence Community
and elsewhere need to focus on what are their critical
functions, and in those critical functions they need to do an
assessment, as I think the Intelligence Community has been
doing now for several years, about whether Federal employees
are present in sufficient numbers, with sufficient
capabilities, to maintain control of the agencies' mission and
operations.
Senator Akaka. I see. Well, I want to thank you very much,
Administrator Gordon, and commend you for what you have been
doing and the progress that has been made. But we needed to
highlight some of these things so that we can see what actually
is happening.
So do you have further comments?
Mr. Gordon. If I could, Mr. Chairman, I would say that I
think that your commitment to this issue and the Subcommittee's
interest in the issue are particularly timely today.
I think that your commitment will be tested in the months
to come because there are those who, I think in a myopic way,
focus on reducing the size of the Federal Government and what
they really mean is reducing the size of the Federal workforce.
The fact is in the Intelligence Community, as in other
agencies, the Federal Government has important tasks that need
to be done. And if arbitrary reductions in the size of the
Federal workforce are put in place, we could have a situation,
as we have unfortunately seen in the past, where agencies turn
in an unjustified and unthoughtful way to contractors to do
work that, on reflection, the agencies recognize should be done
by Federal employees, so that your vigilance in thinking about
and preserving the appropriate balance between work done by
Federal employees and by contractors, I think, will be tested
in the months to come. And I very much appreciate your
commitment to ensuring that the right balance is struck.
Thank you, Mr. Chairman.
Senator Akaka. Thank you very much, Administrator Gordon.
You are correct when you say that it is timely. And with the
situation our country is in economically, we need to do this
throughout the system really, not only with the IC, and see
what we can do in helping our country.
Mr. Gordon. Thank you, Mr. Chairman.
Senator Akaka. So I want to thank you so much for your
testimony and your responses. It will be helpful because I know
you understand that we are doing this to try to work together
to improve the systems that we have in place. And, of course,
intelligence is one of the areas that is so important to our
Nation, and we need to have it work well, as well as sustain it
the best that we can, and we need to work together to do this.
So I thank you so much for your work.
Mr. Gordon. Thank you sir.
Senator Akaka. Thank you.
So let me ask the second panel to please come forward.
I want to welcome Charles E. Allen who is the Senior
Intelligence Advisor, Intelligence and National Security
Alliance, Dr. Mark M. Lowenthal who is President and CEO of the
Intelligence and Security Academy, Scott H. Amey, General
Counsel of the Project on Government Oversight, and Joshua
Foust, a Fellow at the American Security Project.
As you know, it is the custom of this Subcommittee to swear
in all witnesses. So I would ask you to stand and raise your
right hands.
Do you swear that the testimony you are about to give the
Subcommittee is the truth and nothing but the truth, so help
you, God?
Mr. Allen. I do.
Dr. Lowenthal. I do.
Mr. Amey. I do.
Mr. Foust. I do.
Senator Akaka. Thank you.
Let it be noted for the record that the witnesses answered
in the affirmative.
Before we start, I want to again remind you that your full
written statements will be included in the record, and we ask
you to please limit your oral remarks to 5 minutes.
So, Mr. Allen, will you please proceed with your statement.
TESTIMONY OF HON. CHARLES E. ALLEN,\1\ SENIOR INTELLIGENCE
ADVISOR, INTELLIGENCE AND NATIONAL SECURITY ALLIANCE.
Mr. Allen. Thank you, Mr. Chairman. It is a pleasure to be
here and to have the opportunity to speak on this very vital
subject.
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\1\ The prepared statement of Mr. Allen appears in the appendix on
page 47.
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As you indicated, I am representing the Intelligence and
National Security Alliance (INSA). INSA is a small nonprofit
organization that serves as a forum where individuals from the
public, private, and academic sectors associated with
intelligence and national security communities can come
together to discuss issues of common concern and offer
suggestions to policymakers.
Most recently, INSA has published papers on cyber
intelligence, homeland security intelligence, organizational
conflict of interest and recommendations for smart reductions
for the Intelligence Community in the current challenging
fiscal environment. We will soon publish a paper on improving
the security clearance process for contractors.
INSA tries to represent the best interests and concerns of
both public and private sectors, and I believe we can provide
you a unique perspective on the topic of Intelligence Community
contractors.
I have been associated with the Intelligence Community for
over 50 years. I joined the CIA in 1958 and served there 47
years. I was the Under Secretary for Homeland Security for
Intelligence and Analysis from 2005 to 2008.
In many of these assignments, particularly when we were
trying to develop new organizations and capabilities to
confront new threats, we would inevitably be faced with a
dilemma, that we needed an individual with a certain skill or
talent that was not readily available within the organization,
for example, unique foreign language skills or unconventional
information technology skills. Often, the best solution in
those circumstances was enter into a contract with a trusted
private company which could provide such a skill set in short
term.
In earlier days, the numbers were small. In recent years,
because of the complex asymmetric threat of terrorism, these
numbers have grown substantially, and finding the right balance
of government workers supported by qualified contractors with
unique skill sets has become increasingly complex.
It was a good thing and very timely that the Office of
Federal Procurement Policy finalized the policy letter on
``Performance of Inherently Governmental and Critical
Functions'' last week. While the Intelligence Community has
been carefully following interim guidance issued in March 2010,
publication of this definitive policy sends a clear message
regarding the importance of the topic.
The policy letter does a good job of outlining what
constitutes ``inherently governmental'' and what constitutes
``critical functions'', and provides the guidance the
Intelligence Community needs to ensure that functions that are
intimately related to the public interest are performed only by
Federal employees.
Requiring Intelligence Community agencies to carefully
prioritize critical functions and judiciously maintain
management, oversight, and control of those functions ensures
that the agencies operate effectively and maintains control of
their missions and operations, but it gives them the
flexibility to find the right Federal employee/contractor
balance when very unique skills may be required to perform the
critical function.
I do believe that Intelligence Community agencies have
dramatically improved management of the contractor workforce as
part of the strategic workforce planning efforts that the
Director of National Intelligence requires.
When I was the Under Secretary for Intelligence and
Analysis at the Department of Homeland Security (DHS), I did
not ask if the intelligence products or inputs were developed
by a contractor or by government employees, but I knew I had
put in proper safeguards to ensure that priorities and final
analytic judgments--inherently governmental functions in my
estimation--were the ultimate responsibility of Federal
employees. That said, from my perspective, contractors were
part of the team and they were held to the same standard as
other government employees on my staff.
The Intelligence Community has a lot of experience in
lessons learned, managing the contractor workforce,
particularly over the last 10 years when the need for manpower
and expertise increased exponentially, then the Intelligence
Community had little choice initially, than to seek immediate
support from qualified, trusted companies in the private
sector.
In your letter of invitation, you asked me to comment on
how the Intelligence Community addresses organizational
conflict of interest (OCI). The potential for OCI is always
there and there must be management procedures to safeguard
against any such conflict.
We did a study at INSA earlier this year and could not come
across a single instance of an IC contractor intentionally
playing the role of a bad actor in any Intelligence Community
activity.
The study also found that each Intelligence Community
agency had its own policy with regard to OCI and that these
policies were not always consistent. We recommended that the
Director of National Intelligence should provide policy
guidance to create some level of consistency on the issue of
OCI.
With regard to hiring, training and retention challenges in
balancing the Intelligence Community, they differ little from
the challenges facing the Federal Government writ large. The IC
has a large portion of its workforce nearing retirement, and
replacing such expertise will be a challenge because of a gap
in the mid-career population created by the hiring freezes in
the 1990s, pre-September 11. Conversely, well over 50 percent
of the workforce has been hired since September 11, 2001. These
demographics would suggest that the Intelligence Community
continue to rely on contractors for certain skills, at least
until these challenging demographics moderate themselves over
time.
I will stop there and look forward to your questions, Mr.
Chairman.
Senator Akaka. Thank you very much, Mr. Allen.
Mr. Lowenthal, will you please proceed with your testimony?
TESTIMONY OF MARK M. LOWENTHAL,\1\ PH.D., PRESIDENT AND CEO,
THE INTELLIGENCE AND SECURITY ACADEMY, LLC
Dr. Lowenthal. Thank you, Mr. Chairman. Thank you for the
opportunity to appear today.
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\1\ The prepared statement of Dr. Lowenthal appears in the appendix
on page 52.
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I spent 25 years in Federal service. During my last tour in
2002 to 2005, I was the Assistant Director of Central
Intelligence for Analysis and Production, which was the third
highest ranking position in the Intelligence Community. And I
would note that half of my staff were made up of contractors,
and their services were vital to me and vital to the mission
that Director George Tenet had given to me. Since then, I have
been a contractor. I was also a contractor from 1997 to 2002.
So I have seen this from both sides. I was also the Staff
Director of the House Intelligence Committee. So I have also
seen this from the congressional perspective.
The question that is posed in the title of the hearing is
one of balance. Let me suggest another way of looking at this.
Instead of balance and ratios, I think we should be asking
ourselves what is the most efficient, most cost effective way
of getting the necessary jobs done. And it is not necessarily a
balance and ratio answer.
Your letter asked me to comment on four questions, and I
will do that briefly. Regarding the OFPP letter, I think that
the letter has done a very good job, as Mr. Allen just said, in
defining inherently governmental functions. I think their lists
in the letter and in Appendix A make sense and are fairly easy
to follow and should be implemented. And the Intelligence
Community is pretty much doing that as far as I can tell.
I have some issues with Appendix B, which is functions
closely associated with the performance of inherently
governmental functions because several items on that list
strike me as being areas where you could have a contractor do
good work.
I come to this conclusion based on my own experience as the
Assistant Director because two of our major initiatives that we
undertook--the National Intelligence Priorities Framework
(NIPF) and the Analytic Resources Catalog (ARC), both of which
we built to manage the Intelligence Community under President
George Bush and which President Barack Obama continues to use
to manage the community--were built with major inputs from
contractors, and their work was the highest quality. It was
highly objective, and it was absolutely necessary. And we could
not have put in place these major programs without contractor
support.
Second was the question of how we assess the value of
contractors. I think we have to recognize why contractors get
hired. It is the budget you get. If the budget says you can
hire so many full-time employees and so much money for
contracting, there is your answer. Agencies will spend the
money they get in the lanes in which they get it, but they do
not have a lot of say about the allocations once Congress
produces a budget and the President signs it.
We seem to be going through a series of fashions regarding
contractors. In the 1990s, it was generally assumed that
contractors were cheaper than Federal employees because you
could terminate a contract at will and you were not committed
to their health care and to their pension costs, and therefore,
contractors were cheaper. Now everybody knows that contractors
load their rates because they are paying for health care and
pensions costs. So it was probably a null set, but we tended to
hire more contractors.
At the same time, the intelligence budget in the 1990s was
flat, and so the shortfall in personnel was made up for by
hiring contractors. Then, after we were attacked in 2001 and it
was necessary to ramp up our skill set quickly, we turned back
to contractors again because that is where the relevant talent
was. So we sort of have this up and down, back and forth
fashion.
The third issue is the question of how we manage and
oversee Intelligence Community contractors. The vital issue
here, the major difference in intelligence contractors and the
Department of Defense contractors is the issue of getting
security clearances. You have to have a clearance to be a
contractor in those areas.
The letter inviting me to testify, in your opening
statement, made reference to the Washington Post series on the
use of contractors. I would tell you, sir, that most of my
professional colleagues found that series to be hyperbolic in
tone and highly subjective and not terribly informative.
Yes, there are a lot of contractors with clearances, but
the reason you get clearance is because the government tells
you in order to work on this contract you need cleared
employees. It is not our idea. I assure you it would be easier
to run my firm if I did not have to have clearance
requirements.
This leads to two interesting side effects. One you have
already noted is rating Federal employees to hire as
contractors. You made reference to General Hayden's one year
cooling off period. I think his rule is a very sensible rule,
and I think that would be a good rule to put across the
Intelligence Community.
Second, it creates competition among contractors to acquire
other firms not so much for the work they have but to pick up a
lot of people who are cleared.
And so, the requirement for cleared employees has an
interesting side effect.
Finally, there is the issue of the balance of the
workforce. The demographics of our analytic workforce are very
disturbing in my view, as somebody who used to manage the
workforce. The budget was flat in the 1990s, and as Director
Tenet pointed out several times, we lost the equivalent of
23,000 positions across the Intelligence Community, either
people who were never hired or people who were not backfilled
when they left. And so, the net result is a huge loss in
manpower.
Then, after we were attacked in 2001, we started hiring a
lot of new people. So if you look across the 16 agencies, 50
percent of the analytic workforce has less than 5 years of
experience. So we probably have the least experienced analytic
workforce that we have had since 1947 when we first created the
community.
And so, the way that we have made up for this is to hire
contractors because the contractors, the people who left the
community, were the people who had the residual expertise.
And this demographic is going to play out for several years
to come, and so the demographics on the analytic side are a
little bit scary, if you will.
I have in my prepared statement some other ideas I think
the Subcommittee should look at. In the interest of time, I
will skip over those.
I will just close with what I said at the beginning. I do
not think it is so much a question of balance and ratio. I
think it is a question of what is the best way to get the job
done, and I think there are lots of alternatives. And it has to
be, I think, a case-by-case kind of issue.
Thank you, Mr. Chairman.
Senator Akaka. Thank you very much, Dr. Lowenthal.
Mr. Amey, will you please proceed with your testimony?
TESTIMONY OF SCOTT H. AMEY,\1\ GENERAL COUNSEL, PROJECT ON
GOVERNMENT OVERSIGHT.
Mr. Amey. Good morning. I want to thank Chairman Akaka and
the Subcommittee for asking the Project on Government Oversight
to testify today.
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\1\ The prepared statement of Mr. Amey appears in the appendix on
page 59.
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In light of today's hearing, the Members of this
Subcommittee should be asking what intelligence services are we
buying and whether we have the appropriate balance of Federal
and contractor employees supporting the IC.
I am typically able to provide a general assessment of an
agency's contracting portfolio because the public has access to
basic information via the Web. However, in the case of the IC,
the doors to such data are closed. For example, missions,
contract awards, dollar amounts, and the number of contractor
personnel are classified and therefore not publicly available.
Data had been made available in the mid-2000s with an
inventory of IC core contractor personnel which documented that
the IC's budget was roughly $42 billion, approximately 70
percent of the IC budget was spent on contracts and that the
government workforce was approximately $100,000, and
contractors comprised approximately 28 percent of the total IC
workforce.
Based on the public release of the overall intelligence
appropriations request earlier this year for $55 billion, it
does not look like much has changed. POGO is concerned that
despite some additional disclosures prompted by previous calls
by Congress and the Intelligence Community Directive 612,
little has changed over the years.
For example, a 2009 report by the Senate Select Committee
on Intelligence stated that it was trying to enhance personnel
management authority, improve IC personnel planning, account
for the number and use of the growing number of contractors and
replace contractors with Federal employees. The increased cost
due to reliance on contractors was also cited in that report.
However, last week, Senator Feinstein raised IC concerns at
a joint hearing of the Senate and House Select Committees on
Intelligence. The Senator raised concerns about the continued
high use of contractors, the use of IC contractors for
inherently governmental functions that should be performed by
government employees and the high cost of using contractors.
Those are separated by approximately 2 years but sound very
similar.
Earlier this month, DOD released a report about its fiscal
year 2010 insourcing actions. Intelligence work involved about
1 percent of the jobs insourced by DOD. Not surprising, the
rational for insourcing those 170 intelligence jobs was cost 64
percent of the time, inherently governmental functions 16
percent of the time and closely associated functions about 9
percent of the time.
The cost of hiring contractors has been raised before by
the government, and in POGO's most recent report called ``Bad
Business: Billions of Taxpayer Dollars Wasted on Hiring
Contractors,'' many of the job classifications POGO analyzed
are typically characterized as commercial services that can be
found in the Yellow Pages.
However, with respect to the subject of today's hearing, it
is worth pointing out that in 2008 the government outsourced
approximately 28 percent of its intelligence workforce and paid
contractors 1.6 times what it cost to have that work performed
by government employees. The ratio was $207,000 annually for a
contractor employee versus $125,000 for a Federal employee.
POGO's analysis supported those findings. POGO analyzed the
costs associated with outsourcing language specialists, which
are frequently used to perform intelligence functions, and
found that contractors may be billing the government on average
$211,000 per year, more than 1.9 times the $110,000 per year
the government compensates a Federal employee.
Outsourcing work to Federal contractors is premised on the
theory that it provides flexibility to the government to meet
its needs. That may be true in certain circumstances, but
outsourcing work, especially in certain sensitive program
areas, may actually cost the government because you have to
remember government employees, unlike contractors, can perform
both inherently governmental functions as well as noninherently
governmental functions.
The government might be more flexible to adapt to changing
policies, missions, and intelligence operations if we did not
have to worry about its contractors staying in inherently
governmental work. We do not want contractors and contracting
officers bickering in the field over what is or is not an
inherently governmental function, and taxpayers should not have
to pay for the additional expense to supplement the contractor
workforce every time work treads close to the inherently
governmental function line.
POGO recommends that IC agencies and Congress conduct
assessments of IC service contracts in order to gain a better
understanding of the type of services procured, the total
dollars awarded, and to compare the cost of using Federal
employees as compared to contractors. To the extent possible,
these assessments should be made publicly available.
I would also urge all IC agencies to review the Office of
Federal Procurement's new guidance on work reserved for
government employees to ensure that contractors are not
performing inherently governmental functions.
Finally, I would urge the Senate to consider not imposing
IC full-time equivalent (FTE) ceilings. Such restrictions
prevent the government from operating at optimal efficiency and
flexibility, and in the long run might result in increased
costs for agencies and taxpayers.
Thank you for inviting me to testify today. I look forward
to answering any questions and working with the Subcommittee to
further explore how intelligence contracting can be improved.
Senator Akaka. Thank you very much, Mr. Amey, for your
testimony.
Mr. Foust, will you please continue with your testimony?
TESTIMONY OF JOSHUA FOUST,\1\ FELLOW, AMERICAN SECURITY PROJECT
Mr. Foust. Chairman Akaka, thank you very much for inviting
me here this morning.
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\1\ The prepared statement of Mr. Foust appears in the appendix on
page 65.
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So there is very broad public agreement that the government
must take measures to respond to the explosive growth of
contracting in the IC. Now the government tends to contract out
services when it does not have employees with the skill set to
perform a given function, like building a drone, understanding
a certain piece of information that has come in, or so on.
But this public consensus that contracting needs to be
curtailed is based on some, I think, faulty assumptions. One of
them is that the industry of contracting has grown beyond
anyone's ability to control it, that it results in widespread
fraud, waste, and abuse, and that the fundamental nature of
contracting itself presents analysts, agents, and officers of
the Intelligence Community with irreconcilable conflicts of
interest.
I think these are actually the wrong issues to be focusing
on because they do not address the real problems that plague
the IC's reliance on contractors. The biggest problem facing
the IC contracting industry is not that some contractors might
abuse the system but rather that the government has designed a
system that can encourage abuse.
Missing in the public examination of the IC contracting
industry is the role that the government itself plays.
Ultimately, the government is responsible for the conduct of
the companies that it hires to perform functions. While any
violations of rules that are already in place merit
investigation and prosecution, contractor behavior commonly
labeled as misconduct is really perfectly legal and within the
bounds of the contract agreements that companies sign with
their government clients.
The current state of contracting within the IC is
incoherent. There is broad confusion about the nature of what
are appropriate government roles and contractor roles, along
with inconsistent accountability and poor resourcing for
accountability mechanisms. Contracts are often worded vaguely
or incompletely, and with ever-changing requirements,
deliverables, and performance metrics, all of which are
supposed to catalogue and record how a company fulfills a
contract. They create an environment rife for exploitation by
companies seeking to extract revenue from the process.
Every contract that the government issues for a company to
perform work is defined by a Statement of Work (SOW). This is a
document that defines the parameters of the work the contractor
will perform, including a description of the project, expected
duties the contractor must fulfill, and the outputs and metrics
by which performance will be measured. These are often poorly
written, kept intentionally vague and wind up not actually
addressing the stated intent of the contracts.
As one example, every statement of work I've had to either
administer, edit, review, or write has stated as a basic metric
of performance the number of employees the contractor should
hire. That is the basic means by which the government measures
the contractor's performance is based first and foremost on the
number of people hired to work on the contract. This has two
serious consequences that affect the contracting environment.
It removes the distinction between the employees that would
make work products better, and it confuses the number of
employees with contract performance.
This bizarre system of hiring intelligence contractors is
born from several interdependent processes that I go into more
detail in my written testimony.
But there is a very real distinction between the
qualifications and credentials that are put in place to hire
contractors to perform work. Often, a high level clearance is
mistaken as qualification to perform a given type of work,
which leads to questionable product outcomes and questionable
program outcomes.
Furthermore, poorly worded SOWs can place contractors in
positions that introduce potential conflicts of interest. This
can include hiring contractors to work in a government facility
security office which puts them in charge of reading on
competitor contracts, which is also a situation I have
encountered while working in the Intelligence Community.
The SOW system is also unclear on what constitutes
deliverable and contractor outcomes. This makes it difficult
for the government to control costs, measure outputs, and
measure if the contractors are performing the terms of their
contracts in a reasonable way.
It also misidentifies what outcomes really are. Simply
sitting in a chair and turning out reports might be an outcome
the government desires, but absent measuring the context of
those reports and the value that the contractors provide the
government, it is difficult to say for certain that the
contracted tasks actually help the government function.
The broader question of what constitutes an inherently
governmental function is slightly beyond my perspective and
authori tativeness. I do not have direct experience that
would give me an authoritative stance on functions that should
never be performed by a civilian contractor, but I have
encountered situations in which contractors are put in charge
of life and death decisions, either in targeting analysis
shops, running drones programs, and similar situations. This
makes me deeply uncomfortable, and I would be more comfortable
seeing employees that have taken an oath on the Constitution
making life and death decisions in the Intelligence Community.
However, many of the problems that exist within the IC
contracting industry begin with the government lacking the
knowledge and means to design and manage its contracts. Rather
than focusing on the numbers and balance of the contracted
workforce, it would be better to examine the broader systemic
issues that require the use of contractors in the first place.
By fixing the need for contractors and by making the process of
contracting both more transparent and more accountable, many,
if not most, issues of balancing contractor and government
employees will resolve themselves.
Thank you, Senator, and I look forward to your questions.
Senator Akaka. Thank you very much, Mr. Foust, for your
testimony.
Dr. Lowenthal, Mr. Foust's testimony indicated that he
believes there is broad confusion about which roles should and
should not be filled by contractors within the IC. During your
time at CIA, was there a clear understanding of what roles
should be reserved for Federal employees?
Dr. Lowenthal. Mr. Chairman, as I said, when I was the
Assistant Director, half of my staff were made up of
contractors predominantly from one federally funded research
development center (FFRDC) and from two private sector firms,
and I do not think anybody in my office had any confusion about
what they could and could not do, or I do not think any of my
government employees had any confusion about what they could
ask contractors to do.
They could not monitor other contracts. They could not be
involved in solicitations. They could not be involved in
acquisitions.
Beyond those sorts of common-sense rules though, I used
them as an integral part of my staff. I had them manage
planning projects for me. As I said, I had them help create the
priorities framework that is used by the President. I had them
run investigations for me. I had them help set up meetings and
represent me at meetings, all of which seemed to be within
bounds.
So I think it is generally understood, at least within the
Intelligence Community as I saw it, what contractors could and
could not do. And I never saw any confusion on the part of my
contractors, and I never had a situation where I felt a
contractor had gotten out of his or her lane either.
They pretty much understood why they were there and what
they had been hired to do in support of my office, and so I
just did not see it as a problem, sir.
Senator Akaka. Mr. Allen.
Mr. Allen. Yes, Mr. Chairman, we are talking here about
what we call core contractors, not those that build satellites
or do high end, exquisite, exotic engineering, and scientific
work for the Intelligence Community, or the ones that do the
support services because we do contract for heating and air
conditioning and for mowing the lawn. But we are talking here
about those who are working in a more integrated fashion, as
Dr. Lowenthal just described, with the government employees.
From my perspective, when I was the Assistant Director of
Central Intelligence for Collection where I had a social and
environmental impact assessment (SEIA) of contractor support,
and when I was the Under Secretary at Homeland Security it was
very clear that the government was in charge and the government
made the final decisions.
The government makes decisions relating to achievable
intelligence. Life and death decisions are not made by
contractors. That, I can assure you. I know that from personal
experience, having worked at the Central Intelligence Agency
most of my life.
I believe that we are getting much better. I believe that
the guidance that has come from the Director of National
Intelligence, looking hard at the core contractors, this middle
band that we are talking about. I think we are looking at what
is inherently governmental and what is not.
And where we need the expertise--unique expertise, surge
expertise, short-term expertise of core contractors, I think it
is spelled out more clearly. Admiral Dennis Blair, when he was
Director of National Intelligence, signed Intelligence
Community Directive 612 which spells out very clearly the
responsibilities of core contractors.
Senator Akaka. Mr. Foust.
Mr. Foust. Thank you, Senator.
So I should probably clarify that my experience in the
Intelligence Community has not been as a part of the Central
Intelligence Agency. I have worked for the Defense Intelligence
Agency, other military intelligence agencies and organizations.
So it is possible that there is a difference of experience
between civilian and military intelligence agencies.
However, I can say that within the military Intelligence
Community there are contractors who are in charge of selecting
targets for assassination in Iraq and Afghanistan. There are
also contractors who are put in charge of functions that we
would ordinarily consider sensitive. So I do not have any
knowledge as to whether or not this happens in a civilian
agency, but within the military community it has happened in
the recent past.
At the same time, I think when we are looking at this
question of whether or not the government has a good handle on
it, this comes back to what I write in my written testimony
about how good program design and good management will
naturally resolve the question of whether or not contractors
are being used properly.
I have worked on projects where there was a good government
manager, and that government manager kept contractors in their
lane. There was no confusion about roles, duties, and people
did not step out of their line.
I have also worked at projects where that has not been the
case. And if government management is either not properly
trained or if the contracting officer representative (COR) who
is in charge of administering the contract and interacting with
the contractor program manager is not properly trained,
resourced, or given the mandate to their job, there can be
serious problems of either contractor overstep or contractor
misconduct.
And I want to make clear that when I call these things
misconduct or overstep I do not mean to imply that there is any
maliciousness on the intent of the contractor. Like everyone
else on this panel, I have never encountered a contractor or a
contractor manager or executive who behaves mendaciously or I
think has anyone's worst interests at heart. Rather, the system
itself encourages conduct that we would consider to be
unacceptable. I think this is unintentional and a consequence
of design rather than malice.
Senator Akaka. Thank you Mr. Foust.
Mr. Allen, there are governmentwide problems with having
enough acquisition professionals with the right training----
Mr. Allen. Yes.
Senator Akaka [continuing]. To clearly define contracting
requirements and performance metrics from the outset and to
effectively oversee them. This can lead to, of course, cost
overruns and poor outcomes. The need to rapidly expand
intelligence activities after the September 11, 2001 terrorist
attacks, of course, worsened this problem within the IC.
What should be done to enhance government contract
management to improve outcomes?
Mr. Allen. I think, Mr. Chairman, you put your finger on a
problem.
I think in the cold war we had wonderfully experienced
acquisition experts, contracting officers who were deeply
experienced, contracting officers, technical representatives
that helped manage and control that. We had the drawdown. We
grew exponentially after September 11, 2001. We really have yet
to develop, I think, the richness of experienced contracting
officer's technical representatives (COTRs).
In acquisition, my view is that there needs to be a lot
more emphasis on this. I see it at the National Reconnaissance
Office where General Bruce Carlson, I think, is improving the
whole acquisition process. He has had six highly successful
launches with great, exquisite payloads and space that are
operating absolutely and completely effectively.
My view is that it is going to take time. We have
management schools that can build this. We are building it now.
The Director of National Intelligence, General James Clapper,
understands that this is a deficiency, but we are working to
get it better.
My view is that we are not quite there yet. We need to
continue to improve that area.
Senator Akaka. Thank you very much.
Mr. Foust, your written testimony discussed flawed IC
contracting practices such as shortfalls in contract statements
of work and performance metrics. Would you elaborate on what
the IC must do to address these problems, including whether the
ODNI should be responsible for setting better contracting
standards across all IC elements?
Mr. Foust Yes, Senator. So there is a need to keep
statements of work for contracts, to a certain degree, flexible
so that contractors can respond to what their government
clients want them to do in the future.
The shortfalls that I highlight in my written testimony
come down to situations where that flexibility, I think, ended
up being taken a couple of steps too far. The most obvious one
that we have already mentioned earlier today has been the use
of contractors in interrogation, in particular, contractors
running interrogation at Abu Ghraib. They were originally hired
on an information technology (IT) support contract for the U.S.
Army and wound up doing detainee interrogations in Iraq. I
think that is a very obvious example of taking vaguely worded
statements of work and just abusing the process.
A more common use involves what could be more charitably
called mission creep, at least within the analytic community.
So that involves hiring a contractor to perform work on a given
topic and then along the way the government realizing that they
want to have expertise or analysis performed on another topic
and using a phrase like ``other functions as assigned'' to then
require the contractor to hire new people to perform another
job function that was not contained in either the original
request for proposals or the statement of work as written.
As far as fixing this, from the government's perspective, I
think there is a lot of room to tighten up contract language.
One of the processes that I discuss in my written testimony
comes down to measuring what actual project outcomes are, what
you intend this project to do.
This is not a problem that I think would be limited simply
to contractors. I think it gets at a broader systemic issue of
poor project design and a lack of strategic thinking in terms
of what specific agencies and then branches within agencies
want to perform.
There are some job functions like simply maintaining
awareness, or understanding message traffic or information
coming out of an area, that you cannot really put metrics on.
There is no way to measure whether what you are doing is really
going to meet some objective or not because you may not know
what that objective is.
But I think that is when it starts to clarify the question
of whether it is appropriate to be having contractors
performing indefinable tasks with uncertain outcomes. I think
that is a situation that implies a certain permanence to the
function, in which case it would make sense to be assigning
permanent Federal employees to be performing it rather than
temporary contractors.
Beyond that, I mean there have been a couple of mentions
here that there is a lot of case-by-case examples that need to
be taken, and I think maintaining that flexibility is important
because every intelligence function is not the same. And
instituting community-wide guidelines for how to tighten up
statements of work could be really difficult without getting
into an expansive bible of regulations about how to make it
work.
Senator Akaka. Thank you. Mr Amey.
Mr. Amey. If I may, I think your last two questions to the
panel are related. You are going to make mistakes in the
process if you do not have the adequate number of acquisition
personnel that are able to oversee the large amount of
contracts. This is not just in the IC community. This is in the
government overall. We have seen a dramatic increase in
contract spending. Especially service contract spending now
makes up the bulk of the contract dollars that we award each
year. And therefore, if we are operating under a quantity
rather than a quality policy directive, then at that point we
are prone to make mistakes. And so, that is where enhancing the
acquisition workforce, getting them better trained will also
help in better requirements definition, better programs, better
market research. Unfortunately, I think we have been just in a
position where we have to award contracts as quickly as
possible, that we have made mistakes which will lead to waste,
fraud, or abuse.
Dr. Lowenthal. Mr. Chairman, may I?
Senator Akaka. Dr. Lowenthal.
Dr. Lowenthal. If I just can comment on something Mr. Foust
said, certainly, when you are hiring contractors to support
your analysis, which is something I know fairly well, you need
a certain amount of flexibility because you really do not know
what you are going to be analyzing next beyond a couple of easy
guesses. I managed the President's intelligence priorities for
3 years, and one of the hardest things about that is trying to
forecast 6 months out, where do I need my next set of analysts.
To give you an easy example, if I was still managing the
system in December 2010, I would not have assigned an awful lot
of analysts to Tunisia. I think I might have assigned an
analyst to watch Tunisia while watching Algeria and Libya. In
January, I would have had a whole bunch of analysts watching
Tunisia.
Certainly, when you are managing the analytical system or
the collection system that Mr. Allen used to manage, you need a
certain amount of inherent flexibility. The world is nonlinear
because of the crises that we all deal with. But in the
Intelligence Community, you are supposed to anticipate those.
So if you have a workforce that is stuck in certain lanes in
analysis and collection, you are not going to have the
flexibility to respond to the needs of policymakers in the time
that you need them.
Senator Akaka. Thank you.
Dr. Lowenthal, your written testimony discuss how the IC
Federal workforce is fairly young and inexperienced relative to
the contractors that they oversee. How does that dynamic impact
the ability of the Federal IC workforce to appropriately
oversee the contractor workforce?
Dr. Lowenthal. I think we actually have three different
populations operating simultaneously.
The workforce, the young workforce that I mentioned and
that you just referenced, tend to be younger analysts who are
not doing contract supervision. They are working as analysts.
The problem is that across the community--CIA, the Defense
Intelligence Agency (DIA), the National Security Agency (NSA),
DHS--there are too many of them, not that we want to get rid of
them, but we hired so many of them after the shortfalls in
personnel in the 1990s that the demographic is skewed.
So we have former IC employees coming in as contractors,
but they tend to be supervised by middle level people who are
more experienced than the young analysts.
I do not think there is a problem in supervising the
contractors. That tends not to be done by the young analysts.
The problem with the young analysts is simply the fact that
they just do not have a lot of experience and they are there in
much larger numbers than anything we have seen in the preceding
50 years.
But I think in terms of managing the contractors, that is
happening at a level above those new analysts, and so I do not
perceive that as a problem, sir.
Mr. Allen. Mr. Chairman, I would just like to comment on
that as well.
Senator Akaka. Mr. Allen.
Mr. Allen. I agree totally with Dr. Lowenthal on the issue.
When I came to the Department of Homeland Security, I had a
contractor population analytically of about 60 percent,
government about 40 percent.
We started changing that ratio. I talked to Congressman
Thompson and Congressman King on this issue, and I said we are
going to correct this. We changed it over 3 years. Today, my
successor now has it at about 60 percent government, 40 percent
contractor, and she is well on her way to becoming 70-30.
So it was a matter of we brought in a lot of experience,
former agency, CIA and other officers who mentored those young
analysts, but the decisions were always in the hands of the
Federal Government. They were always my decisions or my
deputy's decisions, on any product that we produced.
Senator Akaka. Thank you very much.
Mr. Amey, your statement recommends that Congress remove
ceilings limiting on how many Federal employees an agency can
hire. In this budget environment, some might view this as a
green light to grow the size and cost of government. Would you
discuss how removing these ceilings could actually lead to
reduced costs and more efficient government?
Mr. Amey. Certainly, Mr. Chairman. I think, as Dr.
Lowenthal had mentioned, this is not about ratios. It really is
about efficiencies and providing an effective government.
So with that point, if we have a workforce that is in the
IC and we have an office that is 10 percent government
employees but we have to supplement them with 40 percent
contractor employees, we have a total workforce of 50 percent.
We need to reconsider that number and see if there are cost
efficiencies, that we do not need potentially 40 percent IC
contractor employees supplementing that office.
We are spending the money somewhere. It is not like we
removed it from the Human Resources (H.R.) budget of an agency.
All we have done is supplement it with a contractor award--a
contract award--and we have just supplemented it with a new
contractor employee workforce.
So that is what I think we need to make sure that we go
back and really look at the efficiencies and the effectiveness
of agencies, to make sure that we have the right balance and
there are going to be savings there, if we take a look at that,
whether that work is insourced and we hire more Federal
employees or if that work is outsourced.
If we find that contractors provide the work more cheaply,
then maybe we do not need Federal employees to perform those
functions unless they are inherently government or closely
associated or critical. And that is where you are just going to
have to operate under a weigh test on whether government
employees should, not whether it is legal for a contractor
employee to perform a function, but should a government
employee perform that function, and that is a different
scenario.
And I think that is what we need to really do, and that is
what the Department of Defense has done with their insourcing
study. We have 43 jobs that they found that were inherently
governmental or closely associated. So at that point, they have
taken a look at those jobs.
And when you asked the question to Mr. Gordon earlier on
the first panel, on how do you plan to see this kind of washed
down through the system, I think the OFPP policy letter is a
great step forward.
But I like to see something from ODNI that comes out and
takes it a step further: Here are missions, here are functions,
that we think should be performed by government employees. And
take a look at those and also ask for a cost efficiency study
to be done and performed to make sure that we are saving as
much money as possible.
Senator Akaka. Mr. Amey, as you know, the Intelligence
Community keeps much of its facts and figures regarding the use
of contractors secret. To a large degree, this is necessary to
protect the national security, but it also makes it extremely
difficult for the public and groups like POGO to hold
intelligence agencies accountable.
How could we better balance the need to protect national
security secrets with transparency and accountability?
Mr. Amey. Well, obviously, this Administration has taken a
big step forward in revealing what the budget request was
earlier this year, and I think that is where we can start, with
total figures. I do not necessarily need to know what the
breakdown of every operating personnel is for the IC community,
whether as a Federal employee or as a contractor employee, but
if we just start with kind of the low-hanging fruit dollar
amounts.
If you have read Dr. Ronald Sanders conference call, it is
very difficult. He gets grilled. This was a few years ago, but
he was getting grilled by reporters on what the size of the
workforce was. It was very circular because he was giving a
total number for the number of Federal employees but the
percentage was not a percentage of the total.
I mean I had difficulty in following it, and I think so did
every reporter that was on that conference call.
There are places where I think we can add transparency. We
just have to make sure that it is done with kid gloves to make
sure we do not reveal something that really does place the
Nation in harm or national security at risk.
Mr. Allen. Mr. Chairman, I would just like to add that, as
you know, you are going to be hearing later in a classified
session. I believe that the Senate Select Committee on
Intelligence has been especially active in this area of looking
at contracts, looking at the number of contractors and the
ratios and the balance involved.
As you know, in the past, the DNI has published the numbers
of core contractor personnel. There is an enormous transparency
in a classified environment. So there is nothing held back.
And Director Clapper, who is a good friend, has spoken very
bluntly about this, that he is going to get it right and he is
going to work on what is inherently government and adhere to
that.
Senator Akaka. I would like to ask this next question to
the entire panel.
In your written statements, several of you raised the issue
of how competition for employees with security clearances
impacts IC contracting. Of course, security clearances are
important to protecting classified information within the IC.
This Subcommittee has focused extensively on improving the
speed and quality of the security clearance process, but I
believe there is room for improvement. What changes to the
security clearance process could improve IC contracting and the
quality of contractors hired? Mr. Allen.
Mr. Allen. Mr. Chairman, I am currently head of a task
force sponsored by the Intelligence and National Security
Alliance which is looking at the security clearance process and
suitability, and the emphasis is on contractors because we know
that the system today is arcane in many ways. It is not
efficient. We know there is waste.
And in moving clearances among contractors, the
transportability, if a contractor has Top Secret Sensitive
Compartmented Information (SCI) clearance at DIA, is working on
a contract and his unique skills are needed at CIA, there
should be just simply electronic transfer of his clearances.
Today, we have a fairly painful process.
And we could cite almost any agency of the 16 agencies and
the antiquated way in which we operate.
This study will be out in the December timeframe. We will
make it available to you and to your Subcommittee staff to
review. It is a white paper directed at the Director of
National Intelligence focused on just small, incremental steps
that could be made to improve this.
And we will save, I think, a substantial amount of money.
We will more effectively use contractors than we do today.
Sometimes they have to wait weeks or months in order to get
those clearances transported from one agency to the other even
though the individual involved have--they are fully cleared,
been vetted by all the security organizations.
I look forward to finishing this study and presenting it to
you, sir.
Senator Akaka. Thank you. Dr. Lowenthal.
Dr. Lowenthal. Mr. Chairman, I would just echo what Mr.
Allen said. We have an arcane process that does not even
reflect the technology that is available to us.
I was hiring a government employee on my staff. He was a
DIA officer, and it took me 10 months to transfer his
clearances to CIA. I was astounded. It was a breathtaking
moment. We deal with an arcane process that really does not
catch up with the rules.
But one of the ironies of this is that Mr. Allen and I have
probably done, between us, hundreds of interviews with people
as references for people who are getting clearances. All those
people who interviewed us were contractors. So we hired
contractors to conduct the security clearance process, which is
an interesting irony.
But we could clearly make the process quicker. We know that
there is a problem when you hire a government employee as we
lose some of them because of how long it takes to hire them.
Mike McConnell, when he was the DNI, tried to get the
security community, the people who are in charge of this, to
move from risk avoidance to risk management. I think that was a
good idea that the Director had. It would be a very difficult
cultural shift because if you are a security officer your main
goal in life is to make sure that nothing bad happens on your
watch and you are not going to be liable to say well, let's cut
corners here, let's make the process faster.
So one of the issues you have to deal with is what are the
incentives for the people who actually manage this system, who
are totally separate from the contractor workforce or the
people setting out contractors. It is a whole different
community of people.
But I think there is room for improvement that would make
the system better and less expensive.
Senator Akaka. Thank you so much.
Mr. Amey. I will leave this question for the other
panelists. I do not have any information that would be as
insightful as what they have already had to offer.
Senator Akaka. Thank you. Mr. Foust.
Mr. Foust. Thank you, Senator.
So I think this question about the clearance process comes
back to the point I made in my written testimony about the
difference between qualifications and credentials. Contractors
tend to be used for two primary functions--either to bring
expertise into the IC that it does not already have or to
simply fill seats on a requirement that they need. I think
Tunisia is a good example where the two coincide, but that does
not always happen.
Right now, the security clearance process tends to exclude
the most highly qualified area experts because having
substantial family, social, or other personal contacts in areas
of interest, say the Middle East, North Korea, or other areas
that pose substantial security risks, can actually get in the
way of their getting a clearance to then participate in the
intelligence process. This is a substantial barrier for both
Federal and contracted employees.
I think from the contractor's perspective the real
advantage that contractors bring to the intelligence process is
their flexibility, their ability to be rapidly hired and
rapidly fired.
The problem this introduces in a cleared environment is
that firing a contractor immediately cancels or suspends their
clearance if they cannot be immediately transferred onto
another contract.
I am not sure exactly how the specifics of this could be
worked out, but decoupling one's clearability or one's cleared
status from having to be attached to an active contract
currently drawing money from the Federal Government would go a
long way toward increasing the flexibility that cleared
contractors can provide to the community. There is probably a
lot more research to be done on that, but that is one idea that
could be brought in front of more knowledgeable people than I.
Senator Akaka. Thank you very much.
And finally, I have another question for the entire panel.
As you know, contractors often recruit IC employees because
they have the needed clearance and expertise. We have heard
stories of government employees quitting one day and returning
to the same job as a contractor the next day, often for more
pay.
As you are aware, former CIA Director Hayden instituted a
cooling off period so that CIA employees who left before
retirement could not return immediately as a CIA contractor.
Do you think this policy has been effective and should it
be implemented across the IC? Mr. Allen.
Mr. Allen. Yes, Mr. Chairman, I think it has been very
effective.
General Hayden saw what was happening at the Agency where
people were coming in, working for 2 or 3 years, getting a lot
of expertise working in operations, or in science and
technology, or analysis, and then seeing opportunities to make
more money by immediately going out and keeping their
clearances, coming back as an contractor employee. He
instituted that change. That was a wise decision. I think it
has not affected the efficiency of the Central Intelligence
Agency.
My view is if you are retiring and getting your annuity,
that is fine to go work for a contractor. I have no problem
with that.
But we need a more stable workforce, and occasionally, we
had contractors quite actively recruiting some of our best
personnel. And what General Hayden did at CIA should be
emulated by the rest of the community.
Senator Akaka. Dr. Lowenthal.
Dr. Lowenthal. I mentioned this in my summary remarks, Mr.
Chairman. I agree with Charlie. I think what Mike did in the
Agency was a very good idea.
I spent a lot of my time, when I was the Assistant
Director, counseling younger people who said I have just been
offered this amount of money to go work in another firm. And
they get a bonus for having a clearance. It is like a signing
bonus in baseball. It is not just that they are being offered a
higher salary, but they will get a bonus because they are
coming in cleared.
So I think what General Hayden instituted at the agency was
a very sensible, nonpunitive policy. I think it probably helped
safeguard his workforce. And like Mr. Allen, I would see that
as a rule that could be easily implemented across the community
to the benefit of the government.
Senator Akaka. Thank you. Mr. Amey.
Mr. Amey. I would agree. There is a lot of emphasis on
hiring government employees, but you do not have as much
emphasis on retention of government employees, and so whatever
we can do to improve the retention policy.
A cooling off period, I have seen it manipulated with
defense agencies where the cooling off period actually states
that you cannot receive compensation. So somebody will go there
and not accept compensation for a year, but then come out and
get a bonus 366 days later.
So it always can be manipulated, but anything that we can
do to try to retain qualified government employees that are
highly trained.
And that is where part of the overhead that the government
invests. When people talk about the cost to the government for
a government employee is so high. Well, we do spend a lot of
money on training and on educating, and at that point we do not
want to see all that just kind of spill over and poached by the
contracting industry.
Senator Akaka. Thank you. Mr. Foust.
Mr. Foust. Yes, I would agree with everyone else here, that
was a very good rule.
I have seen where that rule is not in place, in the defense
community, be abused, where government employees go work for
contractors in the same role and in the same office for more
pay, and I think a cooling off period would be very useful to
implement community-wide.
Senator Akaka. Thank you very much. I thank our witnesses
very much, our first two panels as well.
The Intelligence Community has played a critical role in
keeping us safe in the decade since the September 11, 2001
attacks. Our oversight is intended to help make sure that the
IC is as effective as possible. Given the difficult budget
environment, we must also understand the cost implications of
contracting versus insourcing different functions in the IC.
I look forward to working with the Administration and my
colleagues in the Senate to ensure that the IC's total
workforce is properly balanced to further its important
mission.
We are now going to take a short recess and reconvene the
hearing to receive testimony in closed session. While the third
panel will be closed to the public, we will work with the
Administration to release an unclassified transcript of as much
of the proceedings as possible.
The hearing record will be open for 2 weeks for additional
statements or questions from other Members of the Subcommittee.
So this hearing is now in recess until 11:15 a.m. Thank
you.
[Whereupon, at 11:02 a.m., the Subcommittee proceeded to
closed session.]
INTELLIGENCE COMMUNITY CONTRACTORS: ARE WE STRIKING THE RIGHT BALANCE?
(CLASSIFIED SECRET SESSION)
----------
TUESDAY SEPTEMBER 20, 2011
U.S. Senate,
Subcommittee on Oversight of Government
Management, the Federal Workforce,
and the District of Columbia,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, in classified
SECRET session, at 11:38 a.m., in Conference Room 1, Senate
Visitors Center, Hon. Daniel K. Akaka, Chairman of the
Subcommittee, presiding.
(This transcript reflects unclassified excerpts of that
session).
Present: Senator Akaka (presiding).
Also Present: Christian Beckner, Ray Ciarcia, Troy Cribb,
Counsel of the full Committee, Lisa Powell, Staff Director, and
Eric Tamarkin, Counsel, Subcommittee staff; Peggy Evans, Hayden
Milberg, Jared Rieckewald, and Renee Simpson, Senate Select
Committee on Intelligence staff; David Beaupre, George Bremer,
Sharon Flowers, Edward Haugland, Mary Keller, Alexander
Manganaris, Jeanette McMillian, Eric Pohlmann, and Paula
Roberts, Office of the Director of National Intelligence; and
Anne McDonough-Hughes, Government Accountability Office.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. I call this hearing of the Subcommittee on
Oversight of Government Management, the Federal Workforce, and
the District of Columbia back to order. I want to welcome our
witnesses on our third panel. Aloha and thank you for being
here.
The witnesses on our third panel are: Edward Haugland,
Assistant Inspector General for Inspections, Office of Director
of National Intelligence; and Paula J. Roberts, Associate
Director of National Intelligence for Human Capital and
Intelligence Community Chief Human Capital Officer, in the
Office of the Director of National Intelligence.
It is the custom of the Subcommittee to swear in all
witnesses, so would you stand and raise your right hand.
(Witnesses Haugland and Roberts sworn.)
Let it be noted for the record that the witnesses answered
in the affirmative. If you would please try and limit your oral
remarks to 5 minutes, although your full written statements
will be made a part of the record.
Mr. Haugland, please proceed with your statement. Before we
continue, I just want to remind you we don't have mikes, so if
you cannot hear me or I can't hear you I'll let you know. Thank
you. Will you please proceed, Mr. Haugland.
TESTIMONY OF EDWARD L. HAUGLAND, ASSISTANT INSPECTOR GENERAL
FOR INSPECTIONS, OFFICE OF INSPECTOR GENERAL, OFFICE OF THE
DIRECTOR OF NATIONAL INTELLIGENCE, ACCOMPANIED BY GEORGE D.
BREMER, JR.
Mr. Haugland. Thank you, Mr. Chairman. Thank you for the
invitation to the Inspector General of the Office of the
Director of National Intelligence to testify on the topic of
the use of contractors in the Intelligence Community. I'm
honored to represent Roslyn Mazer, the ODNI Inspector General,
and serve as her designee at today's proceedings. As you know,
the ODNI Inspector General recently completed an inspection
that evaluated the ODNI's use of core contractors. The findings
and recommendations from this report, which have been presented
to the Subcommittee as the statement for the record, will be
the basis for my testimony here today.
To begin, I will respond to the four items that you asked
our testimony to address.
First, the findings and recommendations of our report. We
developed three findings and several recommendations. The
findings are: First, the ODNI has not fully performed the
strategic and human capital planning activities required of all
Federal agencies. As a result, there is not a road map upon
which to plan for the effective application and management of
core contractor workforce.
The second finding: Since its standup, the ODNI has
leveraged CIA to provide contracting services through an
interagency acquisition agreement. However, the ODNI has not
implemented internal controls necessary to ensure the
acquisition process is meeting its needs.
The third finding is that the ODNI is not managing
contracting officer's technical representatives (COTRs), as an
essential element or component of the ODNI's acquisition
workforce.
Each finding resulted in several recommendations that, in
summary, are designed to: One, ensure the ODNI complies with
the Government Performance Results Act (GPRA), including
development of a strategic plan and strategic human capital
plan; ensure that internal controls are in place to improve the
oversight of core contracts; and, further, empower the
contracting officer technical representatives and improve the
ODNI's management of them.
The DNI has endorsed our recommendations fully, which are
intended to mitigate the findings in our report.
The Subcommittee also requested that we discuss whether the
ODNI is properly managing and overseeing its core contractor
workforce, to include whether the contractors are performing
core governmental functions, and whether the ODNI is
implementing a strategy to balance the Federal employee-to-
contractor mix.
In both of these areas, we found the ODNI was not
performing optimally and we made recommendations designed to
remedy those shortfalls.
Finally, the fourth item the Subcommittee asked us to
address dealt with the ODNI Inspector General suggestions on
issues involving the use of contractors that should be
investigated across the Intelligence Community.
During the course of our evaluation, we did review a
variety of other assessments that suggest issues identified in
our report are not unique to the ODNI. However, as our office
has not specifically assessed or evaluated other Intelligence
Community elements, we are not in a position at this time to
recommend an investigation of systemic issues. Our evaluation
was focused solely on assessing the risks associated with the
administration and management of core contractors in the ODNI.
This concludes my opening remarks, Mr. Chairman. I look
forward to answering any questions the Subcommittee may have.
Senator Akaka. Thank you very much, Mr. Haugland.
Ms. Roberts, will you please proceed with your testimony.
TESTIMONY OF PAULA J. ROBERTS, ASSOCIATE DIRECTOR OF NATIONAL
INTELLIGENCE FOR HUMAN CAPITAL AND INTELLIGENCE COMMUNITY CHIEF
HUMAN CAPITAL OFFICER, OFFICE OF THE DIRECTOR OF NATIONAL
INTELLIGENCE, ACCOMPANIED BY ALEX MANGANARIS AND SHARON FLOWERS
Ms. Roberts. Good morning, Mr. Chairman. It is my pleasure
to update you on the Director of National Intelligence's
ongoing efforts to oversee our core contractor personnel by
assessing their functions, quantities, and costs. It is worth
noting, as part of our overall efficiencies work that we are
doing across the IC, that the Director of National Intelligence
has directed the agencies to reduce their reliance on core
contractor personnel.
Before I address our efforts, let me give you some overall
context. The IC workforce is composed of three distinct
elements: Civilian personnel, military personnel, and core
contractor personnel. Together they comprise the IC's ``total
force.'' Together they address intelligence mission needs and
requirements. For the Intelligence Community to perform
strategic workforce planning of all three elements, all of the
intelligence needs have to be considered.
[REDACTED]
I would like to specifically address core contractor
personnel, who should be distinguished from other contractors.
Commercial contractors provide services, such as landscaping or
IT support. They are not core contractors. Commodity
contractors are not core either--they deliver commodity
services, such as building a satellite. Likewise, we may
contract for a commodity service such as a specific study.
Core contractor personnel provide direct support to
civilian and military personnel. In 2005, we had 16
intelligence agencies, with no single standard to count or
distinguish contractors. When Congress established the ODNI, we
were able for the first time to bring together the Intelligence
Community and establish core definitions and standards for
contractors.
In 2006, the ODNI began to conduct an annual inventory of
those core contractor personnel that directly support IC
missions. In 2009, the Director of National Intelligence
approved and signed Intelligence Community Directive (ICD) 612
to guide the use of core contractor personnel. First, it
affirms the prohibition on the use of core contractor personnel
to perform inherently governmental activities. Second, it
generally describes the circumstances in which core contractor
personnel may be employed to support IC missions and functions.
Third, it makes the inventory an annual requirement; and
fourth, it provides a standard definition of core contractor
personnel.
In the ICD, we give examples of when to use core contractor
personnel for immediate surges, discreet, non-reoccurring
tasks, unique expertise, specified services, cases where we may
have insufficient staffing, the transfer of institutional
knowledge and cases where it is more efficient or effective.
[REDACTED]
You asked me to address our views on the Office of Federal
Procurement Policy's recent policy letter, ``Performance of
Inherently Governmental and Critical Functions.'' The policy
letter provides a framework and reinforces much of the work
that we have done, and we hope to continue making progress with
this additional policy.
Implementation of this policy will be shared responsibility
across the Intelligence Community's acquisition, human capital,
and financial management communities. We believe many of our
core contractor personnel practices capture the essence of the
policy letter, and we are reviewing the details carefully to
consider where we may need to make additional refinements to
our policies to best implement this policy across the
Intelligence Community.
In conclusion, Mr. Chairman, I believe we are striking the
proper balance with the use of core contractor personnel in the
Intelligence Community. Contractor personnel will remain an
integral part of the IC's total force. At the same time we will
continue to strengthen our oversight mechanisms and management
controls to ensure that core contractor personnel are used
appropriately, and we will continue our efforts to reduce our
reliance on core contractor personnel as appropriate.
I stand ready to answer your questions, sir.
Senator Akaka. Thank you very much for your testimony, Ms.
Roberts.
Ms. Roberts, given the ODNI's charge to oversee the IC and
provide policy and budget guidance, what is the ODNI's
strategic vision over the next 5 to 10 years for its use of
contractors.
Ms. Roberts. We see core contractors as a part of the total
force, and it is imperative that we conduct workforce planning
looking across several years to determine the best use of
contractors as they complement the civilian workforce.
We will continue our efforts to do outreach and recruitment
to try to obtain the skilled workforce we need, and the core
contractor personnel will be complementary to what we're able
to do with the civilian workforce.
Senator Akaka. As a follow-up, are ODNI's current statutory
authorities sufficient to implement its strategic vision?
Ms. Roberts. We believe that we have many of the
authorities that we need to facilitate strategic workforce
planning. We do have a legislative request in to get more
flexibility in the workforce ceiling, so that we may have the
ability to hire the workforce that we need and to convert core
contractor positions to government civilian positions as
necessary.
Senator Akaka. Ms. Roberts, as you know, OFPP recently
released guidance on inherently governmental functions. What
process do you use or intend to use to aid or guide IC agencies
in determining whether specific functions must be performed by
Federal employees?
Ms. Roberts. As part of our workforce planning work, we
look specifically at the skills we need and what's involved in
terms of competencies to do the work that we need to have done
in the intelligence mission. We are working carefully with the
acquisition and procurement folks on what we can expect to have
contractors do to supplement the work that we do.
We make sure we work together to recruit government
employees who meet our needs, and we work very carefully with
the acquisition and procurement folks.
Senator Akaka. Ms. Roberts, in your testimony you discuss
how contract personnel were used to provide key language skills
following the September 11, 2001 attacks. As you know, I
believe foreign language skills are critical to our national
security. Could you elaborate on the steps your office is
taking to improve the language skills within the IC's
government workforce and reduce reliance on contractors for
critical language skills?
Ms. Roberts. Yes. We have a strategic plan that we have put
together to look specifically at language requirements. When we
think about language skills, we think about two things:
Linguists and foreign language skills that analysts need to
have. So we work with the IC elements on an annual basis to
understand what requirements they have, and we are currently
investing in training and education to improve the proficiency
of the people who have foreign language skills.
We likewise have invested quite a bit in outreach to
universities to attract young people with foreign language
skills. In fact, we work very closely with the Department of
Defense on a scholarship program that works directly with
universities and colleges. In addition, we have some outreach
to K through 12 to get the word out on the importance of
studying foreign languages. We have a very deliberate program
that is focused on outreach, education and training, and
developing skills for the IC workforce in both linguists and in
the cases where analysts need to have foreign language skills.
Senator Akaka. Mr. Haugland, in its report on the
administration and management of ODNI core contractors, the
Inspector General recommends that ODNI issue instructions for
enhanced control when contractors closely support inherently
governmental functions. Would you elaborate on the concerns
underlying this recommendation and what these instructions
should contain?
Mr. Haugland. Yes, Mr. Chairman. Through our evaluation, we
did not identify any examples, specific examples where
contractors were doing inherently governmental functions.
However, through the overall evaluation the control processes
that were used to clarify distinctions, the training, those
aspects or areas that required from our perspective
improvement. So in our recommendations we offer specific steps
as relates to training, relates to enhancing internal controls,
and also relating to the reward system for the COTRs.
If I could turn to George Bremer, who actually conducted
the evaluation, he may assist me in providing some clarity on
the specifics, other specifics.
Mr. Bremer. Yes, Senator. As it specifically relates to
those closely supporting inherently governmental functions, and
the FAR requires that when there are contractors performing
functions that closely support inherently governmental
functions there ought to be enhanced management controls to
ensure the contractors aren't influencing the government in
making policy decisions.
We don't specify what the enhanced controls are. We just
found that we couldn't find any examples of advanced controls
or enhanced controls, with the exception of some people thought
that award fee criteria might fall into that category. We
disagreed. So we recommended that there be controls to make
sure that government decisions weren't being swayed by
contractors where those contractors were the experts in that
field.
Senator Akaka. Would you please identify yourself.
Mr. Bremer. I was the project lead for the contractor
evaluation. I work for Mr. Haugland.
Senator Akaka. Your name, sir?
Mr. Bremer. George Bremer, sir.
Senator Akaka. I want to ask, Ms. Roberts, if you have any
further comments on that question?
Ms. Roberts. No, thank you.
Senator Akaka. Mr. Haugland, your report concludes that
ODNI has not fully performed the strategic capital planning
areas required of all the Federal agencies. How does this
finding affect ODNI's ability to manage its core contractors,
and what are the most important elements that ODNI must include
in a strategic human capital plan to correct this finding?
Mr. Haugland. Well, Mr. Chairman, in terms of affecting the
management of the ODNI's core contractors, the strategic
planning basically would spell out the core functions, core
mission areas, and core criteria. The strategic human capital
planning would then expound on that to offer criteria related
to the balance between the core contractors and the number of
government staff.
So without that, as we stated in the report, it's not
really a road map to define what the balance should be or what
that allocation is and therefore strategic planning for the
number of government employees or the number of contractors may
not be as sufficient or optimized as possible in terms of
affecting the ability to oversee and manage the core
contractors.
There are a number of elements we identify within our
report that are ongoing. There's continued work and training
with the COTRs, there's a new contracting database and training
efforts under way to further expand the knowledge and
understanding. So within the ODNI there are measures that are
being taken and we don't want to leave you with the
understanding that there were no controls in place, there was
no training in place, of the ODNI in management of the core
contractors.
However, through our evaluation, as Mr. Bremer indicated,
because we did not find any specific written procedures,
written internal controls, that was one of our findings.
Senator Akaka. Thank you.
Ms. Roberts, would you make any further comments on this
question?
Ms. Roberts. I don't have any comments on that question
sir.
[REDACTED]
I'm going to invite Alex Manganaris to help address some of
the experience we've had looking at the core contract inventory
over the last 3 years. But as he comes forward to talk about
that, I would mention once again the effort that we have in
place within the IC right now to look at efficiencies based on
constraints we have with tight budgets. The DNI has
specifically been working with all of the agencies and asked us
to look very carefully at efficiencies, and so each of the IC
elements are encouraged to look at ways to reduce contractors.
It's important for us to do the workforce planning and to
ensure that everyone is following the proper procedures and
policies that we've laid out. On a recurring basis, we bring
together experts from across the IC elements to have
discussions about these core contractors to ensure that
everyone understands how to interpret the policies.
But let me ask Mr. Manganaris to address some of the
experience we've had with the inventory.
Senator Akaka. Would you please identify yourself.
Mr. Manganaris. Alex Manganaris. Good morning, Senator
Akaka.
[REDACTED]
Over the years, though, the general direction has been a
declining reliance on contractors. Ms. Roberts talked about the
fact that the workforce planning process is ongoing and that
there are times, there are exceptions, when an event happens,
an emergency, where we have to increase the number of
contractors.
Senator Akaka. Thank you.
[REDACTED]
Ms. Roberts. Well, each of the Intelligence Community
agencies look independently at their workforce and what they
are contracting for. We ask them to look each year to see what
changes they need to make in terms of that balance. Now, one of
the things that's very important that I would like to clarify
is, when it's time for us to look at potentially bringing a
function ``in house,'' that we go through a competitive process
in hiring government employees. So any contractor, just like
anyone else, would have to go through the competitive process
to become a government employee, it's not a direct conversion.
But we do have some strategic goals for making conversions,
and in those cases a lot of times the contractors are the most
competitive. Each IC element is a little different. They make
the decisions on what they can afford to bring in house and we
work with them to understand what their plans are on an annual
basis.
The number that we have in the statement reflects what we
were able to gather out of the recent meetings we've had with
IC elements.
Senator Akaka. Thank you.
Ms. Roberts, you mentioned personnel ceilings have led to
greater reliance on contractors rather than government workers
to perform important IC functions. As you know, the House
recently passed the Intelligence Authorization Act for Fiscal
Year 2012, which would give ODNI relief from this personnel
ceiling. Will you further explain how personnel ceilings have
contributed to the IC's reliance on contractors and discuss
whether the House passed provision would adequately address the
problem?
Ms. Roberts. We believe the House passed Intelligence
Authorization Act will greatly help give us the flexibility
that we feel we need in order to go out and hire and recruit
key personnel. We have certainly looked at the strategic skills
that we need and it often takes a while to go out and hire,
bring in an employee, and give them the training and
development they need in order to be fully functional.
On an annual basis we do this workforce planning and we
understand what our needs are. When we look at cases where we
want to, for example, bring in some of the functions that were
contracted out, in order for us to do this conversion work, we
need the flexibility to be able to exceed the ceiling so that
we can bring them in.
Another example of where the ceiling sometimes will give us
a constraint is when we have to surge to quickly to respond to
something that is happening in the world, and we may need to go
out and hire some additional key personnel. Sometimes if we're
constrained with the ceilings it hinders our ability to go out
and get the talent that we need.
I would just see if anyone has anything else to add.
Mr. Manganaris. Senator Akaka, I would like to mention the
challenge that NGA had in trying to reduce its number of
contractors. During the fiscal year 2011 budget process, NGA
requested an increase in its civilian workforce which included
contractor conversions, and they were denied that request
because there's a lot of visibility on the civilian numbers and
the contractor numbers, and the budget requests are much more
general.
[REDACTED]
Senator Akaka. Ms. Roberts, do you have an estimate of what
percent of current IC contracting is the result of personnel
ceilings?
Ms. Roberts. Mr. Manganaris or Ms. Flowers, do either of
you know the percentage? I don't know myself.
Senator Akaka. Mr. Haugland, the Inspector General's report
finds that ODNI is not managing its acquisition personnel, in
particular contracting officer's technical representatives, as
an essential component of its workforce. How can ODNI elevate
and empower acquisition personnel within ODNI?
Mr. Haugland. Well, Mr. Chairman, thank you for the
question. I think our recommendations go right to the heart of
your question in terms of, one, is ensuring that the
contracting officer technical representative roles and
functions are included in the performance report; and two is
that there's an incentive and reward system in place to
facilitate the recognition of COTRs for their job, their
important role within their--three, to make sure that there is
enhanced training to ensure the COTRs fully understand their
roles; and four, from a management oversight perspective we
remain there is an inherently--that the government managers who
oversee the COTRs understand their roles, understand their
functions, and then provide proper oversight and recognition
that it is indeed a core function.
Those different elements that are within the
recommendations of our report--and if I've missed anything I'll
turn to Mr. Bremer--I think are key to ensuring that the COTR
function is not only enhanced, but recognized, but then used to
help drive overall accountability within management of the
contractor and acquisition workforce.
Senator Akaka. Ms. Roberts, what will ODNI do to make sure
it has a robust acquisition workforce, including adequately
trained and empowered employees?
Ms. Roberts. Just recently my office worked very closely
with the ADNI for Acquisition and we have teamed to put
together a strategic workforce plan for the acquisition
workforce. The strategic plan addresses the core skills that we
feel we need, the types of training that the workforce
requires, and the specific milestones for implementation of the
plan.
So we have already spent quite a bit of time working with
acquisition on these, specifically what skills do the
contracting representatives need to have, the procurement
officials, the different types of people that all come together
to manage the contract workforce.
Ms. Flowers, do you want to add anything?
Ms. Flowers. Sharon Flowers, DNI senior procurement
executive.
I would just add that right now, as the DNI actually
evolves into a robust organization that actually has an
acquisition function--in the past, we've actually depended on
an agreement with the CIA to do our contracting for us. So with
that, the highlights of the IG inspection, with the facts that
we have become a very robust member of the community--we're
actually looking at our processes again to figure out the best
way and determine the most economical and effective and
efficient way to do contracting internal to the DNI.
We actually have very robust external oversight of the rest
of the community, but the internal function of DNI is the part
that we want to make more robust.
Ms. Roberts. Perhaps I could clarify the reference I made
just a moment ago on strategic workforce planning for the
acquisition corps: It was a community-level document, and
internal to the ODNI, as per the comments we heard from the IG,
the ODNI staff itself has some work to do.
Senator Akaka. Thank you.
Mr. Haugland, your report raises concerns about ODNI's
reliance on CIA to carry out much of its contracting functions.
I understand that CIA manages the contracts for core contract
employees, who make up a large percentage of ODNI's workforce.
Would you elaborate on the line of concerns and corrective
actions that should be implemented?
[REDACTED]
Mr. Haugland. In terms of how we're looking to strengthen
that, that goes to our second set of recommendations, on the
internal controls, is the overall relationship with CIA was
done in concert with or in compliance with the Economy Act. So,
given that, in terms of the overall benefit to the government,
ensuring that, our recommendations asked the ODNI to put in
specific controls and go to the performance of those contracts,
the performance of the contracting, of the contractors
themselves, and other internal controls related to the
designation and delegation of responsibilities from the
contracting officers to the COTRs.
So there are several steps in there we're taking a look at
within our recommendations to ensure a better understanding of
the performance of the output, of the outcome of the
contractors despite the outsourcing to CIA for the functions.
Senator Akaka. Thank you.
[REDACTED]
Ms. Roberts. I think that the ODNI staff is maturing. It's
only been in place for a few years, and I think at the standup
of the ODNI it was important to go out and get the talent that
it needed to oversee the IC, and in some cases, in many cases,
core contractor personnel were brought in to help supplement
the staff to do this job.
As we're getting more experienced now with the functions
and the work that we need to do, I would expect to see the ODNI
migrate more towards civilian personnel to perform many its
duties and to reduce the number of core contractors.
Senator Akaka. Mr. Haugland and Ms. Roberts, I want to
thank you very much for taking the time to testify today and
thank you for your service to our country as well. As you know,
the ODNI serves an essential role in integrating and overseeing
the Intelligence Community. Our oversight is intended to help
ODNI focus on finding an appropriate balance of contractors and
Federal workers across the IC and investing in the Federal
workforce where needed to accomplish that. I look forward to
working with you on these issues.
This hearing of three panels has helped us examine this
issue so we can improve the system to be efficient and to
continue to serve the country.
This hearing record will be open for 2 weeks for any
additional statements or questions from other Members of the
Subcommittee.
Again, I want to say thank you very much. This hearing is
adjourned.
[Whereupon, at 12:02 p.m., the hearing was adjourned.]
A P P E N D I X
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