[House Hearing, 111 Congress]
[From the U.S. Government Printing Office]
[H.A.S.C. No. 111-95]
DOD SUPPLY CHAIN MANAGEMENT: CAN THE DEPARTMENT IDENTIFY AND MEET ITS
SUPPLY NEEDS EFFICIENTLY?
__________
HEARING
BEFORE THE
PANEL ON DEFENSE ACQUISITION REFORM
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
SEPTEMBER 24, 2009
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT
U.S. GOVERNMENT PRINTING OFFICE
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PANEL ON DEFENSE ACQUISITION REFORM
ROBERT ANDREWS, New Jersey, Chairman
JIM COOPER, Tennessee K. MICHAEL CONAWAY, Texas
BRAD ELLSWORTH, Indiana DUNCAN HUNTER, California
JOE SESTAK, Pennsylvania MIKE COFFMAN, Colorado
Cathy Garman, Professional Staff Member
John Wason, Professional Staff Member
Alicia Haley, Staff Assistant
C O N T E N T S
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CHRONOLOGICAL LIST OF HEARINGS
2009
Page
Hearing:
Thursday, September 24, 2009, DOD Supply Chain Management: Can
the Department Identify and Meet Its Supply Needs Efficiently?. 1
Appendix:
Thursday, September 24, 2009..................................... 21
----------
THURSDAY, SEPTEMBER 24, 2009
DOD SUPPLY CHAIN MANAGEMENT: CAN THE DEPARTMENT IDENTIFY AND MEET ITS
SUPPLY NEEDS EFFICIENTLY?
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Andrews, Hon. Robert, a Representative from New Jersey, Chairman,
Panel on Defense Acquisition Reform............................ 1
Conaway, Hon. K. Michael, a Representative from Texas, Ranking
Member, Panel on Defense Acquisition Reform.................... 2
WITNESSES
Heimbaugh, Nancy, Senior Procurement Executive and Director of
Acquisition Management, Defense Logistics Agency............... 8
McCoy, Maj. Gen. Gary T., USAF, Commander, Air Force Global
Logistics Support Center....................................... 6
Solis, William M., Director, Defense Capabilities and Management,
U.S. Government Accountability Office.......................... 5
APPENDIX
Prepared Statements:
Heimbaugh, Nancy............................................. 52
McCoy, Maj. Gen. Gary T...................................... 42
Solis, William M............................................. 25
Documents Submitted for the Record:
[There were no Documents submitted.]
Witness Responses to Questions Asked During the Hearing:
Mr. Andrews.................................................. 69
Mr. Coffman.................................................. 69
Questions Submitted by Members Post Hearing:
[There were no Questions submitted post hearing.]
DOD SUPPLY CHAIN MANAGEMENT: CAN THE DEPARTMENT IDENTIFY AND MEET ITS
SUPPLY NEEDS EFFICIENTLY?
----------
House of Representatives,
Committee on Armed Services,
Panel on Defense Acquisition Reform,
Washington, DC, Thursday, September 24, 2009.
The panel met, pursuant to call, at 9:38 a.m., in room
2175, Rayburn House Office Building, Hon. Robert Andrews
(chairman of the panel) presiding.
OPENING STATEMENT OF HON. ROBERT ANDREWS, A REPRESENTATIVE FROM
NEW JERSEY, CHAIRMAN, PANEL ON DEFENSE ACQUISITION REFORM
Mr. Andrews. Good morning. Please be seated, ladies and
gentlemen. Welcome. We thank our witnesses, thank our
colleagues on the panel and thank our guests for being with us
this morning for today's hearing. Any large organization has a
responsibility for acquiring goods and getting the amount of
goods that they need to the place that they are needed in the
time they are needed in the most efficient and productive way.
There are a few organizations in the world, perhaps no other
organization in the world with the responsibility as large as
that as the United States Department of Defense (DOD). The best
approximation I have read of the total amount to do that in any
given year is about $42 billion a year. That is a lot of items.
Whether it is food, ``Meals Ready to Eat'' (MRE), whether it is
fuel cells, it is a lot of items that have to be moved, and I
would say from the outset that we are grateful for the men and
women in the federal service, both uniformed and non-uniformed
who have taken on that responsibility. We thank them for it. We
know it is a very difficult job.
So I want to preface all of our questions and remarks this
morning by acknowledging that the men and women in that field
have taken on a very hefty responsibility that has huge
consequences. The chairman of the full committee is fond of
giving committee members reading assignments. And a few years
ago, I was given the reading assignment of reading about
Guadalcanal. There is a famous book about Guadalcanal that is
very voluminous. And the lesson that I learned from reading the
book--two lessons. One was that if the chairman gives you a
book to read, read it. And the second was that in many ways,
the battle of Guadalcanal was won obviously through the
incredible heroism and performance of American warfighters,
Marines and others.
The second was logistics really won that battle, that the
Americans were better prepared logistically than the Japanese
enemy and were able to withstand huge assaults by many, many
more warfighters, because they could outlast them, because they
had the logistics to do it. Happily, there aren't as many of
those dramatic circumstances very often. We don't want those
kind of circumstances if we can avoid them. But every day there
is the challenge of accounting for and moving around, taking
proper care of $42 million worth of items. Now, we come to this
morning's discussion frankly in a context of some challenges
and difficulties that have been raised in that context. The
Government Accountability Office (GAO) has looked at this issue
over a number of years and identified some of those challenges.
Some of the more difficult examples that have come up in
the past I want to stress, in the past really jump out at you.
Between 2004 and 2007, it was concluded that the Army had $3.6
billion more of spare parts than it needed. In the same fiscal
year as the conclusion was that the Navy had $7.5 billion more
of various parts than needed, which was 40 percent of its
inventory. At the other end of the spectrum, around the time of
the Iraq buildup--fully understanding that this was a very
stressful time for everyone involved in the Department of
Defense--for example, the demand for lithium batteries was 18
times greater than the supply that we had of lithium batteries.
So for every 18 lithium batteries that we needed to accomplish
a task in the field, we only had one. There are other sort of
eye-catching facts that come out of some of the work the GAO
has done. In March of 2002, the price of a refrigerator which
would go on an aircraft was about $13,800. But in September of
2004, not much later than that, the price jumped to $32,600 for
the same product.
This indicates that the challenges are substantial. The
purpose of our hearing this morning is to hear about the
progress that has been made in meeting those challenges. There
have been efforts to reorder the way our relevant DOD agencies
work to identify these challenges and work with them. We are
interested in hearing this morning about the progress of that
work. Suffice it to say that it is easy to Monday morning
quarterback this, to say ``my goodness,'' you paid $32,000 for
a refrigerator you paid $13,000 for a few months earlier.
That is not our intention. We understand the monstrous
scale of the job that our agencies have here in purchasing $42
billion a year worth of items. But we do want to take a serious
look at how we can improve the way we look at that, so we can
get better value for those who serve our country and better
value for those who pay the bills for our taxpayers. That is
our approach this morning and we look forward to the witnesses.
And at this time, I would ask the senior Republican on the
panel, my friend, Mr. Conaway for his statement.
STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE FROM
TEXAS, RANKING MEMBER, PANEL ON DEFENSE ACQUISITION REFORM
Mr. Conaway. Thank you, Mr. Chairman. And witnesses,
welcome. Thank you for setting aside time in your schedules to
come visit with us this morning. Last week's panel looked at
the DOD's role in tackling the challenges facing the industrial
base in the global market. Today we are here to receive expert
testimony about another major component in the acquisition
process, which is the purchase of commodities, the suppliers of
those commodities which are a significant part of the
industrial base. There is no question that our Nation's ability
to project and sustain military power depends on effective
logistics.
It was General Eisenhower who said you will not find it
difficult to prove that battles, campaigns and even wars have
been won or lost primarily because of logistics. The challenge,
of course, is how does the government--how does the Department
manage the supply chain more effectively and efficiently.
Clearly the Defense Logistics Agency (DLA), which, by the way,
supplies almost every consumable item America's military
services need to operate, has learned a lot in the last eight
years. DLA has made many improvements in the last eight years
such as placing senior executives at each of the four major
buying activities to serve as the head of the contracting
activity which ensures the efficacy and the integrity of the
acquisition process. When you get it right, a scant thank you
is offered up. When you get it wrong, people get hurt and die
and it is a wreck.
So thank you for all the good things that you do do
unnoticed. Because like I say when you get it right, they just
keep going. When you get it wrong, then things get out of
whack. I look forward to hearing our testimony from our
witnesses today. And with that I yield back, Mr. Chairman.
Mr. Andrews. Thank you very much. The staff has assembled
an outstanding panel of witnesses this morning. We are very
glad these three individuals are with us. I want to take a few
minutes to read their respective biographies. I think all three
of you are experienced Capitol Hill witnesses, so you know
without objection your written testimony will be entered into
the record of the hearing in its entirety. And we will ask you
to provide a five-minute or so oral synopsis of your testimony.
When each of you has done that, we will turn to the panel for
questioning so that we can maximize the amount of time that we
can interact with the witnesses. Mr. William Solis is on his
second appearance before our panel, I believe. He serves as the
Director of the Defense Capabilities and Management team at the
GAO.
Prior to this appointment, he worked in a variety of
engagements that covered topics such as military readiness,
training, weapon system effectiveness, housing and military
doctrine. Much of his work involves close interaction with
Congress and key national security experts. For example, he
works with the congressional authorization as we know,
appropriation oversight committees that have jurisdiction over
DOD agencies.
Throughout his over 30 years at the GAO, Mr. Solis has
served in a wide variety of positions and has become the
recipient of numerous honors and awards. Most recently he was
selected to receive the 2008 GAO Award for Distinguished
Service. And we so much appreciate your work. The work that you
and your colleagues did on the Weapons Systems Acquisition
Reform Act of 2009 (WASTE-TKO) bill that was signed by the
President in May was invaluable. You continue to demonstrate
each time you are here the professionalism and quality of the
GAO's work. We thank you very much for it.
Nancy M. Heimbaugh. Did I pronounce your name correctly,
Ms. Heimbaugh? Okay. Currently serves as the Director of
Acquisition Management, the Defense Logistics Agency at Fort
Belvoir. In this capacity, she is responsible for the
development, application and oversight of DLA acquisition
policies, plans, programs, functional systems and operations.
Her past assignments include Executive Director for Contracting
and Acquisition Management at the Defense Supply Center in
Philadelphia. Did you live in New Jersey or Philadelphia when
you had that job?
Ms. Heimbaugh. Philadelphia.
Mr. Andrews. That is the wrong answer. But a lot of my
constituents work there and it was a pleasure to have you
there. The Director of Field Contracting Management, Director
for Naval Supply Systems Command and frankly a long list. She
then served as Chief of Contracting Operations in the
Acquisition Directorate at DLA where she was responsible for
overseeing procurement operations at all DLA field contracting
activities in support of the DLA Senior Procurement Executive
Component Acquisition Executive.
She has a Bachelor's of Science, magna cum laude from
Strayer University, a Master's in National Resource Strategy
from the National Defense University, a Certificate of
Completion from the Defense Acquisition University Senior
Acquisition Course. In 1996, Ms. Heimbaugh received Vice
President Gore's National Performance Review's Heroes of
Reinvention Hammer Award for electronic commerce.
Congratulations on that and welcome to the committee, Ms.
Heimbaugh.
Major General Gary T. McCoy is the commander of the Air
Force Global Logistics Support Center (AFGLSC), located at
Scott Air Base in Illinois, an Air Force Materiel Command
Sustainment Center. The AFGLSC executes the Air Force supply
chain by integrating enterprise-wide planning and strategy with
global command and control serving as the single focal point
for the warfighter. The command manages an $8.5 billion budget.
It has over 4,200 personnel.
General McCoy is a South Carolina native, was commissioned
through Officer Training School in July 1976. He has his
Bachelor of Arts degree from Culver-Stockton College in
Missouri, as the chairman instructed us to pronounce it that
way. His military career has been very distinguished. Prior to
his current assignment, General McCoy was the Director of
Logistics Readiness Office of the Deputy Chief of Staff for
Logistics Installations and Mission Support Headquarters, U.S.
Air Force, Washington, DC.
Thank you, General, for your service and welcome to the
panel.
Mr. Solis, we are going to start with you this morning. As
I say, we would ask you to summarize orally in about five
minutes. We will not rigidly hold to that rule. We had a chance
to review the written testimony of each of you. It is very well
prepared and you are on.
STATEMENT OF WILLIAM M. SOLIS, DIRECTOR, DEFENSE CAPABILITIES
AND MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Solis. Thank you. And good morning again. Chairman
Andrews, Ranking Member Conaway and members of the panel, I am
pleased to be here today to discuss DOD supply chain management
and more specifically the challenges DLA faces in ensuring it
provides good value and adequate oversight for goods and
services bought from contractors with taxpayer dollars.
Effective and efficient supply chain management is important
because the availability of spare parts, commodities and other
critical supply items affects the readiness and operational
capabilities of U.S. military forces.
Moreover, the investment of resources in the supply chain
is substantial, amounting to approximately $178 billion in
Fiscal Year 2007 according to DOD. As a result of weaknesses in
DOD's management of supply inventories and responsiveness to
warfighter requirements, supply chain management has been on
our list of high risk government programs and operations since
1990. To execute its support missions and supply troops with
the goods and services they need, DOD relies to a great extent
on contractors; however, the Department faces many long-
standing contracting challenges which are especially important
to address as the Department's use of contractors has grown.
As DOD's largest combat support agency, DLA provides over
$42 billion in goods and services to our military serving
domestically and around the world, including the ongoing
campaigns in Iraq and Afghanistan in Fiscal Year 2008. This
crucial logistical support to our military makes it vital that
DLA along with the rest of DOD employ sound contracting
practices in order to ensure that goods and services are
attained in a cost efficient and effective manner.
As we have continued to report, however, the Department
struggles to implement sound contracting policies such as
clearly defining requirements using appropriate contract type
and exercising effective contract management. In absence of
these, DOD exposes itself to unnecessary risk and may not be
able to ensure that tax dollars are spent on goods and services
that provide the best value. There are several contracting
practices we continue to review as most vital in order to
mitigate this risk. First, when making a contract decision, a
prerequisite to good outcomes is a match between well-defined
requirements and available resources. This requires accurate
demand and supply forecasting and realistic timeframes among
other things. Our previous reports and testimonies have
highlighted several cases where poorly defined and changing
requirements have contributed to increased costs as well as
services that did not meet DOD's needs.
For instance, because DLA could not produce an accurate
demand forecast for ``Meals Ready to Eat'' in Iraq in early
2003, some combat units came within a day of running out of
MREs. Also the difficulty of military services had with
forecasting demand for spare parts is among several reasons we
have placed DOD supply chain management on our high-risk list.
Second, when the correct contract type is selected, the
government's risk is minimized. Due to the volume and value of
contracting arrangements made by DLA, it is critical that the
agency choose the most appropriate contract vehicle. DLA has
taken steps to mitigate the risk of choosing the wrong contract
type for the situation, such as reexamining programs to decide
whether a prime vendor, for example, is the best acquisition
strategy. Third, DOD has long had significant issues providing
adequate management and assessment of contractor performance,
making it difficult for DOD to identify and correct poor
contractor performance in a timely manner. Proper contract
management requires an adequate number of personnel who are
suitably trained or in place to perform oversight. We have
previously reported DLA officials had not conducted the
required price reviews for prime vendor contracts for food and
service equipment and construction equipment and commodities.
DLA officials acknowledge that part of what led to the problem
was poorly trained contracting personnel and the agency has
since implemented additional training for its contracting
officers and managers.
Over the last several years, we have made numerous
recommendations for DOD to improve contract management and the
use of contractors to support deployed forces and Congress has
enacted legislation requiring DOD to improve its management and
oversight of contracts. To improve outcomes on a whole, DOD and
its components, such as DLA, must ensure that these changes and
other efforts are consistently put into practice and reflected
in decisions made on individual acquisitions. This will take
sustained commitment by senior DOD leadership to translate
policy into practice and to hold decisionmakers accountable.
Finally, the recent surge of forces in Afghanistan make it
critical that contract oversight is adequately performed to
minimize the risk of fraud, waste and abuse experienced in
Iraq. To better ensure that DLA has minimized the risk for
government in fulfilling its combat support mission in the most
effective and efficient manner, DLA will need continued
vigilance with regard to its contract administration and
oversight. Mr. Chairman, this concludes my oral statement. I
would be happy to take any questions.
[The prepared statement of Mr. Solis can be found in the
Appendix on page 25.]
Mr. Andrews. Thank you very much. I want to apologize,
General, for my breach of protocol in not recognizing you
first. This hearing is so much later in the day than we usually
start. We are usually a 7:30, 8:00 a.m. deal. I apologize for
the breach of protocol. And, Ms. Heimbaugh, if it is okay with
you, I am going to recognize the General next for his
testimony.
STATEMENT OF MAJ. GEN. GARY T. MCCOY, USAF, COMMANDER, AIR
FORCE GLOBAL LOGISTICS SUPPORT CENTER
General McCoy. Chairman Andrews, Congressman Conaway and
distinguished members of the Defense Acquisition Reform Panel,
I thank you for this opportunity to address the mission of the
Air Force Global Logistics Support Center which I will refer to
as the AFGLSC and how it links with the Defense Logistics
Agency. The AFGLSC has rapidly evolved since the standup in
March of 2008 at Scott Air Force Base, Illinois, as a new
center in Air Force Materiel Command. The AFGLSC was born out
of a compelling need for change in the 2005 and 2006 timeframe.
The Air Force was challenged with increased operational tempo,
manpower cuts, increased deployments, aging aircraft and budget
constraints. In addition to these pressures, we were
transforming into a highly expeditionary Air Force. A more
efficient, streamlined and effective supply chain was required
to sustain and improve our performance in such challenging
times.
I took command of the Air Force GLSC in November of 2008
and I am honored and delighted to lead this great organization
as we transform supply chain management in the Air Force to
improve our combat capability. As a career logistician, I look
forward to discussing how the professional men and women of the
AFGLSC are executing our challenging global mission, how we are
improving our enterprise operations through the implementation
of a comprehensive and forward thinking strategic campaign plan
and how we are working closer with DLA to ensure we can
successfully support our Air Force and other worldwide
customers.
To execute the service function of organize, train and
equipment and provide forces to combatant commanders, we are
heavily reliant on our logistics and supply chain capabilities.
The formation of the AFGLSC enabled the establishment of a one
supply chain process owner who provides a single point of entry
and contact for our Air Force warfighters and customers
throughout the supply chain. Employing lessons learned from
commercial industry, from academia and government, we are
eliminating duplication and focusing on standardization of our
critical processes. We are just getting started and are
extremely proud of our progress to date.
As a total force organization consisting of active duty,
Guard, Reserve and civilian personnel, the AFGLSC has three
primary functions. Enterprise supply chain planning execution,
operations and strategy and integration. Our total team
simplifies the complexities of the Air Force supply chain for
our warfighters, providing the most logical, expedient and cost
effective solution. Our warfighters and other worldwide
customers don't have to worry anymore about chasing information
or chasing parts because AFGLSC assumes that role for them.
Now, I would like to turn your attention to our partnership
and collaboration with DLA to improve and drive improvements to
the Air Force supply chain. We have three primary initiatives
at work. First, we are developing a set of joint customer
metrics with the intent of presenting one picture of the supply
chain health to the warfighter.
Secondly, the AFGLSC has established an organization
devoted to the consolidation and submittal of the Air Force
requirements to DLA. This initiative is called Planning for DLA
Managed Consumables or PDMC and is a means for the Air Force to
more accurately project supply plans to DLA that are based on
information that would not otherwise be anticipated through
historically based forecasting techniques. And third, we are
working closer with DLA to improve the support we provide to
Air Force depot maintenance operations. We have created a depot
supply chain management team that uses predictive analysis and
identifies and solves supply chain constraints well ahead of
the need for the item to support that operation.
The AFGLSC and DLA have also been working on a number of
joint sourcing initiatives to commit resources for joint
collaboration opportunities for long-term strategic contracts.
The purpose is to apply our combined buying power where
appropriate to leverage tactical and strategic relationships
with our commercial buyers, the collaborative sourcing
opportunities that govern through a joint service board that
meets quarterly.
In closing our mission, our role, our responsibilities and
vision are clearly defined for the Air Force Global Logistics
Support Center. We are a relatively new organization that has
stepped out quickly to achieve the results the Air Force
envisioned when they established the center in March of 2008.
Our early success has motivated us to bring even better support
to the warfighter. I am equally proud and pleased with our
strong relationship with DLA and I am encouraged by the
collaborative initiatives we have developed together. Global
logistics with a warfighter focus, that is what the Air Force
Global Logistics Support Center is all about. I look forward to
your questions.
Mr. Andrews. General, thank you very much.
[The prepared statement of General McCoy can be found in
the Appendix on page 42.]
Mr. Andrews. And, Ms. Heimbaugh, it is my understanding it
is your first time testifying on the Hill. We are honored that
we would be your maiden voyage here. This is a very aggressive,
hard edge committee here, so you should be on guard. No. You
are very welcome. We appreciate your service to your country
and look forward to your testimony this morning. Welcome.
STATEMENT OF NANCY HEIMBAUGH, SENIOR PROCUREMENT EXECUTIVE AND
DIRECTOR OF ACQUISITION MANAGEMENT, DEFENSE LOGISTICS AGENCY
Ms. Heimbaugh. Thank you. Chairman Andrews----
Mr. Andrews. Ma'am, would you turn your microphone on? It
would be better if we could hear you that way. Okay. Thank you.
Ms. Heimbaugh. Chairman Andrews, Congressman Conaway and
distinguished panel members, thank you for the opportunity to
appear today and discuss the Defense Logistics Agency's mission
as a supply chain manager responsible for providing the best
available supplies and services to the warfighter at the best
value to the taxpayer. The Defense Logistics Agency, or DLA, is
the Department's combat logistics support agency. It manages
4.8 million items and supports nearly 1,600 weapons systems. It
is the end-to-end supply chain manager for 8 supply chains and
it provides approximately 84 percent of the repair parts and
nearly all of the subsistence, fuels, medical, clothing and
textiles and construction material required by the military
services.
DLA has a global distribution capability, including 26
distribution centers around the world. DLA is an integral part
of the end-to-end supply chain it works closely with the
services to ensure support for their requirements. For example,
DLA is partnering with the Air Force Global Logistics Support
Center to execute the base realignment and closure decision to
realign depot level reparable acquisition, as well as supply,
storage and distribution responsibilities to DLA. DLA provides
storage and warehouse management for service required items and
coordinates movement of items directly with vendors or with the
U.S. Transportation Command to ensure on-time delivery. DLA's
responsibilities also include stock positioning at forward
locations for faster delivery.
DLA uses demand planning and forecasting to reflect usage
factors accurately and leverages distribution to complete the
supply chain. And DLA now uses the Northern Distribution
Network to move supplies and equipment to the U.S. forces
deployed in support of operations Enduring Freedom and Iraqi
Freedom. DLA provides support to the warfighter no matter where
located.
Acquisition is a core DLA competency and essential to its
success as a supply chain manager. As requirements are
identified by the service, DLA develops the supporting
acquisitions, drawing upon a portfolio of tailored acquisition
solutions. For example, DLA's prime vendors distribute
commercial products to assigned customers in a designated
region, accelerating deliveries, eliminating inventory and
reducing costs. They provide the same high quality support to
deployed warfighters as to military service members in the
continental United States. DLA is aware of its responsibility
to maintain its industrial base of which small businesses are a
critical component.
DLA invests approximately $50 million of congressional
funding annually to maintain production capacity for go-to-war
items such as nerve agent antidote auto-injectors. In addition,
DLA supports the Department's socioeconomic programs, having
awarded approximately $7.9 billion to small businesses in
Fiscal Year 2008. In executing its stewardship
responsibilities, DLA has established a separate acquisition
management directorate and has placed senior acquisition
executives at its major activities to enhance management and
oversight.
DLA also has a sound oversight program in place to ensure
effective stewardship. A performance-based agreement with the
Defense Contract Management Agency (DCMA) emphasizes contract
administration. In addition, a new Center of Excellence for
Pricing identifies contract pricing issues and supports
improved management decisions. And it has already generated
significant savings. DLA's workforce is a key to its mission.
And DLA ensures that these professionals are fully trained and
job ready. DLA is also planning for the future with 399
contracting interns in its 2-year intern program. DLA monitors
acquisition performance using metrics that relate directly to
success.
Analyzing these metrics allows DLA to assess performance
and identify effective solutions if performance lags, a key
capability of DLA's recently implemented Enterprise Resource
Planning System. Given the size of its program, DLA is prepared
to face major challenges. For example, the pending rollout of a
single agency-wide contract writing system is a major
undertaking; however, DLA is confident that it will meet its
challenges and that it will continue to provide effective
support to the warfighter while being an efficient steward of
the taxpayer dollar.
Mr. Chairman and distinguished members of the panel, this
concludes my statement. I will be pleased to answer your
questions.
Mr. Andrews. Thank you very much, Ms. Heimbaugh, and
welcome to the committee. We hope you are here many times.
[The prepared statement of Ms. Heimbaugh can be found in
the Appendix on page 52.]
Mr. Andrews. I thank all three of the witnesses. And we
begin with Mr.--is it ``Solis'' or ``Solees''? I am sorry.
Which do you prefer.
Mr. Solis. ``Solis'' is fine.
Mr. Andrews. Mr. Solis, I notice in your written testimony
there was the discussion of one of the prior reports about this
refrigeration unit and this is on page 10 of the written
statement that--the price was $13,825 in March of 2002 and
apparently in September of 2004, we paid $32,642. Was it the
same unit? Was it the same product?
Mr. Solis. That is my understanding.
Mr. Andrews. And the report goes on to say that there was
an acknowledgement by senior officials that there wasn't proper
supervision. But I would like to try to get into the weeds of
that one a little bit more. How did the person who bought the
second refrigerator not know that the price was so much higher
than the one for the first?
Mr. Solis. I think a couple of things in terms of the
history. At the time when we went back--and this actually was
at the behest of the Armed Services Committee that we did this
work--some of these things had been occurring in terms of the
lack of pricing reviews and the lack of emphasis on price going
back several years prior to this even happening within DLA.
This had been brought to senior management attention. We are
not sure why things--I mean, within--the DLA internal review
brought this up. There were other internal studies that were
brought forward in terms of the problem. But there was not an
emphasis as much as it could be on doing pricing reviews. The
metrics were more towards how much sales volume do you have. So
I think there was a disconnect between the emphasis on----
Mr. Andrews. So the person who was doing that job
understood his or her responsibility, prime responsibility is
buying ``X'' number of refrigerators by some deadline?
Mr. Solis. That is correct.
Mr. Andrews. And there wasn't an emphasis on how much they
cost?
Mr. Solis. There wasn't the emphasis on cost or pricing
reviews at the time.
Mr. Andrews. Do you recall under what kind of contract the
refrigerator was purchased under?
Mr. Solis. I am not sure.
Mr. Andrews. If you could supplement for the record how
that happened. How about the personnel involved? I don't mean
the specific people. Was it the same subunit of the DLA that
made the two purchases or was it two different subunits?
[The information referred to can be found in the Appendix
on page 69.]
Mr. Solis. It was the same unit. I don't know if it was the
same individual who made the decisions.
Mr. Andrews. Did they have access at the time to a database
that would show what had been paid in March of 2002? Or would
they not have known that?
Mr. Solis. If it was, I don't believe that they accessed
that database.
Mr. Andrews. What I hear you saying is it wouldn't be a
part of the sort of regular routine of the person doing the
job.
Mr. Solis. That is why I mentioned in my oral statement, I
think as well as in testimony, there was a lack of emphasis on
that kind of training to do the pricing reviews as we
indicated.
Mr. Andrews. We certainly can't fault the person if their
job is to purchase quantity and not price. You follow orders.
But I guess the question that I would raise is--this is more of
a rhetorical question. Are we orienting people properly not to
look at--let me put it to you this way. I would bet you
anything that the person or the people responsible for making
that decision, if they had bought a refrigerator for their home
in March of 2002 and paid $900 for it, they would have been
shocked to go pay $2,000 for one 2 years later. They wouldn't
do that. They would say wait a minute, what is different about
this refrigerator, why does it cost more. Does that not happen
because we are not expecting people to think that way? Or does
that not happen because they don't have the information? Why do
you think that happens?
Mr. Solis. I think that happened before because there
wasn't an emphasis on it. Maybe Nancy can probably answer this
better where they are at.
Mr. Andrews. I was coming to that. Yeah, I want to ask Ms.
Heimbaugh----
Mr. Solis. The orientation has changed. I know there is a
unit that is doing that right now.
Mr. Andrews. Let us ask it in terms of that specific
example, Ms. Heimbaugh. Let us say that I work for you, I am
part of the Agency and it is my job this morning to go buy a
refrigeration unit. What would be different today than occurred
in 2004? And let us say hypothetically that the unit that comes
across my desk for approval is $40,000. What would be different
today about the way I would approach that problem than when
this situation arose the first time?
Ms. Heimbaugh. I can assure you that there would be a big
difference. A lot of corrective actions have been put in place
since the time that that issue became identified. And actually
folks, there were personnel that were either removed or
specific action was taken because to answer your question,
there was a need for more focus not only from a pricing
standpoint, but from a training standpoint as well.
Mr. Andrews. Let me ask you this way. If I signed off on
the $40,000 refrigerator and we should be paying $17,000 for
it, what would happen to me?
Ms. Heimbaugh. Well, first of all, we have measures in
place that precludes one individual from making that sole
decision.
Mr. Andrews. What if myself and my superiors had access to
information that told us that it could be gotten for 17, and we
signed off on it anyway for 40. What would happen to us?
Ms. Heimbaugh. There would be specific action taken. We
also have processes in place that monitor even after the awards
are made to ensure through various internal reviews and
external reviews to ensure that we are reviewing these actions
very closely.
Mr. Andrews. How would I know--do I have access to the data
that would tell me it would cost 17 instead of 40? Is there a
database that would let me know that information?
Ms. Heimbaugh. Yes, in some cases we have a database that
every order is recorded in this database that has the item that
was bought, how much it was bought for and the description. It
also requires contracting officers to clearly document the
source of the information that they receive----
Mr. Andrews. So I would know--I would have easy access to
data that would tell me in March of 2002, we paid $13,000 for
this refrigerator?
Ms. Heimbaugh. I have a group of folks that are focused
strictly on pricing. They go in and they have access to this
database and they review the specific items in this database.
And if they saw something questionable, they would bring that
to our attention.
Mr. Andrews. Would that be after it was purchased, though?
Ms. Heimbaugh. It would be after it is purchased.
Mr. Andrews. What about the person that makes the
purchasing decision, are they expected to know this and do they
have the availability of the information to know it?
Ms. Heimbaugh. Yes, they are expected to know this. They
are trained. They have been since this event. They have been
put through numerous training programs and so they know how to
properly determine a price is fair and reasonable. In addition
to that, we have process reviews prior to making these types of
awards.
Mr. Andrews. Thank you very much. I appreciate it. I am
going to turn to Mr. Conaway for his questions.
Mr. Conaway. Thank you, Mr. Chairman. Witnesses, thank you
very much for being here. I appreciate that. My professional
background gives me a keen appreciation of how hard your job
is. And it is mind boggling the reach that what you do--I think
it is around the world. So I appreciate your efforts on--Mr.
Solis, the--you said that you made numerous--GAO has made
numerous recommendations. I would really rather focus not on
the ones that have been done and implemented, but on the
recommendations that have been made and not implemented. Where
should the focus for purchasing be or acquisitions be in your
mind?
Mr. Solis. Well, a couple of things come to mind and this
refers back to some of the inventory reports, for example, that
we just did with the Army and the Navy and going back to the
Air Force. I think one of the things that we would suggest is
that there needs to be a better emphasis on demand forecasting.
We understand the nature of the beast. Things are going to
change in terms of what the services are going to need and DLA
is going to order. We understand that. But we also understand
that in terms of our reports, what you end up with is a lot of
excess inventory on hand or on order. And we view that also as
an opportunity cost, that better demand forecasting be used and
you can also use that money elsewhere.
Mr. Conaway. Are the just-in-time inventory management
systems being used throughout the system in your mind where
they are supposed to be used?
Mr. Solis. I am not sure that they are, just-in-time. I
think--and if you go back, a lot of times it is a just-in-case
scenario. Again, I understand that the military has to have the
parts that they need. But at the other hand, there is $82
billion worth of inventory total that the Department has and
yet we still have shortages as well. So again----
Mr. Conaway. Shortages of stuff that is in inventory or
shortages of----
Mr. Solis. Of things that they need to order. Things that
are--deficits, as they call them.
Mr. Conaway. Nancy or General McCoy, do you want to visit
with us about this idea? We have got obviously inventory
management. If you are in the commercial business it is
important, because there are carrying costs associated with
that inventory and the less you have to spend on stuff in
inventory, the better. But at the same time, you have got to
have it available. Are there ways of knowing that you have got
excess inventory in one part of the world or one part versus
buying new stuff in another one when you can swap it around?
How do you manage that inventory in your mind appropriately?
General McCoy. Yes, sir. In fact, one of the reasons we
established the agency that I have the honor of commanding
today is so that we could have a single face to the customer
but also an agency whose responsibility is to look across the
enterprise. You are absolutely right. In an expeditionary world
in which we live, we have inventory scattered around the world.
What we don't want to do is buy more or place more in locations
where the need is not there in that location.
So we spend a tremendous amount of our analysis capability
trying to make sure that we can identify where the need will
occur and to put the right amount of inventory in those
locations. In the event that a need arises greater than we
anticipated at another location, then our first objective is to
try to move that inventory rather than buying new inventory.
The precious dollars that we have, we know that we have to
spend them wisely. In fact, to your earlier question, one of
the principles that we operate by is to treat resources as
though they were our own. So if we are buying components to go
on aircraft or buying refrigerators, we want to treat those as
though they are our own resources and therefore not buy one
more than we have to.
In an expeditionary environment, however, we also want to
make sure we can consider contingencies. But we also want to
make sure that we don't exceed that requirement even preparing
for contingencies even with old airplanes that often break
today and it becomes even more difficult to find those parts.
But the answer is, yes, sir, we move resources around. We have
visibility of those around the world. And we would rather move
them rather than replace them with new inventory when they have
that opportunity.
Mr. Conaway. Ms. Heimbaugh, we are doing the Defense
Reauthorization Act right now. I am getting significant
pushback on whether or not the Department of Defense should be
audited or within what timeframe. And part of the issue is
resource allocation to that deal. Back office work, which is a
lot of what you do, is sometimes resource-starved to make sure
you get the right resources on the front end of the deal. Do
you have the right number of people to do the contract
management? Do you have the right resources to train? Or are
there gaps--General McCoy, you can pitch in on this one as
well. What do you need to do your job better than you are
currently able to do it?
Ms. Heimbaugh. Yes. The way that we are--the way that DLA
is established is that we are a working capital fund
environment, and what that means is that we have the ability
based upon the funds that generate our business through our
sales is how we fund our resources. And today what we are
looking at in the contracting arena is to ensure that the
contracting resources that we have today is the right balance
to meet the mission that we have. So what that means is that--
although we have a very strong intern program, we also want to
ensure that we have the right mix at the journeyman level as
well as the senior level and so we are looking at recruiting
plans, marketing and recruiting plans to ensure that as we hire
new people into the workforce, that we have a sufficient level
of experience in order to meet those requirements.
Mr. Conaway. But are you constrained as to actually hiring
those folks? It is one thing to know you need somebody, but to
not have the resources to be able to hire those folks, you are
telling me that you have got the resources you need if you
could just find the right people to plug into the jobs you have
got available?
Ms. Heimbaugh. I would say right now our focus is being on
very efficient. So we want to take a look at the resources that
we have and focus on being more efficient and then determining
after that if there is additional resources that are needed.
But I would say we are not as concerned as perhaps the military
services are in how they obtain their resources.
Mr. Conaway. Okay. General McCoy, any thought?
General McCoy. Often when we look at our acquisition
process or our supply chain, the first conclusion if you see
problems is to simply assume that if I can just add more people
to this, I can do it better. In many cases, that is not the
answer. The first thing we try to look at is ``what is the
process?'' And we find that in many cases that is where we find
our greatest opportunity to make things better. We have
antiquated processes that we need to change, we need to
streamline, and we need to make sure that the people that are
in that chain have the authority to make the decisions at the
right level.
I think the other thing is--and I will--is with DLA, we
also need to make the right investment in our workforce, to
make sure that they are properly trained and that we are
acquiring the people with the right skill sets and that we are
investing in the right kind of information technology (IT). You
just cannot do this business at the dollar amount and the
number of items we are talking about on the back of an
envelope.
So we want to make sure that we are continually looking at
upgrading and bringing in the right IT. So the visibility is
there. We have talked a little bit about pricing. So you have
that information and you don't have to search for it. It is
there available to your buyers. It is there available to those
in the supply chain. And it is there for those who want to
challenge it if they see things not going properly in their
mindset.
Mr. Conaway. One final thought. Ms. Heimbaugh, is the Air
Force's efforts with its Global Logistics Command, are there
similar commands in each of the other services or is this the
prototype that you are going to use to see whether or not to
set these same processes up at other services?
Ms. Heimbaugh. Well, I would say that the Global Logistics
Support Center is something that we view as something very
beneficial to DLA in supporting our supply chain management
functions. Of course, we look across all of the services and
having a particular or a specific service be able to look and
standardize its processes within the supply chain really does
make our job much better. Now, I certainly think that that is
something that will reap benefits into the future and probably
serve as a model.
Mr. Conaway. So you are telling me that the Air Force is
far enough along that you are going to recommend this to the
Army and the Navy as well?
Ms. Heimbaugh. No. I think right now in terms of working
with the Air Force and their concept, I think we are just
beginning to see the improvements. But I cannot really speak
for the other services in how they choose to structure.
Mr. Conaway. Okay. Thank you, Mr. Chairman.
Mr. Andrews. The Chair recognizes Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman. First, thanks to the
Defense Logistic Agency. As a former consumer of those MREs, I
want to say that they have improved over time. I can recall in
the first Gulf War where my Marines referred to them as ``Meals
Rejected in Ethiopia,'' to being in Iraq in 2005 and 2006 in
some forward operating bases where we relied on those. They are
much improved today. There was an article recently in The Army
Times that talked about the camouflage pattern for the Army
utility uniform that it was inadequate. And how does that--how
does the Army interface with DLA to make decisions like that?
Does DLA have input on those issues or was that strictly an
Army decision?
Ms. Heimbaugh. The requirements are developed by the
services, and in this case, it would be the Army. They
determined what the wear policy was, they determined what the
design of the uniform is and then we do work closely with them
to provide them with information in terms of the impact that
that would have, for example, in the industrial base or from a
logistics standpoint. So they really make those requirement
decisions and then we take that and we develop an acquisition
strategy.
Mr. Coffman. What would be the cost of--or is there an
estimate in what it would cost to correct that issue as it has
been raised?
Ms. Heimbaugh. I don't have that number with me. I can get
it for you if we have it. But I do know that any time that they
develop a requirement, we do sit down and we take that into
consideration.
[The information referred to can be found in the Appendix
beginning on page 69.]
Mr. Coffman. Who makes--but it is the Army that ultimately
makes the decision?
Ms. Heimbaugh. Yes, sir.
Mr. Coffman. For all of you, there has been talk in
acquisition reform about the need to in-source expertise within
your respective agencies. To what extent have you all had to do
that or have you had to do that, bring technical skills in
house that were once contracted on for doing--for acquisition
purposes? Anybody--can anybody respond to that?
Ms. Heimbaugh. I can tell you that we are in the process of
evaluating and developing an in-sourcing plan in accordance
with the requirements. But in addition to that and aside from
that, we have also, again, because we want to look for those
efficiencies where we can, we are looking across the contractor
support where we have contractor support to see where we can be
more efficient. But from a very structured in-sourcing
standpoint, we want to do what is best. And so we are looking
at developing a business case analysis which will allow us to
make those decisions because we do want to ensure that we are--
that the positions that we are looking for will be the correct
positions to either in-source or remain as contractor support.
Mr. Coffman. So you have been given no requirements by the
Department of Defense in terms of--it is basically on a case-
by-case basis? There is no quantitative requirements on your
agency then?
Ms. Heimbaugh. What we have--what the Department has asked
us to do is develop a plan, an in-sourcing plan and then we
provide that plan and then as we start to go through our
inventory of contracts, we will prepare a business case
analysis and then determine whether or not that is the
appropriate mix to either bring back or retain this
contractor's support.
Mr. Coffman. Anyone else? Mr. Chairman, I yield back then.
Mr. Andrews. I thank the gentleman. With the indulgence of
my colleagues, I will go a second round. The difficulty of
requirements seems to be a recurring theme in this panel's
deliberations. And the GAO testimony this morning reflects on
that as one of the challenge areas. I would like to follow up
on Mr. Coffman's questions about the camouflage for the Army
and ask you this hypothetical: Let us say that the Army comes
up with a certain design of a camouflage and let us further say
that there is a commercial design out there that looks almost
exactly like it, with some minor modifications that that design
could fit the Army's requirements quite well.
Number one, is there a mechanism, Ms. Heimbaugh, where
someone in your agency would ask that question in the first
place, would say is there a clothing manufacturer making
something that looks a lot like this now? And number two, if
there were, how would he or she go about reporting that back to
the Army's requirement people so you could talk about this? In
other words, the overall question I am asking is do we reinvent
the wheel each time we go to buy a wheel?
Ms. Heimbaugh. I would say that one of the things that we
do is we do work very closely, for example, with the Army as
they are beginning to design either a new item or a new design
of an item. What we can bring to the table and I am sure the
Army does this as well, is look at the market and determine
what is available in the market. In addition to that, they
prepare a package that provides us with the right information
and we work together to ensure that at the point that
requirement is finalized, that we then work with industry to
ensure that there is a capability in industry and most times we
find that it is something that the industry is looking at in
terms of having to manufacture a particular clothing item or
uniform.
Mr. Andrews. How about outside the clothing area? What if
one of the services is looking for, I don't know, a certain
kind of copier machine that can handle a heavier load of
copies? What is the process? Do you begin to look in the
commercial sector and then only if the commercial sector
doesn't provide it, look to ask someone to manufacture it or
how do you do that?
Ms. Heimbaugh. As soon as we get the requirement, we
conduct market research so that market research will lead us to
whether that particular product is available on the commercial
market or not.
Mr. Andrews. If you had to guess and you can supplement the
record later if you can, what percentage of the time does the
market already supply the product that you need and what
percentage of the time do you have to turn to a manufacturer to
have it made for you?
[The information referred to can be found in the Appendix
on page 69.]
Ms. Heimbaugh. I would have to----
Mr. Andrews. Okay. If you can supplement the record, we
would be interested in that. General McCoy, I note with
optimism on page three of your testimony, you say that in the
very early days of your organization, you have been able to
achieve, according to a memo from the Central Command area of
responsibility, a reduction in daily aircraft grounding
conditions from 150 groundings a year ago to about 30 today.
Two questions. One is how much money does that save? Or how
much economic value does that create, number one? And number
two, how did you do it?
General McCoy. I would have to get the exact number in
terms of dollars for the record, but I will tell you that when
we are talking about expensive components that go in our
airframes, that dollar amount is significant and I will get the
exact amount.
[The information referred to can be found in the Appendix
on page 69.]
Mr. Andrews. By the way, the savings I assume would be
generated because there would be less wear and tear on the
planes that could fly, you would fly them less frequently if--
how does the savings occur there?
General McCoy. The savings would be, in many regards, one
is if you need fewer parts because of increased reliability,
for example, that lessens the amount of inventory you have to
carry. The administrative overhead, the amount of people that
have to manage the assets. And equally important are the amount
of people you have got to have on the ground to maintain those
systems.
So the more you can keep a system operational, in other
words not ground it for any problem, the less cost and manpower
you need devoted to that system. To your second question on how
do we do it. We focus what we call weapon system teams today in
the AFGLSC on a specific weapon system. For example, I have a
team that works the F-15. I have a team that works the B-52. I
have a team that works the C-130 and on and on. And those teams
are entrusted with the responsibility of looking at how they
can ensure that we don't have grounded systems and when we do,
we can respond very quickly. So the first point would be we are
very focused.
Mr. Andrews. So they diagnosed what used to cause the
groundings and they fixed it?
General McCoy. We are proactive rather than reactive. And
that has probably been one of the underpinnings of----
Mr. Andrews. Can you give us an example of one of the
ways--what did they diagnose and start to do or stop doing?
General McCoy. What they look at is, first of all, is what
is causing those grounding activities and then how do we put
solutions in place. An example in the case of the Central
Command area of responsibility (AOR), it is a matter of looking
at demand patterns. If you are strictly looking at historical
commands, that may give you a piece of the information. But
what we want to get is day-to-day information on the ground.
And we have our logisticians on the ground that are
providing that information. Then we can look forward and see
what changes can we make, and in some cases, even modifying the
component that may be failing or bringing that airplane in for
some form of modification or maintenance to get ahead of the
problem. But the other point is to make sure that we have
properly calculated and anticipated demand and have those parts
on the ground so that you can reduce the number of airplanes
that break and can't fly the next day.
Mr. Andrews. That is an answer which does not surprise me
and sounds really very viable and valid, which leads to my
final question for Mr. Solis. One hypothesis that I would offer
is that the more data you have and the more you know how to
manipulate it, the better job you are going to do at diagnosing
problems and preventing them. I think I am paraphrasing what
the general just said, but his teams got on the ground,
analyzed what used to cause 150 groundings a year ago, took
some preventive measures and knocked it all the way back to 30.
So they created a database. They understood it and they used
it. How typical are such databases throughout our acquisition
system? In other words, if I was responsible for buying bottles
of water, how much data would be available for me about
patterns of how much water we used, when, and how much we paid
for?
Mr. Solis. I will talk about in terms of the Army, in terms
of some of the experience we have had. There are models that
the Army can run for example, to look at war reserve
requirements to look at higher operational tempo (optempo),
particularly at the beginning or the outset of an operation.
Some of the things that you mentioned in your opening statement
with regards to some of the problems or shortfalls they had,
there were war reserve models that I mentioned that are out
there. Had they run those models prior to the operation, I
believe that some of those shortfalls would have been
alleviated.
Mr. Andrews. Have you gone back and actually run the
models? Let us take the lithium--or whatever kind of battery,
but lithium battery, whatever it was. Let us use the battery
example. Is there a model that would have forecast how many
batteries would be needed for an operation the size of the one
in Iraq?
Mr. Solis. It would have not only for that, but for things
like tank tread, tires. I mean, you get into modeling what your
potential----
Mr. Andrews. Did anybody use it before the operation?
Mr. Solis. At the time when we looked at it, the answer was
no.
Mr. Andrews. Why not? Do you know?
Mr. Solis. There were--one reason was that the information
did not get to the logisticians, although there was some
disagreement about that. It is not clear to us why that did not
occur.
Mr. Andrews. I say this coming full circle as I said at the
beginning of the hearing. I would assume part of the answer to
the question ``why not'' is because they had to move 160,000
people 5,000 miles away in a hurry. And I understand that is a
huge job. And sometimes you can't do it as perfectly as you
would like. But I would hope that one of our goals--and I see
you moving in this direction--would be to institutionalize on a
macro level what General McCoy just talked about on a micro
level, that people responsible for those airplanes in Central
Command had data in front of them about why we had 150
groundings a day, understood how to manipulate and use the
data, drew some conclusions about why we had the situation and
did something about it, right? And saved money. It increased
our use of our resources, and I would hope that we could
institutionalize that. That is the idea. Mr. Conaway, do you
have any follow-up questions?
Mr. Conaway. Just one. Using the refrigerator as an
example, folks work better with incentives and rewards and is
there any system within your system, are there ways to reward
or incentivize people to do the kinds of things that you are
talking about? It is music to my ears to hear you say you have
a focus on spending money as if it were your own money, because
we all make better decisions in that regard. Are there
incentive programs or reward programs that reward folks who go
a little bit beyond just the normal deal to save taxpayer
money? Which leads to the other point, the other semantics
issue, Ms. Heimbaugh. You mentioned congressional funding.
Congress doesn't have any money. We take it away from
taxpayers. So it is taxpayer funding. But are there ways to
reward it within your system that makes sense? Are there ways
that you like to set up that are currently in place?
Ms. Heimbaugh. Yes. From the acquisition standpoint, we do
have and have recently established an award program that does
recognize the acquisition folks that do step up and make
different improvements and processes and also that do excel in
some of the things that they are responsible for. So we have
recently put in several acquisition programs and I think that
is--will help address some of the issues.
Mr. Conaway. General McCoy, are there dollar incentives or
savings that result from doing things better than you were
doing them before?
General McCoy. Absolutely, sir. Not only on the acquisition
side, but the customer side. We encourage our customers, our
airmen on the ground who receive the products and use the
products to challenge particularly pricing. If for some reason
they feel that an item is overpriced, we give them a challenge
to bring that to the attention of their leadership. And we have
had everything from zero overpricing award systems to making
sure through suggestion programs or what have you that we can
even give some kind of cash incentive or some kind of award to
people to do that. And trust me, that is one way to make sure
that people are looking very carefully. Because they know that
they can not only save the taxpayer dollars, but they can also
be recognized for that kind of effort. And we applaud that and
we encourage it.
Mr. Conaway. Thank you, Mr. Chairman. Witnesses, thank you
very much. Very informative today.
Mr. Andrews. Could I just ask the general, does that apply
to uniform personnel or civilian or simply uniform?
General McCoy. It applies to both, yes, sir. We have a
tremendous number of civilian and military uniform at every
point of our supply chain and so we do apply that. And then, in
fact, many of the incentives and cash rewards that we can give
are those that we give to civilians, in many cases decorations
to our military if over a period of time, they have shown that
as a part of their job they are saving money, make things more
efficient and putting more capability in the hands of the
warfighter.
Mr. Andrews. Sound goods to us. Mr. Coffman, do you have
any follow-up?
Mr. Coffman. Mr. Chairman, I have no further questions.
Mr. Andrews. I would like to thank my colleagues and this
outstanding panel. You have prepared thoroughly and I think you
enlightened the panel. Where we are going from here is that we
will be considering your written testimony. And I would
appreciate you supplementing the record with the requests we
made this morning.
In the first quarter of 2010, the panel is going to meet
and discuss among ourselves recommendations that we think would
respond to some of the issues raised in our hearings, we would
certainly solicit your input as to those recommendations as to
what you think could be done. The panel will be issuing a
report in the first quarter of calendar 2010 with the goal of
presenting to the chairman and the ranking member of the full
committee some legislative ideas for inclusion in next year's
defense authorization bill.
So we welcome your continued participation, not just in
this morning's hearing, we thank you for the job that you did.
And the hearing is adjourned.
[Whereupon, at 10:36 a.m., the panel was adjourned.]
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A P P E N D I X
September 24, 2009
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PREPARED STATEMENTS SUBMITTED FOR THE RECORD
September 24, 2009
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[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
September 24, 2009
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RESPONSES TO QUESTIONS SUBMITTED BY MR. ANDREWS
Mr. Solis. As noted in the testimony, GAO previously reported that
DLA acquired an aircraft refrigerator under its prime vendor program
that was almost twice the amount paid two years earlier. The type of
contract used for this purchase was an Indefinite Delivery, Indefinite
Quantity contract. It was purchased under a prime vendor contract for
food service equipment under DLA's Subsistence Directorate. The same
contracting officer was responsible for both purchases. According to
DLA, the problem occurred because the contracting officer was not
conducting price reasonable determinations. In order to correct the
problem, DLA now required that contracting officers conduct price
reasonable determinations up-front. [See page 10.]
Ms. Heimbaugh. Based on FY 08 data, we use market supplied products
for 48 percent of the Defense Logistics Agency's total contract actions
representing 40 percent of award dollars. Products for the remainder of
our customers' requirements are manufactured to meet those
requirements. [See page 17.]
General McCoy. The primary goal of the AFGLSC is to streamline our
supply chain management processes and improve support to the
warfighters. A measurable outcome of our effort is increasing the
number aircraft available to fly required missions each day. By
reducing the grounded aircraft from 150 to 30, we are able to realize a
reduction in the use of premium transportation to expedite parts
shipments by approximately $252,000 per month for 1 year.
The AFGLSC has implemented a number of initiatives that have
resulted in the reduction in aircraft grounding incidents. Some
examples include: 1) Implementation of a demand forecasting tool to
measure forecast effectiveness; 2) Collaboration with maintenance
organizations throughout the Air Force enterprise to improve component
repairs; 3) Implementation of new and streamlined contracting
strategies that have reduced purchasing lead times; and 4)
Implementation of ``proactive leveling'', whereby likely critical
stockouts are identified and stock levels are established to mitigate
the risk. Using a global, enterprise approach to supply chain
management, we have been able to improve aircraft availability while
reducing operating cost. [See page 17.]
______
RESPONSE TO QUESTION SUBMITTED BY MR. COFFMAN
Ms. Heimbaugh. There would be a one-time cost for a cloth
manufacturer to change the camouflage pattern of the existing Army
Combat Uniform (ACU). That cost would be determined by the amount of
work required by the cloth manufacturer to convert to the new cloth. In
discussions with our cloth manufacturers, they are unable to quantify
that exact cost without specifics on the fabric involved; however, at a
minimum, for the same basic fabric, the cost to change a pattern would
be between $400.00 and $1000.00 per loom. The cost to then field that
uniform for the entire Army, Active, Guard and Reserve, would range
from $360,498,600 to $699,383,160. This cost range is based on the new
uniform being issued in an all Fire Resistant (FR) fabric with and
without permethrin, half FR with and without permethrin and half non FR
or all non FR fabric.
The following assumptions were made in developing this cost.
1. All soldiers would be issued four uniform coats and four
trousers, one patrol cap and one sun hat.
2. Every Active duty, Guard and Reserve Soldier would get the
uniform. If the new uniform distribution is limited to those soldiers
deploying to Afghanistan, the total cost would be considerably less.
a. 562,000 authorized active duty
b. 572,000 Guard and Reserve
3. The only difference in the new uniform would be the camouflage
pattern. No changes in material or construction from the current Army
Combat Uniform (ACU).
4. Prices used to determine this cost are based on the current
Standard Prices for these items.
5. This estimate does not include the potential cost of issuing
other equipment type items in a new pattern. This includes such items
as the Extreme Cold Weather Clothing System (ECWCS), Improved Outer
Tactical Vests (IOTV), Modular Lightweight Load bearing Equipment
(MOLLE), various coveralls, and any other equipment item that may have
the ACU camouflage pattern.
6. This estimate does not include the cost of disposal for any
residual items in the old camouflage pattern.
[See page 15.]
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