[Senate Hearing 112-659]
[From the U.S. Government Printing Office]
S. Hrg. 112-659
THE COMPREHENSIVE CONTINGENCY CONTRACTING REFORM ACT OF 2012 (S. 2139)
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HEARING
before the
AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
APRIL 17, 2012
__________
Available via http://www.fdsys.gov
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 and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
Joyce Ward, Publications Clerk and GPO Detailee
AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT
CLAIRE McCASKILL, Chairman
THOMAS R. CARPER, Delaware ROB PORTMAN, Ohio
MARK L. PRYOR, Arkansas SUSAN M. COLLINS, Maine
JON TESTER, Montana JOHN McCAIN, Arizona
MARK BEGICH, Alaska JERRY MORAN, Kansas
Margaret Daum, Staff Director
Brian Callanan, Minority Staff Director
Kelsey Stroud, Chief Clerk
C O N T E N T S
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Opening statement:
Page
Senator McCaskill............................................ 3
Senator Portman.............................................. 5
WITNESSES
Tuesday, April 17, 2012
Hon. Jim Webb, a United States Senator from the State of Virginia 2
Patrick F. Kennedy, Under Secretary for Management, U.S.
Department of State............................................ 8
Richard T. Ginman, Director, Defense Procurement and Acquisition
Policy, U.S. Department of Defense............................. 10
Angelique M. Crumbly, Acting Assistant to the Administrator,
Bureau for Management, U.S. Agency for International
Development.................................................... 11
Lynne M. Halbrooks, Acting Inspector General, U.S. Department of
Defense........................................................ 28
Harold W. Geisel, Deputy Inspector General, U.S. Department of
State.......................................................... 30
Michael Carroll, Acting Inspector General, U.S. Agency for
International Development...................................... 31
Alphabetical List of Witnesses
Carroll, Michael:
Testimony.................................................... 31
Prepared statement........................................... 114
Crumbly, Angelique M.:
Testimony.................................................... 11
Prepared statement........................................... 81
Geisel, Harold W.:
Testimony.................................................... 30
Prepared statement........................................... 108
Ginman, Richard T:
Testimony.................................................... 10
Prepared statement........................................... 56
Halbrooks, Lynne M.:
Testimony.................................................... 28
Prepared statement........................................... 98
Kennedy, Patrick F.:
Testimony.................................................... 8
Prepared statement........................................... 44
Webb, Hon. Jim:
Testimony.................................................... 2
Prepared statement........................................... 39
APPENDIX
Background Memo.................................................. 130
Statements submitted for the Record:
Center for American Progress Action Fund..................... 149
Katherine V. Schinasi, Former Commissioner, The Commission on
Wartime Contracting in Iraq and Afghanistan................ 152
Charles Tiefer, Professor of Governmental Contracting at the
University of Baltimore Law School......................... 157
THE COMPREHENSIVE CONTINGENCY CONTRACTING REFORM ACT OF 2012 (S. 2139)
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TUESDAY, APRIL 17, 2012
U.S. Senate,
Ad Hoc Subcommittee on Contracting Oversight,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:32 a.m., in
Room 342, Dirksen Senate Office Building, Hon. Claire
McCaskill, Chairman of the Subcommittee, presiding.
Present: Senators McCaskill and Portman.
Senator McCaskill. I want to welcome everyone to this
hearing this morning.
I know that Senator Portman will be arriving shortly. I did
not want to keep our first witness waiting.
My colleague, Senator Jim Webb, is here to give testimony
about our subject today. As a brief introductory remark, I am
not going to go into who he is and why he is here because I
think most people know who he is. But I do want to say just
about why he is here.
When I came to the Senate in 2007, Senator Webb and I
quickly found that we had a place we wanted to work on, and
that was contracting and contingencies. His background in the
military was a great asset to us as we put together the War
Contracting Commission legislation, and he and I worked on it
together and succeeded back in the day. Before Senator Warner
had retired, Senator Warner, as the Ranking Member of the Armed
Services Committee was a tough sell. I mean, people need to
remember the context that this legislation was brought forward
in. It was when President Bush was still President, and I think
there was a fear that this Contracting Commission was a
political exercise. And, of course, it was far from that. It
was something that was really needed to take a hard look at
what had gone wrong with contracting and contingencies and to
build a body of work that could change the culture around
contracting and contingencies for the long haul.
I want to thank him for his friendship and his hard work on
this issue and look forward to his comments today as we look at
legislation trying to implement the recommendations of the
Commission that we worked hard to create together.
Senator Webb.
TESTIMONY OF HON. JIM WEBB,\1\ A UNITED STATES SENATOR FROM THE
STATE OF VIRGINIA
Senator Webb. Thank you very much, Madam Chairman and
Ranking Member Portman and other Members of the Subcommittee. I
know you have two full panels. I will be brief here. I would
ask that the full written testimony that I have would be
included at the end of my brief oral remarks.
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\1\ The prepared statement of Senator Webb appears in the appendix
on page 39.
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Senator McCaskill. Without objection.
Senator Webb. Thank you. I am here to basically express the
strongest support possible for the movement of this legislation
that you, Madam Chairman, and I have worked on in different
capacities for now, I guess, 5 years. At a time when the Senate
is continually bogged down in symbolic votes rather than issues
of governance, I am very proud of what we have been able to do
on this issue since 2007. I would say it has been one of the
great pleasures of being in the Senate, to have been able to
get this legislation into place, the first round of it with the
Wartime Contracting Commission and hopefully with this
recommendation that will be implementing some of the findings
of that Wartime Contracting Commission.
As the Chairman mentioned, she brought a strong background
in auditing to the Senate. I spent 5 years in the Pentagon in
different capacities, including 4 years on the Defense
Resources Board. One of my eye openers coming to the Senate was
sitting on the Foreign Relations Committee in 2007 when we had
a hearing on Iraq reconstruction programs with the State
Department and they mentioned in their testimony that they had
$32 billion in Iraq reconstruction programs that had been
appropriated and were in some form of being put into play. And
I asked, in a way that I would normally have asked if I were in
the Pentagon years before, to see the contracts and the amount
and who the contractor was and what the state of implementation
was on these different contracts and they could not tell us. We
worked with them for months and they could not tell us where
$32 billion had been spent in a specific way where we could
evaluate the results.
That was one of the motivations that caused me to start
working as avidly as I did, along with Chairman McCaskill, to
see if we could not have the management structures in place,
catch up with the realities of what had happened in the post-9/
11 environment of military commitments overseas. This is a
particular problem in the State Department and the United
States Agency for International Development (USAID). I do not
think they had anticipated these sorts of programs before the
situation that existed once September 11, 2001 occurred.
We were very lucky, as Chairman McCaskill mentioned, to
have the support of Senator John Warner when we were advancing
this legislation through the Senate. He was my senior Senator,
was a Republican. I had worked with him when I was a young
Marine, my last year in the Marine Corps, when he was Secretary
of the Navy. I had followed him as Secretary of the Navy. And
he, by stepping forward and demonstrating that this was an
issue with wide concern and from people like himself who had
spent time in management positions in the Pentagon, really
helped us push this over the threshold and into reality.
We had a bipartisan Wartime Contracting Commission. I think
they did a really fine job. I personally will say I am very
disappointed that a lot of the findings have been sealed up for
20 years. But the overall recommendations, I think, are
something that we will be able to work on in terms of
implementing legislation that get into management, policies,
and how we bring rigor to the process.
And I would like to emphasize here, as I did in our press
conference earlier, that I believe, and I want to acknowledge
that the great majority of the contractors who participated in
this process since September 11, 2001, are not only reputable,
but they have really done a very fine job in an environment
that a lot of people had not anticipated. So this is not a
piece of legislation nor was it a major goal of this process
simply to bash wartime contractors. We cannot get along without
them. This has been an effort to put the right kind of
structure into place so that we can have efficiently run, well
managed, and effective wartime contracting and operational
contingencies now and in the future.
So I was very pleased to have worked in detail on this
legislation as it was developed. It has my strongest support
and I thank Senator McCaskill for her untiring efforts here in
order to bring good governance into this body.
Thank you, Madam Chairman.
OPENING STATEMENT OF SENATOR MCCASKILL
Senator McCaskill. Thank you, Senator Webb.
I will make a brief opening statement and then turn it over
to my colleague, Senator Portman, for a brief opening
statement, and then we will ask our first panel of witnesses to
come to the table.
On August 31, 2011, the Commission on Wartime Contracting
(CWC) in Iraq and Afghanistan presented its final report to
Congress. On February 29, 2012, Senator Webb and I introduced
S. 2139, the Comprehensive Contingency Contracting Reform Act
of 2012. This legislation is based on the findings and
recommendations of the Commission.
This morning, I have the honor of hearing the distinguished
representatives of the Defense Department (DOD), State
Department, USAID, and respective agencies' Inspectors General
(IG) present their views on this important legislation. Based
on their contributions and what we have heard from many of the
stakeholders with whom I and the Subcommittee staff have met
with over the last few months, and on the input of other
Senators, we will revise the legislation and introduce a new
version for consideration by the Homeland Security and
Government Affairs Committee (HSGAC). This legislation will
increase accountability for wartime contracting and transform
the way the Federal Government awards, manages, and oversees
wartime contracts. It will help ensure that the waste, fraud,
abuse, and mismanagement that we saw in Iraq and Afghanistan
will never happen again.
I want to make a few points about today's hearing. First,
we are here today to seek input from the Executive Branch
agencies and Inspectors General because we want to get this
right. The Subcommittee has previously met with contractors and
other stakeholders regarding this legislation. However, major
portions of this bill deal with accountability and
responsibility for the government, and that is by design.
Therefore, I encourage you to share any suggestions you have to
improve this legislation.
Second, this legislation builds on existing structures and
rules to solve the problems identified by the Commission. S.
2139 requires each agency responsible for wartime contracting
to establish clear lines of authority and responsibility for
all aspects of contingency contracting. It requires the
Department of Defense, the State Department, and USAID to
improve their training and planning for contract support and
contingencies. The legislation reduces reliance on
noncompetitive contracting practices and restricts
subcontracting practices that have resulted in a lack of
transparency and visibility.
The legislation requires agencies to conduct risk analyses
before relying on private security contractors (PSC) and to
terminate unsustainable reconstruction and development
projects. It also strengthens tools to combat human
trafficking. This approach is pragmatic and will reduce the
potential for waste, fraud, and abuse in future wars.
Many of the witnesses today have already testified numerous
times before this Subcommittee about lessons learned in Iraq
and Afghanistan. I commend the Departments, particularly the
Defense Department, for recognizing that they have shortcomings
in implementing changes. However, the Commission concluded in
its final report that, quote, ``meaningful progress will be
limited as long as agencies resist major reforms that would
elevate the importance of contracting.'' I want to put you all
on notice today that such resistance is no longer acceptable.
Today and in the weeks and months to come, we have an
opportunity to make a real change in the way government spends
money during wartime. It is not too late to prevent further
waste in Afghanistan, and it is not too late to prevent the
problems in Iraq and Afghanistan from occurring in the next
war, whenever and wherever that may be.
Everyone knows that contracting in a wartime environment is
not going to go away. It will be here with our Nation in the
future. It is imperative that we no longer make excuses,
rationalizations, or hide behind existing structures to defend
the gross inadequacies that our government has displayed during
contracting processes in Iraq and Afghanistan. We must fix
these problems now while the memory is fresh, while the memory
of these failures are fresh, and before the harsh lessons of
Iraq and Afghanistan are forgotten.
I remember on my first trip to Iraq on contracting
oversight, I remember being accompanied by a general, a high-
ranking general in the Army, and I remember the conversation
where it was said, ``You know, we did a lessons learned after
Bosnia. I just do not know what happened to it.'' I want to
make sure that those same sentences are not uttered during the
next contingency as we face contracting in the most difficult
environment that contracting occurs, and that is when our men
and women are putting their lives on the line for our security
and our freedom.
I thank the witnesses for being here today and I look
forward to their testimony.
Senator Portman.
OPENING STATEMENT OF SENATOR PORTMAN
Senator Portman. Thank you, Madam Chair. I appreciate your
comments and I am pleased that our witnesses are experts who
can give us some input, as you say, and it was good to hear
from our colleague from Virginia, Senator Webb.
It is an incredibly important hearing and it is an
opportunity to examine the lessons we have learned from wartime
contracting, from our experience over the last decade, 10 years
in Afghanistan, 9 years in Iraq. And it is a chance to hear
from witnesses on some of these reforms that are necessary to
improve the stewardship of our taxpayer dollars in some very
challenging environments.
This past August, as was noted, the Bipartisan Wartime
Contracting Commission issued their final report on its
investigation of our government's use of contractors in Iraq
and Afghanistan. In my view, the Commission came to a very
troubling bottom-line conclusion. It was estimated by the
Commission that out of the $206 billion we spent on service
contracts in Iraq and Afghanistan, which includes everything
from building military installations to training election
workers, between $31 billion and $60 billion was lost to what
they termed to be avoidable waste. So out of $206 billion spent
on service contracts, between $31 and $60 billion lost to
avoidable waste.
It is a difficult environment. Winston Churchill once
famously said, ``The only thing certain in war is that it is
full of disappointments and also full of mistakes,'' and it is
true. It is a tough environment. But when it comes to wartime
contracting, we certainly have a responsibility to look back
and understand what reforms are necessary to avoid making more
costly mistakes.
And this is not just a retrospective exercise, of course,
because contractors are still very much engaged, particularly
in Afghanistan, where the United States still has, as we count
them, over 100,000 private contractors. Even in Iraq today,
after the last U.S. troops returned home in December, the
Departments of Defense and State maintain roughly 30,000
private contractors. At this time of serious fiscal challenges
and trillion dollar deficits, we must do all we can to avoid
waste and to get the best possible value out of the taxpayers'
dollar.
The Wartime Contracting Commission along with a long series
of Inspector General reports identified some of the issues we
should be focused on. The challenges range from improving the
use of reliable price information, which we will talk about
today, to ensure that the government is getting a fair deal, to
tightening restrictions on the use of non-competitive
contracts, to strengthening oversight of subcontractors, who
are too often insulated from direct accountability.
In addition, looking ahead, one of my principal concerns is
that of sustainability, and by that I mean how do we ensure
that our work, reconstruction, development work, and so on,
will last and be carried on by the Afghan and Iraqi government
and the people of those countries. The issue is critically
important because it is about making sure that our good
investments do not go bad. That means we have to consider not
only, for example, how many additional schools and health
clinics we can construct, but who is going to sustain them. Do
they have the medical professionals and the teachers to be able
to sustain them and keep them going? On this issue, the Wartime
Contracting Commission was not very optimistic, and I will look
forward to hearing from our panel on what steps are needed to
reduce this risk of future waste or, again, lack of
sustainability.
Of course, beyond ensuring that wartime contracting is
fiscally sound, we have also got to ensure it is performed
consistently with our deeply held values as Americans. On that
score, it was concerning to see the Commission's report on what
they called the tragic evidence of the recurrent problem of
trafficking in persons (TIP) by labor brokers or subcontractors
of contingency contractors. The report said that existing
prohibitions on such trafficking have failed to suppress it.
Labor brokers or subcontractors have an incentive to lure
third-party nationals into coming to work for U.S. contractors,
only to be mistreated or exploited.
One of the Commission members, Dov Zakheim, a former Reagan
and Bush Administration defense official, testified before the
Armed Services Committee here in the Senate that these findings
were, in his view, just the tip of the iceberg. And both DOD
and State Department IGs have told us that we lack sufficient
monitoring to have clear visibility into labor practices by
contractors and subcontractors.
As many of you know, that is why we introduced legislation
recently. Senator Blumenthal and I are the original sponsors,
but it is bipartisan legislation. We have been joined by
Senator McCaskill, the Chair here this morning, as well as
Senator Rubio, Senator Lieberman, Senator Collins, Senator
Franken, and it is intended to strengthen the existing
protections against human trafficking directly in connection
with overseas government contracts.
Broadly defined, human contracting means forced labor and
other coercive labor practices that contribute to trafficking.
It includes recruiting workers to leave their home countries
based on fraudulent promises, confiscating passports to limit
the ability of workers to return home, charging workers
recruitment fees that consume more than a month's salary, and
many other forms of abuse that were mentioned in the
Commission's report.
We should be clear that the overwhelming majority of U.S.
contractors and subcontractors are law abiding and reputable
and they are doing a good job in a difficult situation. They
have made it a priority to ensure that abusive labor practices
play no role in this challenging work they are doing in Iraq
and Afghanistan.
Our proposal is designed to ensure that the best practices
adopted by those contractors become standard practice for all
contractors, and they include requiring contractors to have a
compliance plan in place and reporting and monitoring
requirements to ensure that credible evidence immediately
triggers an investigation and giving contracting officers more
tools to hold violators accountable. I am hopeful we can work
to make these commonsense and bipartisan reforms the law of the
land.
We have invested heavily to achieve the goal of building up
civil institutions, functioning economies, and stable
constitutional governments in both Afghanistan and Iraq, and
our military men and women have done everything they have been
asked to do and more in Iraq and Afghanistan. They perform with
extraordinary skill and bravery under the toughest of
circumstances. Getting this overseas contracting right,
especially in the area of reconstruction and development, is
critical to consolidating the hard-won gains that they have
achieved.
Madam Chair, again, thanks for holding this hearing. I look
forward to hearing from our witnesses today.
Senator McCaskill. Thank you, Senator Portman.
If our first panel of witnesses would come forward, and
while you are doing that, I will introduce you.
Richard Ginman assumed the position of Director of Defense
Procurement and Acquisition Policy (DPAP) in June 2011. Mr.
Ginman retired as a Rear Admiral from the U.S. Navy after 30
years of service in 2000. Prior to assuming his current
position, he served as Principal Deputy to the Director from
2008 until 2010, and Deputy Director, Contingency Contracting
and Acquisition Policy, from 2010 until assuming the position
as Director.
Patrick Kennedy has served as Under Secretary for
Management for the United States Department of State since
2007. He has been with the Department of State for 39 years and
has held positions including Director of the Office of
Management Policy, Rightsizing and Innovation, Assistant
Secretary for Administration, U.S. Representative to the U.N.
for Management and Reform, Chief of Staff of the Coalition
Provisional Authority in Iraq, and Deputy Director of National
Intelligence for Management.
Angelique Crumbly is the Acting Assistant to the
Administrator for the Bureau of Management for the United
States Agency for International Development. She is a member of
the Senior Executive Service (SES) with more than 20 years of
Federal service and has held several key positions at USAID,
including Senior Deputy Assistant Administrator in the Bureau
for Management and Director of the Office of Management,
Policy, Budget, and Performance.
It is the custom of the Subcommittee to swear in all
witnesses that appear before us, so if you do not mind, I would
ask you to stand.
Do you swear that the testimony you will give before this
Subcommittee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Mr. Kennedy. I do.
Mr. Ginman. I do.
Ms. Crumbly. I do.
Senator McCaskill. Let the record reflect that all the
witnesses have answered in the affirmative. Please be seated.
We will be using a timing system today. We would ask that
your oral testimony be no more than 5 minutes. Your written
testimony will be printed in the record in its entirety.
I am told that we have committed a protocol gaffe, Mr.
Kennedy. That under the hierarchy of Under Secretaries versus
Directors and Assistant Administrators that you should be first
in the pecking order at this hearing, so we will call on you
first for your testimony concerning your input into this
legislation from the perspective of the Department of State.
TESTIMONY OF PATRICK F. KENNEDY,\1\ UNDER SECRETARY FOR
MANAGEMENT, U.S. DEPARTMENT OF STATE
Mr. Kennedy. Madam Chairman, I certainly defer to the Chair
and you may please call upon the witnesses in whatever order
you wish.
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\1\ The prepared statement of Mr. Kennedy appears in the appendix
on page 44.
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Senator McCaskill. It is fine. You can go ahead, Secretary
Kennedy.
Mr. Kennedy. Thank you. Chairman McCaskill, Ranking Member
Portman, thank you for inviting me to discuss the Comprehensive
Contingency Contracting Reform Act of 2012. We share your
desire to strengthen contingency contracting. Our review of the
bill continues and we very much welcome, Madam Chairman, your
request that we work with you. We have met with your staff once
and we very much appreciate your invitation. We look forward to
continuing to do so.
This legislation builds on the important work of the
Commission on Wartime Contracting, an independent, bipartisan
panel that you, Chairman McCaskill, created with Senator Webb.
The Department worked continuously with the Commission from its
formation in 2008 until its sunset, gaining valuable insight.
We have taken many steps to improve our contingency contracting
based on the work of the CWC and other oversight entities and
our own lessons learned. We are now engaged with the Government
Accountability Office on its review of the Iraq transition,
contingency contracting, and the CWC's final report. We have
learned much from the Iraq transition, working closely with
DOD, USAID, and interagency partners.
On April 3, Secretary Clinton, addressing cadets at the
Virginia Military Institute, described the Iraq transition as
the largest military to civilian transition since the Marshall
Plan. We are now taking the lessons learned in Iraq and
applying them to contracting planning and execution in
Afghanistan.
State's centralization of acquisitions for goods and
services in our Acquisitions Management Office, which together
with its two regional procurement support offices handle over
98 percent of our contracted dollars. This centralization of
acquisitions obviates the need for the extensive additional
policy guidance and oversight in a dispersed acquisition
organization. We have hired 103 additional acquisition
management staff since 2008 using our working capital funds, 1
percent fee on all procurements. This has enabled us to devote
37 contracting officers and support personnel to Iraq and
Afghanistan, and we have trained and deployed more contracting
officer representatives, with 1,080 certified contracting
officer representatives (CORs) in 2011 and 1,200 total
projected by the end of this year.
To elevate accountability for contracting as called for in
the Secretary's Quadrennial Diplomacy and Development Review,
the requesting bureau must now ensure that adequate resources
are identified early in planning. The cognizant Assistant
Secretary must certify that planning and oversight is adequate
for every service contract valued at an annual expenditure of
over $25 million and also verify annually that oversight
continues to be sufficient.
We have also increased accountability by mandating that
contract oversight work elements include in performance
appraisals of technical personnel with contract management
responsibilities. All CORs and government technical monitors
(GTMs) must now complete a 40-hour training course, which we
updated to be more interactive, skills based, and adult
learning focused. A separate class session has been tailored
for diplomatic security CORs who deal with local guards and
other security programs overseas. All Department CORs
supporting DOD-issued contracts for our Iraq mission take
additional DOD training in the contingency environment and any
other specialty training related to that specific contract.
This ensures that State personnel managing DOD contingency
contracts meet the DOD standard.
To improve our suspension and debarment efforts, we have
issued detailed procedures and provided training to grants
officers and contracting officers. Suspension activities
increased from no suspension in 2009 to five each in 2010 and
2011 and 19 actions halfway into fiscal year (FY) 2012.
Debarment activity increased from no debarments in 2009 to six
issued thus far halfway through 2012. This increase is due to
more active coordination between the Department and our Office
of Inspector General (OIG) investigators, stronger referral
activity, and improved processes and focus within the
suspension and debarment office (SDO).
Contingency contracts now require special vigilance against
trafficking in persons, and initiatives have been undertaken at
State to address TIP contracting issues. Contracting officers
and CORs are trained as our front line in preventing contractor
TIP and worker abuses. Contracting officers tailor specific
oversight requirements on local, service, and contract type.
Contracting officers travel overseas to monitor performance at
the site and enforce TIP programs. In some locations, we have
hired a direct hire program manager or a contracting officer
representative lives onsite with construction and security
staff at their housing areas. New solicitation language
regarding recruitment includes recruitment plans, and
submission of agreements has been developed to prevent
maltreatment of workers. We continue to strive for zero
tolerance of trafficking in all our contracts.
The Department has taken a significant number of positive
steps to improve our contracting function. As the CWC
recommended, we have strengthened contract administration in
conflict affected States through hiring and training adequate
Federal personnel to provide strong governmental oversight of
contractors.
The bill you have introduced, S. 2139, has many positive
elements and we look forward to working with you on contingency
contracting.
Thank you very much, and I look forward to your questions.
Senator McCaskill. Thank you very much.
I apologize for mispronouncing your name. Mr. Ginman, we
will take your testimony now. Thank you.
TESTIMONY OF RICHARD T. GINMAN,\1\ DIRECTOR, DEFENSE
PROCUREMENT AND ACQUISITION POLICY, U.S. DEPARTMENT OF DEFENSE
Mr. Ginman. I have learned to respond to almost any
pronunciation.
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\1\ The prepared statement of Mr. Ginman appears in the appendix on
page 56.
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Senator McCaskill. I know the feeling. [Laughter.]
Mr. Ginman. Chairman McCaskill, Ranking Member Portman, I
welcome this opportunity to discuss the proposed Comprehensive
Contingency Contracting Reform Act of 2012, the impact the
legislation would have on the Department of Defense.
I have addressed the Department's position on each of the
provisions in the proposed bill in my written testimony, so I
am not going to repeat that now.
Senator McCaskill, you and Senator Webb also cosponsored
the legislation that created the Commission on Wartime
Contracting, and I would like to thank both of you for your
leadership on this important topic. The Commission's efforts
spanned 3 years, and their August 2011 final report
recommendations are the basis for many of the provisions of
this bill.
The Department maintains a scorecard to manage our progress
against all of the Commission's recommendations. The Government
Accountability Office is currently evaluating the Department's
implementation of the Commission's recommendations and we have
been actively providing information on our progress to them.
The Department has been and continues to be focused on
improving operational contract support. It has been a journey
and we believe we are making good progress. The bill we are
here to discuss today is another positive step in that journey.
The Department of Defense concurs with many of the
provisions of the bill, but we do have some concerns and we
would like to work with the Subcommittee to resolve those.
We are committed to enhancing contingency contracting and
is in favor of legislative efforts to augment the ongoing
Departmental initiatives to oversee contingency operations. We
are especially appreciative of the 2012 National Defense
Authorization Act (NDAA) coverage of no contracting with the
enemy, access to subcontractor records in an overseas
contingency operation (OCO), and the increased authorities
provided to the reachback cell that supports the joint theater
support contracting command.
In closing, I wish to reiterate the Department's
appreciation for your continued commitment to improving
operational contracting. Like you, the Department is focused on
meeting the warfighters' current and future needs while
judiciously managing DOD's resources and balancing risk. Much
has been accomplished, but, of course, challenges remain.
Thank you for the opportunity to provide you the
Department's reactions to this bill. I ask my written testimony
be submitted for the record and I welcome your questions.
Senator McCaskill. Thank you, Mr. Ginman. Ms. Crumbly.
TESTIMONY OF ANGELIQUE M. CRUMBLY,\1\ ACTING ASSISTANT TO THE
ADMINISTRATOR, BUREAU FOR MANAGEMENT, U.S. AGENCY FOR
INTERNATIONAL DEVELOPMENT
Ms. Crumbly. Chairman McCaskill, Ranking Member Portman,
thank you for the opportunity to discuss the potential impact
of the Comprehensive Contingency Contracting Reform Act on the
U.S. Agency for International Development. I will briefly
summarize my remarks and ask that my full statement be entered
into the record.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Crumbly appears in the appendix
on page 81.
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Madam Chairman, Senator Portman, as you know, more than
9,000 men and women of the USAID work to provide effective
economic development and humanitarian assistance in support of
U.S. foreign policy goals. How we improve our contracting
practices, including in contingencies, directly impacts the
success and sustainability of our mission. Accountability to
Congress and the U.S. taxpayer for the funds we use is a duty
and it is a duty that we take very seriously.
In November 2011, when USAID Administrator Rajiv Shah asked
me to lead the Bureau for Management, he did so because he knew
that I was a career civil servant with more than 20 years of
experience making things work at the Agency. Throughout my
career, I focused on making our business practices more
efficient and effective with the overall goal of enhancing
performance while reducing unnecessary cost, so I understand
the motivation behind this legislation very well. It addresses
many of the management challenges highlighted in the report of
the Commission on Wartime Contracting that you, Senator
McCaskill, created along with Senator Webb. It also addresses
some of the most important issues in our current engagements in
Afghanistan and Iraq and those we could contend with in future
contingencies.
USAID has already begun to implement the lessons learned
from Iraq and Afghanistan. Over the past 2 years, Administrator
Shah has instituted one of the most comprehensive reform
packages I have seen in my time with the agency. Our USAID
Forward Reforms, as we have named them, are designed to ensure
that we provide a more effective business model and deliver
more sustainable and results driven development programs.
Implementation and procurement reform is a key element of
USAID Forward, and I want to note that this reform agenda is
complementary to many of the recommendations of the CWC, so
USAID has already made great strides in enhancing the oversight
and accountability for our acquisition and assistance
portfolio.
For example, we are increasing transparency. We have been
working actively with our Department of State colleagues to
make foreign assistance data available to the American public.
As a result, anyone can view USAID spending, including overseas
contingency operations, online at foreignassistance.gov.
We have been actively engaged in strengthening our
oversight. In February 2011, we stood up a Compliance Division
within the Bureau for Management's Office of Acquisition
and Assistance (M/OAA) to serve as the central repository for
any and all referrals of administrative actions, including
suspension and debarment. In just one year, the Division has
issued 102 administrative actions and recovered nearly $1
million in taxpayer funds, compared to eight such actions
between 2003 and 2007.
We are promoting enhanced competition. In 2010, we
established a Board for Acquisition and Assistance Reform
(BAAR). In its first year alone, the Board's recommendations
resulted in a 31 percent increase in prime awardees, from 29 to
38. This is significant because it means we are broadening our
partner base and reducing dependence on any single
organization.
USAID has instituted several cost saving measures and our
acquisition savings plan has yielded approximately $171 million
in cost savings or cost avoidance since 2010.
While we have had some difficult challenges in Iraq and
Afghanistan, we have also achieved some significant successes.
As Administrator Shah noted before the CWC, in Afghanistan, we
have put more than 2.5 million girls back in school, helped
rebuild the Afghan civil service, aided farmers in growing
legitimate crops, and assisted in dramatically improving health
care, particularly among women. In Iraq, we have made
significant contributions toward diversifying the economy and
promoting women's participation in the market.
With regard to your legislation, my written statement
details comments and concerns that we have on specific
provisions of the bill and I am happy to address any particular
section that you wish. But I would like to take this
opportunity to compliment you and your staff for your
leadership on this issue and your willingness to engage in a
dialogue because we all share the same goal, enhanced
accountability in overseas contingency operations.
Again, thank you for the opportunity to be here today and
for your support of USAID. I look forward to our discussion.
Senator McCaskill. Thank you.
I am going to really try to make an effort today to take
off my typical hat in this Subcommittee, where I am kind of
tough on folks and try to point out inadequacies and make a
point by using the power of almost a cross examination, and I
am going to really try--because I really do want this to be
about how we can get this legislation in a place that it is not
going to be just something that is ignored or that is checking
a box that we are completing the work of the Wartime
Contracting Commission. I really want this legislation to be a
framework that is workable for your agencies.
And so I want to underline my sincerity about getting your
input, and whether it is today in the give-and-take of this
hearing or whether it is by members of your staff sitting down
and slogging through the difficult process of going through
phrases and going through sections of the bill and double-
checking. What I do not want to have happen is for us to get
this legislation passed, in its entirety or partially, and then
have a hearing several years down the line and realize that
nobody paid much attention to it.
So this is your opportunity, and with that will come the
danger that I hope I or somebody who will sit in this chair
will not let you off the hook or your agencies off the hook in
a few years when you say that legislation just was not
workable. I do not want those words to ever come out of the
mouth of you or your successors in yours jobs as it relates to
improving contracting.
So with that, let me get started on what is one of my--I
have several overarching concerns about this, but in the
interest of time, I am going to hone in on some of my, quote-
unquote, ``favorites,'' and I mean that sarcastically.
Let me start with debarment and suspension. I think the Air
Force has provided such a good role model for everyone as it
relates to suspension and debarment. I was interested to hear
in your testimony, Ms. Crumbly, about how you all have really
stepped it up in terms of looking at performance on contracts
and whether or not a suspension or debarment is something that
should be considered.
Just to give you some big numbers, according to the Defense
Department, over a 5-year period, we had--let me get the exact
numbers, because I want to make sure I get it right--in 2011,
the Defense Department found that over a 10-year period, the
Department had awarded $255 million to contractors who were
convicted of criminal fraud, and $574 billion to contractors
involved in civil fraud cases that resulted in a settlement or
judgment against the contractor, many of whom were never
suspended or debarred. In 2011, the General Accounting Office
(GAO) reported that the State Department had only had six
suspension or debarment cases with over $33 billion in
outstanding contracts. Now, look at Air Force. Air Force had
367 suspension or debarment actions in a single year last year.
The State has had six in 5 years.
The Air Force suspension and debarment officer is
independent from the acquisition chain. So somebody who is
involved in acquiring stuff is not involved in determining
whether or not there should be a suspension or a debarment. The
State Department SDO does not have those attributes. The State
Department's suspension and debarment officer has other duties
involved especially also in acquisition.
Why do you not speak to that, Secretary Kennedy, about any
resistance or reluctance you might have to separating out the
suspension and debarment officer from any duties particularly
related to acquisition. It is kind of hard to be in charge of
buying something or buying services and then turning around
later and say, I really screwed up and gave it to a bad guy. It
seems to me that separating that duty makes so much
commonsense, and I am curious as to your input on that.
Mr. Kennedy. Senator, I fully agree with you, but I believe
that is the process that we have in place at the State
Department now. We have a head of contracting activity, a
senior career Senior Executive Service civil servant, who is
responsible for all of our contracting activities. It is her
responsibility to buy and it is her warranted contracting
subordinates who do all our buying.
We have a separate Senior Executive Service career civil
servant who we call our Procurement Executive. He has no
responsibilities to actually buy anything. He sets the policies
and the practices of the State Department but does not engage
in buying. He is in charge of the suspension and the debarment
activity.
So we fully agree with you, Senator. We believe that it is
absolutely correct to split the duty of buying from, in effect,
the duty of oversight with due respect to our Inspector
General, who also has the larger oversight framework. And so it
is our Procurement Executive who is the debarment official and
who, thanks to his good work, we have increased the number of
suspension and debarments significantly, as I outline in my
testimony. So we agree with you, Senator.
Senator McCaskill. So in our briefing, we were told that
Corey Rindner is in the Office of Procurement Executive (OPE),
an office that also assists State in contracting for supplies
and services. That is incorrect?
Mr. Kennedy. He writes the policies, ma'am. He does not buy
anything. He is a warranted contracting officer, yes, but he
does not procure any goods or services for the State
Department. We have hired--and it was actually my predecessor
who hired him--someone with wide and deep experience in
contracting, because who would better know how to set policies
and to discover when you should suspend or debar someone if you
do not have that background. But he does not engage in
procurement activities.
Senator McCaskill. Would it make sense for you to have
somebody full-time just on suspension and debarment? With the
amount of money that is being contracted by State, would it not
be better to have someone whose full responsibility was just
suspension and debarment?
Mr. Kennedy. He has staff assisting him, and that staff is
a professional staff, and so we believe that we have
constructed a pyramid in the Procurement Executive of
professionals who know how to write the regulations so that we
can hold contractors responsible, and then implement a full-
fledged suspension and debarment program should it become
necessary for us to take that action. So we believe that we are
complying with both the letter and the spirit of what you put
forward because we agree with you. It is our responsibility to
ensure that every single taxpayer dollar is administered and
used to the best interest of the national security of the
United States.
Senator McCaskill. OK. I am hoping that we can get you to
have somebody that is at the top of the organization of
suspension and debarment. I do not know whether you need
assistance under him, but who has just that responsibility,
because we think it is that important in terms of setting the
tone. But we can talk about that going forward.
Another one of my big problems is sustainability in terms
of projects, and I have a--we tried to do our greatest hits
list here for this hearing and this is examples of waste,
fraud, and abuse on projects in Iraq and Afghanistan. I think
if I asked all of you to guess three or four of the projects
that would make this list, I am hopeful that you would know
what they were without me reminding you, because it is not
good. And I think that the notion that we have actually done a
full-bore sustainability analysis is just not borne out by the
results of many of these projects and I think it is very
important that this legislation include something that requires
a certification on sustainability.
I know under the Foreign Assistance Act, USAID is required
to have a certification. That is because AID traditionally has
been the one doing these projects, and as we know, it is a
whole new world out there with Afghanistan Infrastructure Fund
(AIF) and with, what I call the Commander's Emergency Response
Program (CERP) and Son of CERP and, the way CERP has morphed
into something far beyond what was explained to me when I first
arrived in the Senate.
In a report by the International Security Assistance Force
(ISAF), which I previously discussed, there is no persuasive
evidence that the commander's emergency response program has
fostered improved interdependent relationships between the host
government and the population, arguably the key indicator of
counterinsurgency success. This legislation would impose a much
more rigorous review of these projects, and I have circled
several of them.
I have a USAID project in Afghanistan which is the power
plant, $300 million power plant. Clearly whatever certification
was required, it was flawed, because that is not sustainable.
I've got the Khost and Gardez Road in Afghanistan. I have the
water treatment plant that the State Department did in Iraq, it
was almost $277 million that we know the Special Inspector
General for Iraq Reconstruction (SIGIR) found was operating at
only 20 percent of capacity because of the failure of the Iraqi
folks to knowing how to operate or maintain it. I have the
Fallujah water waste treatment system, which was a State
Department-Defense Department joint project.
Is there any argument or push-back from any of you on the
sustainability front that this has been a failure and that even
going--as we speak, we are building things in Afghanistan that
will not and cannot be sustained?
Mr. Ginman. So clearly, at least from the Defense
Department perspective, we have not always covered ourselves in
glory on this area, and you have listed those examples.
In August, we did create the Afghanistan Resource Oversight
Council (AROC). I think we are in our fourth or fifth meeting
of that. It has been chaired by Alan Estevez, the Assistant
Secretary of Defense for the Logistics and Material Readiness
(L&MR) and basically filling in just as the principal deputy.
Mike McCord is the principal Deputy and the CFO. And by Jim
Miller, who, in his current acting role, has continued to be
the Chair. And sustainability has clearly been on the topic and
the agenda in each of those meetings for what we can do or not
do.
I think when Mr. Kendall testified before the Senate before
with General Bash, they expressly talked about what we had
attempted to do, to go in, particularly in the Corps of
Engineers when we were evaluating projects, to ensuring the
sustainability. It was an issue that was discussed and
addressed.
And I know as the CERP projects currently come through and
are reviewed at the OSD level, over $1 million, we are asking
the question up front, what is the sustainability.
So have we done it well in the past? No, Senator. Are we
attempting to do a significantly better job as we go forward?
Yes. Do I think we have put the structures in place to ensure
that we can do a better job? I think we have done that, as
well.
Senator McCaskill. I guess my biggest problem with this is
that I know and understand that our military is the best in the
world, because there is nothing--there is no mission they
cannot accomplish if we set our minds to it and put the power
of the resources of this country behind it.
And it feels like, to me, that in some room somewhere there
is not an acknowledgement that we are using fairy dust to
really justify what this country can do when we leave and what
they are capable of doing when we leave. Now, I am not even
talking about the security forces. I am not even talking about
creating an army for a country that has never had a centralized
army. I am not even talking about creating police forces that
are capable of sustaining the rule of law after we leave. I am
just talking about who is going to pay to fix the roads. I am
just talking about who is going to operate power plants. I am
just talking about who is actually going to have the technical
expertise on these water projects.
It is just hard for me to imagine, with the gross domestic
product (GDP) of this country, once you take out the huge
influx of American dollars, they do not have any money. I mean,
is somebody being brutally honest about going forward with
these reconstruction projects as it relates to the reality of
what this country is once we are gone?
Mr. Ginman. So again, from the ARPC perspective, I mean,
those three individuals are consciously looking at what are the
current projects that are there, what do we think the long-term
tail is. CSTC-A/NTM-A, the people who are, in fact, overseeing
the training of the military forces and the ability to do it,
are participants in that discussion. I mean, from my
standpoint, I think we have the right people together to, in
fact, attempt to address that question and can we, in fact,
afford it, and then how is it going to be paid for in the
future.
Senator McCaskill. We are building highways for a country
that does not even have a highway department. I mean, they do
not even have any revenue to support their highways. They have
no--there is no fuel tax. There is no tax out there that would
sustain a highway, and it is just--I just think that this
certification included in this--what about the others in terms
of sustainability, and then I will turn it over to Senator
Portman. Is there anything that you want to add on the
sustainability? And, Ms. Crumbly, how did this power plant get
built? I mean, who decided a dual-fuel $300 million power plant
was a good idea in Tarakhil? I know that is not what it is
typically called. I do not know if I am pronouncing it right.
Ms. Crumbly. I call it Kabul power plant.
Senator McCaskill. Yes. I always say it is in Kabul
somewhere, so----
Ms. Crumbly. Exactly. In essence, it was an interagency
decision to move forward with the power plant. And I do want to
note that the power plant is working in terms of performing at
peak or surge capacity. I know we were talking----
Senator McCaskill. Yikes. Three-hundred million dollars
for--that is one expensive generator in an emergency.
Ms. Crumbly. No, I understand, and we have turned it over
to what they call DABS or the Afghan utility portion of the
government. So we are looking at how that can be sustainable in
the long term. So it is meeting some needs in the country.
You noted that the Foreign Assistance Act requires that we
focus on sustainable development, and we do that in USAID
programs. It is a key factor for consideration whenever we are
developing program or projects.
I would say that we have had some work to do and we have
taken seriously the CWC recommendations and, in essence, we
have put together a sustainability policy in Afghanistan. And
actually, I was talking with the Deputy Director of our Office
of Acquisition--I am sorry, Afghan and Pakistan Affairs, and he
noted that when he was out in Afghanistan recently, they are
implementing the sustainability policy at the provincial
reconstruction team level. So we are taking it seriously. We
are, indeed, putting policies into place and we are looking at
the longer-term sustainability in Afghanistan.
Senator McCaskill. Anything from State, Secretary?
Mr. Kennedy. I would agree that there, clearly, are issues.
We have tried to do a lot in very difficult environments, and
obviously we have not succeeded completely. I think my two
colleagues have addressed that.
The major State Department activity in this regard is our
police program. We are working very carefully with both the
government of Iraq and the government of Afghanistan to ensure
that we are providing them the kind of training that they need
and the kind of training that will have a long-term positive
impact in their police programs. We have a senior State
Department officer who is assigned in both Iraq and Afghanistan
as the coordinator for foreign assistance to make sure that we
are focusing on sustainability.
Senator McCaskill. OK.
Mr. Kennedy. But it is just as the Admiral said. There is a
lot that we can do better and I believe we have learned our
lessons.
Senator McCaskill. OK.
Mr. Kennedy. And we welcome the dialogue, as you suggest,
on how we can ensure that sustainability is institutionalized
and carried forward.
Senator McCaskill. Let me know if there is anything about
the sustainability portions of this legislation that you think
are not sustainable.
Secretary Portman--Senator Portman. [Laughter.]
Senator Portman. I have had a lot of titles. I cannot keep
a job. But it has never been Secretary yet. [Laughter.]
First of all, thanks for getting into the sustainability
issue. I did not get to hear the entire dialogue, but I think
that is a critical part of what needs to be done, as we talked
about in the opening remarks. I know you also talked about
enforcement, suspension, debarment, and other ways to have
enforcement play a more credible role.
I want to talk a little about database of pricing
information, which is something that is in Senator McCaskill's
bill and it has also been talked about by the Wartime
Contracting Commission, and a number of the IG reports have
talked about it, as well. It is basically how do you get a fair
price, and competition, I think, is the best way. But another
way, of course, is to ensure that we have a database of pricing
information that is transparent, that is accessible, and that
is one that the agencies and departments can rely on.
One dramatic example is a report that came out of the
Special Inspector General's office in July last year which
found that one Department of Defense contractor was charging
$900 for a control switch that was worth $7. In some cases, the
IG found contractors overloading the government with markups
ranging from 2,300 percent to 12,000 percent. So we have,
again, had plenty of examples of this brought forward by IG
reports and by the Commission itself. And again, enhanced
competition is a powerful tool, but I would like to hear from
our witnesses about the feasibility of a more systemic way to
approach this issue, tracking pricing information to ensure
that contracting agencies are getting a good value.
Mr. Ginman, if we could start with you, that would be
great. I understand DOD has established a pilot program under
the Director of Defense Pricing, and the notion here is to
create a more transparent and accessible, again, accurate
database on prices. Can you talk about the status of that
program and whether you think it is working? Is it producing
savings?
Mr. Ginman. Certainly. So I will start out that the
Department agrees unequivocally that competition is the best
way to get good pricing. The pricing database, or the pricing
effort pilot that is under the Director of Defense Pricing is
born from, frequently, we do not have good competition, and it
is an effort to--what is it we need to do to be able to put
into the hands of contracting officers when they are
negotiating with companies the information they need.
So examples I would give, the Director, from his former
life he speaks, he frequently, when he would negotiate missile
buys with the Army, Navy, and Air Force, he would be the one
person at the table that, in fact, understood what the entire
Department was doing because the Army, Navy, and Air Force did
not speak with each other well and understand. So the thought
process behind the information that we are gathering is to put
in one place, so when a Navy contracting officer is doing a
missile buy or buying a ship, whatever, for that particular
company, they can turn to this database and find what was the
last negotiation that was done, what were the overhead rates
that were there. They can turn to the Defense Contract
Management Agency (DCMA) again in one place from an overhead
rate structure.
It is interesting when I know that an overhead rate for a
company is 20 percent this year, 21 percent the next year, 22
percent the following year. What I really want to know is, so
tell me how they executed to that rate, so that if, in fact,
not a 20, 21, or 22, what they actually executed was 18, 19,
and 20, I would like the contracting officer to understand when
they are negotiating the contract that, in fact, they under-
executed what their rate is that they are bidding, so that you
are putting the contracting officer on at least fair footing
with equal knowledge that is there.
We have created, it is called the Contractor Business
Analysis Repository (CBAR), and I apologize that I cannot do
the acronym, but it is a database where we will put up all of
the business clearances that are done. We will put up all of
the pricing information, all of the rate information that is
available to us so that when you are negotiating with any of
the major defense contractors, you will be able to go to this
one place and see what has everybody else done before you. What
did they actually negotiate? What were their examples?
I would say, from the way the legislation is written, and
asking in ways that it be changed, that we are a little leery
that the way it is read is that this is, tell us pricing
information. So if I am buying, port-a-potties, what was the
price we paid for port-a-potties? I do not think that is what
you are intending. So that what we are attempting to do is when
we do not have the forces of competition behind us, what we
will have is the ability to provide the contracting officers
with tools. We are going to make it available--we have agreed
that we will make it available to the Office of Federal
Procurement Policy (OFPP) and to any other agency that is
dealing with those that has the appropriate need to be able to
see this information.
We believe--let me step back. When I started doing this as
a Lieutenant JG in 1973, we expected contracting officers to be
skilled pricers. Probably in the--about 1990 coming forward, as
we downsized within the Department, we more or less gave away
the pricing capability within the contracting community. So
while today we have pockets of people in various commands, we
do not have a strong skill set.
So one of the other parts of the pilot project that is
there is creating in DCMA groups of people that are experts in
pricing and knowledgeable of the specific major companies so
that when the different contracting officers are negotiating,
they can turn to this group of experts to help.
We have also, not part of the legislation, but we have also
reintroduced what we call mid-level training courses to get the
1102 community to again regain the skills that are necessary to
be able to adequately price contracts. It is not----
Senator Portman. Admiral, let me interrupt you just for a
second. We have a vote in 5 minutes and have to run over there.
Although the Chair and I are very fast, we are going to have to
take off here in a minute.
If you could get back to us in writing with how you think
the pilot is working, it sounds like you have three or four
good ideas that are agency-wide that have potential, but tell
us how you actually think it is working, that would be helpful.
And then to the other panelists, any thoughts, obviously,
on this issue of the pricing database and how to be sure that
we are getting a fair price, as was talked about by the
Commission.
And then, second, on the trafficking bill with regard to
the provisions in the McCaskill bill, if you could get back to
us in writing, just give us any comments you have.
And again, I apologize. I am going to run to the floor to
vote. I appreciate you being here today and I thank the Chair
for holding the hearing.
Senator McCaskill. And what I will do is I will ask you all
to hold. I will run over, vote quickly, and come right back. I
just have a little bit more for this panel and then we have the
remaining panel of the IGs. I will be right back. [Recess.]
I would like to look at subcontracting as an area that I
would like your input on. There has been--and especially, I
would like you to speak before you all leave the stand about
whether or not you think any of the limitations we have put in
here on suspension and debarment or on limitations on
subcontracting, if you think they are workable in a
contingency. Do they cause you pause, especially if you
consider the waivers that we--the provisions that we have in
there, the 6-month lead time before any of these requirements
would go into effect, the noncompetitive requirements that we
have in here.
Let me start with that. Do any of those cause you all
problems as it relates to contracting in wartime?
Mr. Ginman. So, Senator, the one tier, I think is a
problem, and I think what the Commission on Wartime Contracting
was really trying to get to was why were we unable to break out
work that was under the Logistics Civil Augmentation Program
(LOGCAP) expressly and to go through that, and I think that is
a good question. But then the translation of that to one tier,
from our perspective, in any scenario, wartime or not, is just
simply unworkable. I mean, I cannot imagine a situation with
almost anything we do that I could get to a single tier of
subcontracts in doing it. So we think there are ways that can
be rewritten that will get to what I believe the Commission was
really trying to get to and the objective that would help, and
we are happy to work with the staff to come up with those
words.
Senator McCaskill. Well, as you know, we had a Tamimi
problem in the LOGCAP contract where we have kickbacks with
KBR, and that is one of those large duration wartime contracts
that is kind of the poster child for contracting gone badly.
The Khost Trucking contract, with the multiple layers of
subcontracts, really had a security risk associated with it as
it related to where the money was going. And clearly, we
figured out that some of the money was going to the bad guys.
So what we are looking for here is we do not want to get
away from the efficiencies that subcontracting might provide,
but we have to really get to a much more transparent situation.
Mr. Ginman. So expressly with Tamimi, and in my opening
oral statement, the legislation that the NDA gave us in 2012
that grants this as an overseas environment for access to
subcontractor records, where they refused to provide records,
that legislation should open the door for us to be able to go
and demand those records and get them. Task Force 2010, which
is really the group that is trying to follow the money and get
there, they really wanted that legislation and we very much
appreciate the Senate's help in providing that legislation to
us. So I am hopeful that we will not face Tamimi again, at
least from a standpoint of not being able to get the records,
that legislation has now given us the authority to go get it.
Senator McCaskill. And what about the recompeting contracts
more frequently?
Mr. Ginman. Well, I think the Department's position writ
large is we prefer shorter length periods of contract. But in
all instances, it depends. What is the scenario I am in? What
is the frequency with which we want to turn over contracts? I
mean, the express example I gave in my written testimony was as
we were pulling out of Iraq and we were looking at recompeting
some task orders, the Combatant Commander came in and said, I
mean, I can focus us on getting out of Iraq or I can focus on
transitioning contractors. I would much prefer to focus on
getting us out of Iraq. Could you please just leave the
contractors in place? So we did that.
Senator McCaskill. Would that not be a waiver situation
under this?
Mr. Ginman. I think----
Senator McCaskill. Is that not envisioned with the waiver?
I would think that would be just custom tailored for a waiver
situation, when you would document that there was an either/or
here and that moving people out was more important than
recompeting at that particular juncture.
Mr. Ginman. Yes. I mean, we have basically said for all our
contracts, particularly in those where the technology moves
quickly, we do not want contracts that exceed 3 years. I mean,
that has been the Department's position. If we are in sole
source contracts, we would like to find ways to get the
competition. But if I am in a scenario where I cannot get the
competition, I am going to have a lot of waivers. I mean, if I
really am in a situation of sole source, it is going to be sole
source for an extended period of time, then you would see a lot
of waivers to go do that.
I mean, the waiver provision certain provides the out, but
I think that length of term of a contract is truly dependent.
Tell me where I am. Tell me what the opportunities are. Tell me
the technology of what I am buying. And then tell me how well I
can price it.
The other issue we have with long contracts is it is
difficult to price effectively for a long period of time at a
fixed price. So we look for shorter contracts.
Senator McCaskill. You just know----
Mr. Ginman. Yes.
Senator McCaskill [continuing]. That if a contract is more
than 3 or 4 years old, that someone is on the bad end of it.
Mr. Ginman. Yes.
Senator McCaskill. Now, in some instances, it may be the
contractor. Unfortunately, not often enough. I mean, I should
not say that. I do not want the contractor to be on the bad end
of it. I am focused on saving the government money, so I think
that the more frequent recompetes--and I know that there is a
culture that kind of weighs against recompeting because it is a
pain to compete. This is not like an exercise that everyone
looks forward to, either the ones bidding or the ones running
the competition.
And clearly, I mean, the notion that KBR was a noncompete
came from Bosnia. Everyone then turned to Halliburton KBR
because they had done it in Bosnia. And it was, like, everybody
is sitting around, who can do it? Well, we know they can. They
were in Bosnia and they got it noncompete and made a huge
amount of profit off that contract, much more than they needed
to make had we been more aggressive about overseeing it.
Mr. Kennedy. Senator, if I may----
Senator McCaskill. Yes.
Mr. Kennedy. We are in favor, absolutely, of full and open
competition, and all the points that you made are absolutely
correct. But if I could just posit one scenario. The State
Department has put out, in effect, competitively bid, a number
of master contracts and then we issue recompetitively bid task
orders once we have qualified a group of companies. We would
want to make sure that nothing in the exact legislation could
be interpreted to mean that we would have to back away from
that activity. We go out. We note something either on food
service or security service or whatever, go to a number of
major companies, competitively bid, then award and put them on
the master list, and then we award them task orders.
We would not want this limitation to say, well, since that
contract is, in effect, over 2 years old, you cannot then issue
a task order that is valid for more than 1 year. That would set
us back, because we are trying, as you have put forward almost
in the preamble of your legislation, to make sure that we have
planned. And so one of the steps that we are taking to plan for
the future is to have master contracts in place, competitively
bid, that then we can utilize them, having obtained the best
price, and issue task orders.
Senator McCaskill. I am curious, how long do you envision
the master contracts being in place?
Mr. Kennedy. Five years, ma'am. And then we issue task
orders that would run the duration.
Senator McCaskill. And was the security contract a master
contract at the embassy in Kabul?
Mr. Kennedy. No. That is one of the steps we have taken
since then, to put this into place.
Senator McCaskill. OK. So there was not a master contract
with subs----
Mr. Kennedy. No. Those were individually bid.
Senator McCaskill. OK.
Mr. Kennedy. So we want competition. We want to do the
best. But we want to make sure that our planning that has led
to a contract in place would e available to us given a fluid
situation.
Senator McCaskill. OK. Ms. Crumbly, could you speak--in
response to a report by the Senate Foreign Relations Committee,
your administrator wrote, in Afghanistan, quote, ``now includes
a subcontractor clause in new awards that permits USAID to
restrict the number of subcontract tiers and requires the prime
contractor to perform a certain percentage of the work.'' Have
these changes been implemented?
Ms. Crumbly. Yes, they have.
Senator McCaskill. And so they are in every contract now in
Afghanistan?
Ms. Crumbly. That is correct and the limitations are to a
two-tier subs, so----
Senator McCaskill. Two tier?
Ms. Crumbly. Two tiers, exactly. We found that is what
works operationally best in Afghanistan----
Senator McCaskill. And have you found any problem with
having the two-tier requirement? Is there anything that you
think that, in terms of value of competency, that you have
sacrificed for a two-tier limitation?
Ms. Crumbly. I would say not as yet, but we need time to
see the implementation----
Senator McCaskill. How long has this been in place?
Ms. Crumbly. I want to say within the last 6 months? Mm-
hmm, 6 months.
Senator McCaskill. Kudos, and I would be very anxious to
see if you hit any bumps----
Ms. Crumbly. OK.
Senator McCaskill [continuing]. Because that seems
reasonable to me----
Ms. Crumbly. Mm-hmm.
Senator McCaskill [continuing]. That you can restrict the
number of tiers and requires the prime to do something other
than taking a cutoff the top.
Ms. Crumbly. Right.
Senator McCaskill. We have a lot of those around, too many
prime contractors that just take a cutoff the top. That just
means that they are managing the contract because we are not in
a position to manage it ourselves. I would like to see those
kinds of contracts go away.
Let me now turn to a broad-based question. What is not in
this legislation that you think should be? Should we go further
in any places? Have we adequately addressed training? I worry
that we have not gone far enough on training. Obviously, we
hollowed out the acquisition force in the 1990s and paid a dear
price. Think of the money that we lost because we had nobody
minding the store in contracting. It is just mind boggling.
I mean, this is what is so hard about funding our
government, because what sounds good in the short run, in a
budget cycle, we do not have a tendency to think in decade-long
implications. And I think that we have to be very careful as we
go toward a much leaner government, which we must do, and
toward a Defense Department where DOD does not get everything
it asks for, in fact, is looked upon to find savings many
places.
I think I know the concerns. Your staffs have visited with
us. We know where your concerns are. Is there any place that
you would like to see us go further than we have or to clarify
something that is in the legislation that you do not think is
clear? And if you do not have anything for the record today, I
certainly will take it in a followup after the hearing.
Mr. Ginman. Well, so things that particularly concern me is
in the area of past performance, not giving--when the
Commission made this recommendation, we objected to it then and
it is in the legislation--not giving contractors an opportunity
to rebut negative past performance. We use the past performance
for other contractors to make decisions when they award going
forward. Anything that is negative requires the contracting
officer in that competition to go out and ask industry, explain
to me this negative past performance. So I can do it one time
up front or I can have 10 people afterwards do it. So from my
standpoint, not giving the contractors an opportunity, if there
is negative past performance, to rebut it is only setting us up
downstream where a contracting officer fails to do what they
are supposed to do and go ask. It becomes a protest risk and we
would do much better to give them an opportunity up front, and
particularly if for whatever reason it was an unfair statement.
Letting one level above the contracting officer to have the
authority to say, all right, I have looked at what the
contractor said, looked at what the contracting officer said,
this is what I think the final answer should be, it just makes
sense to us.
Senator McCaskill. Secretary Kennedy.
Mr. Kennedy. I think that there are two issues that I think
I would like to see in the bill and one that I have some doubts
and will communicate that to your staff.
But on the two that I would like to see, at times, lowest
price is not the best value for the American taxpayer. And so
we have had some legislative exceptions from time to time
allowing us to award contracts on the basis of best value,
because the best value over time actually does result in a
lower price than just the first bid and that. And so that is
something we would be interested in discussing with you and
your staff.
The second is that the ability to use direct hiring
authority, to hire 1102s, to hire professional contracting
officers, that authority legislatively expires on the 30th of
September. As we are trying, as you rightly say, to regrow the
contracting community, anything that would enable us to bring
in a new generation and get them trained up as fast as we can
is of very great interest to us.
The one issue that we will be discussing with your staff
that we are concerned about is in the section on security
contracting, there is a statement that the Combatant Commander
in the theater has the final say on all security activities.
That is of great concern to us because that substitutes the
judgment of the Combatant Commander for that of the Secretary
of State in determining what is the best way to ensure that the
diplomatic and consular and assistance programs are protected
as opposed to the Combatant Commander, who is focused on
protecting the troops and engaged in force projection rather
than force protection. And so that is the remaining large item
of concern.
Senator McCaskill. OK. So you have a sincere fear that the
Combatant Commander would perhaps view the protection of the
State Department's personnel as not mission specific enough in
terms of his decision--his or her decisionmaking power?
Mr. Kennedy. That is correct.
Senator McCaskill. OK.
Mr. Kennedy. And the charge of the Secretary of State in
what is usually known as the Inman legislation, the Omnibus
Diplomatic Security Act----
Senator McCaskill. Right.
Mr. Kennedy [continuing]. That vests the responsibility for
protecting of civilian employees overseas in the Secretary of
State.
Senator McCaskill. And I want to followup on a previous
statement you made. It is my understanding that the State
Department's worldwide protective services umbrella contract is
10 years, not 5 years.
Mr. Kennedy. There is a base contract and then we award
these task orders for no more than 5 years.
Senator McCaskill. OK, but the umbrella contract that they
can be awarded under is not 5 years, it is actually 10 years,
correct?
Mr. Kennedy. Yes. Right, but the task orders are 5 years.
Senator McCaskill. That seems like a long time.
Mr. Kennedy. Because the pricing, as my colleague, and as
you both referred to, you want to make sure that the price is
always best. The price is determined in the task orders that
are awarded, and so that is where we ensure that the quality is
still there and the price is in the best interest of the
government. And so you have the master. You have qualified the
firms to compete for the task order.
Senator McCaskill. Well, and this is getting a little far
afield and I will not go too far in the weeds on this, but I
would love to spend more time, your staff with the staff of the
Subcommittee, working on this, because I, frankly, I am not
sure that we should ever not have private security forces at
embassies in a contingency. I mean, I think there is a strong
argument that can be made, if we are in a country where we are
fighting a war, that the security of that embassy should be by
our military and not by Third World nationals that are being
hired by a subcontractor under a 10-year umbrella contract. I
mean, obviously, we had bad things happen in Kabul, as was a
subject of a different hearing here. And I am not saying that
is a fault of the contracting that went on, but I just think
that if we are in a contingency, I think that the people of
that embassy could be best protected by American military.
Mr. Kennedy. We would certainly, and we benefit greatly now
and over time with cooperation from our military colleagues.
But we also know that the U.S. military is exceedingly
stretched. And when I first served in Iraq in 2003, the U.S.
military was protecting the civilian contingent. But over the
course of time, as the demands on the U.S. military increased,
they could not and did not have the resources to protect us.
I have less than 2,000 diplomatic security special agents
and officers for the entire world, 285 embassies and
consulates, plus their responsibilities for security protection
of foreign dignitaries in the United States. And so I am caught
in a bind here. I am required to ensure that we can continue
diplomatic and consular operations, not only in war zones or
zones of conflict, but also everywhere else in the world, and
the ability to do that is constrained by my internal resources
and the resources that the DOD is able to put at my disposal.
And the compromise there is to do, I think, the better job that
we are now doing with more training and these master contracts
that will have a better quality control so that we avoid the
problem that you alluded to in Kabul 2 years ago.
But I would note, just as an aside, the U.S. Embassy has
been attacked twice in the last 6 months and it is that same
security personnel who have done heroically in defending the
U.S. Embassy against both the attacks, both the one this past
Sunday and the one several months ago.
Senator McCaskill. But that is a new contractor.
Mr. Kennedy. No, it is the same one.
Senator McCaskill. I thought EODT was terminated.
Mr. Kennedy. EOD has been terminated, but EOD never
started. The previous contractor that was involved with a small
unit of specific people, those individuals were replaced, the
upper level management replaced. The company is still there and
will be there until the new contractor arrives.
Senator McCaskill. I did not realize that. So Armor is
still there under the British contract.
Mr. Kennedy. Yes, ma'am.
Senator McCaskill. OK. And, Ms. Crumbly.
Ms. Crumbly. I would like to support the points raised by
my fellow panel members, but I also want to note, as Under
Secretary Kennedy mentioned, he has a working capital fund that
is able to supply a steady stream of resources to support his
acquisition assistance workforce. We, too, are requesting that
authority. So if there is a way to go further and have support
for that working capital fund authority for USAID so we have
that steady stream, I think that is important for us.
One other thing I did want to correct, in terms of the
subcontracting, while we are at the two tier, we do have the
flexibility or an approval process where the Assistant
Administrator for the Bureau would approve it if you go beyond
those three. So we do still want some flexibility on
subcontracting, so I did want to note that, as well.
Senator McCaskill. Yes, and I think we have--every place
that we have said, this should be the rule, we put in waivers.
And so what we are looking for is a change in what is the
primary conduct of contracting and contingencies. And,
obviously, because it is a contingency and stuff happens, there
are going to be times that waivers will be necessary. But at
least if waivers are necessary, that means you are going to get
documentation, which is one of the challenges we have had in
this area.
Well, I want to thank all three of you. I know that in some
ways I have been a broken record on this subject for 5 years,
but I have a tendency--I am going to try to be kind to the
institution that I am lucky to serve in. Sometimes this place
has the attention span of a kindergarten class, and I have
noted that things like this, once they move off the front
pages, have a tendency to fall through the cracks. And so I
have really tried to stay on this and want to get this across
the finish line in terms of getting these changes into law and
monitoring the continued progress as we cleanup contracting and
contingencies.
One thing I would let you know, Mr. Ginman, is that I did
have an amendment to pull all the AIF funds out of Afghanistan
and have them to into the United States Highway Trust Fund.
People did not think I was serious. I was serious, and the
reason I am serious is the projects that are now on the board
for AIF, which is the morphing of CERP into infrastructure by
the Defense Department as opposed to AID, that has
traditionally done all this work, is that the projects we have
ongoing now are not going to be completed until 2014.
So if we are adding additional resources for the next
fiscal year, that means we are starting new projects. And I
have not yet gotten from the Defense Department what they are
envisioning what these new projects would be. And what I am
envisioning is if we are starting new infrastructure projects
in Afghanistan as we are trying to pull out of Afghanistan,
then we may end up with that reality that I think is very hard
for Americans to understand, that our military would, by and
large, be gone from Afghanistan, but we would have a full force
of contractors that we would be paying on the ground for years
to come on projects that we really would struggle to provide
the security necessary for completion under that scenario.
So I continue to wait to find out what this new $400
million that has been requested is supposed to be building in
Afghanistan over the next 2, 3, 4, 5, 6 years, and hope you can
spread the word over there that I am drumming my fingers
waiting for that information.
Mr. Ginman. Yes, ma'am.
Senator McCaskill. OK. Thank you all very much for being
here. [Pause.]
I will introduce these witnesses. The first witness is
Lynne Halbrooks. She became Acting Inspector General for the
Department of Defense in December 2011. She joined the
Department of Justice as an Assistant U.S. Attorney in 1991 and
has served as General Counsel for the Special Inspector General
for Iraq Reconstruction, and General Counsel for the DOD
Inspector General. Prior to her appointment as Acting Inspector
General, she served as the principal Deputy Inspector General.
Harold Geisel has served as the Deputy Inspector General
for the State Department since June 2008. He has more than 25
years of experience with the State Department and previously
served as Acting Inspector General in 1994.
Michael G. Carroll has served as Deputy Inspector General
for the U.S. Agency for International Development, USAID, since
February 2006. Mr. Carroll is a member of the Senior Executive
Service with more than 26 years of government service. Prior to
his appointment, Mr. Carroll served as the Director of
Administration for the Bureau of Industry and Security in the
Department of Commerce.
It is the custom of this Subcommittee to swear all
witnesses that appear before us. If you do not mind, I would
ask you to stand.
Do you swear that the testimony you will give before this
Subcommittee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Ms. Halbrooks. I do.
Mr. Geisel. I do.
Mr. Carroll. I do.
Senator McCaskill. We will ask you to try to hold your
testimony to 5 minutes. I must say that the attention you will
get today is much less than your colleague Brian Miller will
get this week, but that is probably a good thing. I am not sure
that we will have any injuries of TV cameramen trying to follow
you down the hallway. If you are going to talk about Las Vegas,
warn me ahead of time because--and I joke about this, but I
must say, every once in a while, something happens in the world
of Inspectors General that highlights your work. And for most
of the time, your work is done in the shadows. No one pays a
whole lot of attention. Unfortunately, sometimes the agencies
do not pay a whole lot of attention.
It is very important to me that we get this legislation
right from your perspective because you are the front line. And
while there may be a hit every once in a while that gets the
bright glare of camera, you toil away most of the time in
relative obscurity. Most Americans have no idea what Inspectors
General are and they do not realize the work you do. They do
not understand the capacity you have to look after your
interests. And they certainly do not get to watch those small
but important battles that you wage every day with people who
lead your agencies toward a goal of more accountability,
transparency, and saving the taxpayers money.
So as I always try to say to Inspectors General that I am
honored to deal with in these hearings, thank you for your many
years of service in this area. You are great examples of public
servants that are painted with a broad brush, overpaid,
underworked, too many of you. There are not enough of you and
you will never hear me say that you are underworked or
overpaid. So thank you, and we will begin with you, Ms.
Halbrooks.
TESTIMONY OF LYNNE M. HALBROOKS,\1\ ACTING INSPECTOR GENERAL,
U.S. DEPARTMENT OF DEFENSE
Ms. Halbrooks. Thank you, Chairman McCaskill, and thank you
for your appreciation for the IG community's work. That means a
lot to us. Thank you today for inviting me to express our views
on the Comprehensive Contingency Contracting Reform Act of
2012.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Halbrooks appears in the appendix
on page 98.
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As the Acting Inspector General at the Department of
Defense, oversight of contingency operation remains my No. 1
priority. I am committed to continually refining and improving
our oversight approach.
Last week, I was in Afghanistan and had the opportunity to
observe firsthand how the oversight organizations currently
plan, coordinate, and deconflict audits and assessments. At the
most recent Shura oversight meeting that I attended, IG staff
from Defense, State, USAID, the Special Inspector General for
Afghanistan Reconstruction (SIGAR), the GAO, and local command
IGs discussed critical oversight challenges and exchanged
information in a productive and collaborative manner.
I also met with senior commanders there to determine how
the DOD IG can continue to provide the best independent and
objective oversight of contingency operations in Afghanistan.
The senior commanders understand the need for transparency and
oversight, and the men and women serving deserve to know that
every dollar spent for their health, safety, and security is
spent efficiently and effectively. I believe that the
organizations that do oversight and the commands are working
well together to make this happen.
To make this effort even more effective, we at DOD IG have
a special Deputy Inspector General for Southwest Asia (SWA) who
functions as the authoritative source to plan, coordinate,
deconflict, and facilitate effective oversight. He also serves
as Chairperson of the Southwest Asia Joint Planning Group,
which is the principal Federal interagency forum to promote
coordination and cooperation for comprehensive oversight. This
group meets at least quarterly, and is comprised of
representatives from over 25 DOD and Federal oversight
agencies, functional components, and command IGs.
We as an oversight community have developed considerable
experience in conducting timely and relevant audits,
inspections, and investigations of overseas contingency
operations. At DOD IG, we have the capacity to deploy anywhere
in the world and are prepared to respond effectively, of
course, in coordination with other Federal agencies and
internal DOD oversight offices, to address future contingency
operations overseas.
With this background, I would now like to discuss the
Comprehensive Contingency Contracting Reform Act of 2012.
Overall, I support the legislation and, in general, support the
provisions of Section 103 of the bill, which calls for a lead
IG in overseas contingency operations.
Based on the strong working relationship that has evolved
between the Department of Defense, State, and USAID IGs, I do
not believe there is a need, as the bill is currently written,
for the Chair of the Council of Inspectors General on Integrity
and Efficiency (CIGIE) to designate a lead IG in a contingency.
Given that the bill defines a contingency operation as, quote,
``a military operation outside the United States and its
Territories and possessions,'' I believe the legislation should
recognize the Department of Defense Inspector General as the
lead IG. Alternatively, a determination of the lead IG could be
made based on the amount of funding appropriated to the
respective agencies.
Congress mandated in Section 842 of the National Defense
Authorization Act of fiscal year 2008 that the DOD IG, in
conjunction with multiple Federal IGs and DOD oversight
agencies, issue an annual comprehensive oversight plan for
Southwest Asia. I recommend the Subcommittee consider similar
requirements to develop a joint oversight plan under the
direction of the lead IG that would include a focus on
strategic issues and contingency operations oversight.
I would also like to work with the Subcommittee further to
refine the reporting requirements in the proposed legislation.
While compilation of data on obligations and disbursements is
primarily a management function, an IG can add value by
independently analyzing this data. Therefore, we believe a
requirement to compile the data should be assigned to each
Department and the IGs should review the quality of that data
as part of their oversight plan and use it to inform their
work. We believe that a semi-annual or even annual reporting
requirement would provide Congress with meaningful data and
necessary transparency.
Finally, the provision in the bill authorizing the lead IG
to employ annuitants and other personnel on a temporary basis
will definitely enhance our ability to move the right people in
country quickly to establish an immediate overseas presence.
However, I believe the special hiring authorities would be most
effective if they are not time limited.
With the few changes that I have outlined above, plus a
funding mechanism to resource the hiring of additional staff,
the proposed legislation would be an efficient, effective way
to ensure independent and comprehensive oversight of future
overseas contingency operations.
Thank you for your support of the community. I appreciate
the opportunity to testify today and express our views and look
forward to answering any questions you might have.
Senator McCaskill. Thank you. Mr. Geisel.
TESTIMONY OF HAROLD W. GEISEL,\1\ DEPUTY INSPECTOR GENERAL,
U.S. DEPARTMENT OF STATE
Mr. Geisel. Thank you, Chairman McCaskill, for the
opportunity to discuss our views on strengthening oversight of
government contracts during contingency operations. I ask that
my full testimony be made part of the record.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Geisel appears in the appendix on
page 108.
---------------------------------------------------------------------------
We commend the Subcommittee for its leadership and tenacity
in developing this critical legislation. Madam Chairman, we
believe that S. 2139 is a positive effort to ensure that
statutory IGs have the tools needed to provide efficient and
effective oversight in the most challenging overseas
environments.
The effect of the bill's provisions on OIG would be broad,
positive, and certainly manageable. OIG agrees with and
supports Sections 101 and 103 in the bill with three suggested
revisions. First, we recommend a small but important revision
to Section 101. We suggest an automatic percentage-based
funding mechanism be included in the operations budget for IG
oversight. IGs will need immediate additional funds to offset
the unforseen and unbudgeted costs of doing business in a
contingency environment. A model for these mechanisms can be
found in the American Recovery and Reinvestment Act, where
funding for all of the involved IGs was provided to oversee the
Act's significant new appropriations.
Second, Section 103 of the bill would mandate that the
Chair of the Council of Inspectors General on Integrity and
Efficiency designate a lead IG for the contingency operation
and resolve conflicts of jurisdiction between the participating
IGs. We suggest that at the onset of a contingency operation,
the relevant IGs would first determine which agency is expected
to have the largest share of the operation's funding and that
agency's IG would become the lead IG. It would then follow that
the agency with the next highest level of funding would become
the operation's associate IG.
In recent years, the statutory OIGs worked well together to
oversee contingency operations. For example, conflicts on
jurisdiction and work deconfliction have been resolved
efficiently by both the Southwest Asia Joint Planning Group and
the International Contract Corruption Task Force for work in
Iraq, Pakistan, and Afghanistan. These groups, which are
comprised of all IGs working in these countries, meet quarterly
and have been a success. This approach would save time and
simplify the process during the hectic period at the onset of
the contingency operation.
Last, we support the provision for semi-annual IG
reporting. We do suggest one adjustment, that this reporting be
scheduled to coincide with the IG's semi-annual reporting
cycle. However, the quarterly reporting provision in Section
103 would mandate that IGs provide detailed financial data,
specific obligations and expenditures, a project-by-project,
program-by-program accounting of incurred costs, foreign
investment revenues, seized or frozen asset information, agency
operating costs, and detailed contract and grant financial
information. All of this data resides in the Department or
agencies, not in OIGs. We suggest the participating Departments
provide a periodic stream of data to Congress and to the
participating statutory IGs. We can use this information on a
semi-annual basis to better plan and prioritize our oversight
work.
Finally, our recent successes in OIG are a result of the
increased confidence in our work and the resulting
congressional funding increases appropriated since 2009. These
increases have enabled our OIG to increase audit inspection
reports by more than 56 percent. Similarly, suspension and
debarment actions based on our referrals have increased
dramatically, from zero in 2008 to 17 in 2011. And today, we
are operating in five overseas offices, from Cairo to Kabul. So
when Congress provides the necessary funding, we deliver good
results.
That said, when you set out to rebuild an organization,
take it to new regions, and modernize its approaches, it is not
always about the money. That is why we appreciate your efforts
to provide the new hiring authorities and the legal framework
adjustments that support more effective law enforcement.
Thank you, Chairman McCaskill, for this opportunity, and I
am prepared to answer your questions.
Senator McCaskill. Thank you very much. Mr. Carroll.
TESTIMONY OF MICHAEL G. CARROLL,\1\ ACTING INSPECTOR GENERAL,
U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. Carroll. Chairman McCaskill, thank you very much, and
Senator Portman and distinguished Members of the Subcommittee.
Thank you for inviting me here today.
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\1\ The prepared statement of Mr. Carroll appears in the appendix
on page 114.
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You may recall my impassioned plea the last time I
testified before you in November 2010 on behalf of the
statutory IGs. I said then that you had what you needed right
here and nothing in the last 18 months has changed my mind on
that. So this is truly, I think, a step in the right direction,
the legislation not only on behalf of the agencies for
performance and accountability, but also giving us the
resources and authorities we need to do our job in a
contingency operation. So I really appreciate this opportunity
today.
I would also like to thank you for the inclusive nature of
the deliberative process, working with your professional staff
on both sides. They have been really open to our suggestions
and I would like to think that is reflected in the bill, that
there are not a lot of major changes that we think need to be
made. I think it is well down the road to be where it needs to
be. We just have a couple of issues that we just want to nail
down, if I could.
As it relates to Section 103, I agree with my colleagues
that based on the way you have defined a contingency operation,
it is clear that DOD IG--it is clear to me that DOD IG would be
the lead IG in this particular case, and then whether it is AID
IG or State IG on an associate IG basis. So we do not see a
need for CIGIE. If, somehow, that came to pass that CIGIE was
part of this equation, then we would hope that there would be
some committee that the three of us participated in that would
be able to inform the CIGIE committee on whatever needed to be
done. But we do not think there is a need for CIGIE, a role for
CIGIE in this process.
On the funding and the authorities, as you know, we are a
foreign service organization and our auditors and investigators
are stationed around the world. We just want to make sure that
the authorities for rehired annuitants and dual compensation
waivers not only address Title V employees, but address Title
XXII employees, as well, retired Foreign Service Officers, so
we could then reach back to our cadre of retired auditors and
investigators to be able to do the job.
There is one aspect not in the legislation that I would
like to propose, and I know you asked that question to the
previous group of witnesses, and that is based on our
experience in Pakistan, we have had great success with a
national hotline on the Kerry-Lugar implementation, and I can
share the stats we have and the successes we have had with you
and your staff and I would like to possibly work with you to
include something like that. I have talked to my colleagues. In
principle, they agree. We could work through the jurisdictional
issues and that sort of thing with no problems. But I think it
would enhance the oversight of whatever the programs are in a
contingency situation.
Related to the agency and the agency's oversight, on
suspension and debarment, as it currently is written, there is
an automatic trigger for suspension and debarment if there is
an indictment and I would say that we should talk about that. I
think there are times when an agency has demonstrated already
that they have addressed the issues that we brought up in our
investigations, even though they admit there may be an
indictment on a criminal or civil referral. So I would ask that
you just consider the possibility of that being a case-by-case
basis rather than an automatic trigger.
And I think from an agency point of view--I am not here to
advocate on behalf of the agency, but I do endorse what Ms.
Crumbly said. I think the agency has made huge strides since
our audit of 2009 that was borne out of a bit of frustration on
our part about how the agency was proceeding with our
referrals. So I think the AED case in Pakistan is a great
example of the agency stepping up and being able to make the
hard decisions, even when it impacts potential program
implementation.
On TIP, which is very important to Senator Portman, I just
wanted to let you know that, recently, we have met with the
agency personnel responsible for trafficking in persons. We are
attempting to, with our colleagues at State and DOD, to come up
with a training package for our auditors and investigators
because this is not in our sweet spot. We are contract
procurement fraud investigators and auditors, and so this is
different than what we normally do. So we want to create a
training package that we could implement at the Federal Law
Enforcement Training Center (FLETC) and at CIGIE, the IG
Academy at CIGIE, that would train our auditors and
investigators.
And I can also let you know that both for sustainability
and TIP, they are standard audit provisions and audit
objectives in each one of our audits, regardless of whether it
is in Iraq, Afghanistan, Pakistan, Haiti, wherever. Those are
two audit objectives we are always going to have in our audits.
So with that, I appreciate the opportunity again and look
forward to answering any questions that you might have.
Senator McCaskill. So it looks like that all three of you
agree that in contingency, the three of you should work
together with DOD as lead.
Mr. Carroll. Yes.
Senator McCaskill. And there is no reason to do the CIGIE
decision and all that, that both State and AID acknowledge that
if it is contingency, then in reality, the vast majority of the
resources that are going to be brought to bear are going to be
coming out of the Defense Department. Therefore, in any kind of
decision as to risk and work, it is all yours, Lynne.
Ms. Halbrooks. Yes, ma'am. [Laughter.]
We are ready to step up and assume that responsibility. I
think that the last few years have taught us all as an
oversight community a tremendous amount about how to work well
together, and I think we would be able to respond quickly and
effectively.
Senator McCaskill. And let me just say, I think I should
point out for the record that none of you are the official
full-time appointed and confirmed IGs. I guess you are, Mr.
Carroll.
Mr. Carroll. No, I am not. I am acting right now----
Senator McCaskill. No, you are not, either.
Mr. Carroll [continuing]. And my authority is running out--
--
Senator McCaskill. Yes. That is right. So we do not have
SIGAR. We do not have DOD. We do not have State. And we do not
have AID in terms of an appointed and confirmed Inspector
General. And let me say, in case anyone is--let me disabuse
anyone of the notion that I am not willing to criticize the
White House. I find it appalling that these people have not
been appointed. There is a long list of qualified people to
hold these jobs, and I am sure that some of you are on those
lists, if not all three of you. And I do not understand why
this is taking so long. I mean, if you look at the world of
Inspector Generals and the money that is being spent, how these
positions can go vacant for this period of time is beyond me,
and I am hoping that the White House gets busy and starts
announcing the appointment of some Inspectors General.
Let me ask about suspension and debarment. As you know--I
mean, what this legislation is trying to do is move a boulder,
that there has been cultural reluctance on suspension and
debarment. There has been cultural reluctance to not give
performance bonuses in government as it relates to contracting
and there has been a cultural predisposition to not suspend or
debar, with the exception of the Air Force. I do not know what
they are drinking at the Air Force, but I like it that they are
aggressive about suspension and debarment.
So we are trying to encourage aggressiveness. Now,
obviously, this is controversial, because several people have
said they do not like the automatic suspension or debarment
upon criminal indictment. Should we not, at a minimum, require
an assumption that there would be a debarment that would
trigger a requirement to document why not?
Mr. Carroll. Yes.
Mr. Geisel. Yes.
Senator McCaskill. Ms. Halbrooks.
Ms. Halbrooks. Yes. I think memorializing the
decisionmaking would be fine, yes.
Senator McCaskill. I do not know, and I am not saying that
we would change the legislation at this juncture as it related
to that, but there clearly have been bad actors where there has
not even been a ripple. It seems to me that a criminal
indictment of a contractor should be an event that requires
some folks in that agency to take a hard look, do some
scrubbing, and figure out what the problem is, and if the
problem is an isolated bad employee, that be documented
thoroughly with some kind of formalized process. Do you
envision you all being engaged in that process? Would it make
sense to have a justification for non-suspension or debarment
in light of criminal or civil fraud, that be forwarded to the
Inspectors General?
Ms. Halbrooks. I would want some time to consider that
option in a little more detail, but it would definitely sort of
change the culture of the suspension and debarment programs,
which typically are not about punishment. They are about making
business decisions and making sure the Department is working
with responsible contractors.
I can say that I think in the case of a criminal
conviction, at least from the point of view of our IG agents,
the Defense Criminal Investigative Service, we do play a role
in that we are the referring entity often for a potential
suspension and debarment and we do not just wait until there is
a criminal conviction. One of the remedies in our tool kit is
to make a referral to the suspension and debarment authority.
I do not think that we need to play a role in management of
that program. We should oversee it. We issued a report in July
2011 on the Service agencies and the Defense Logistics Agency
(DLA); and DLA was actually fairly aggressive in the sample
that we looked at in terms of taking the contracting officers'
recommendations and proceeding. So I think that we have a role.
I do not think it is oversight of the specific decisions that
the SDO authority makes, but I do think that as a referring
agency, we can help to ensure that the Departments are
promoting the suspension and debarment program and training the
contracting officials properly in the process and how to make
those referrals, absolutely.
Senator McCaskill. What about limiting the amount of time
for contractors to respond to past performance reviews? Do any
of you believe that makes sense? Do you have any problems with
that? That also has received some attention from folks, that
they think that allowing contractors to respond to past
performance reviews before they are submitted to the
government's database, lowering that from 30 days to 14 days is
unreasonable. Do you all have any view on that particular
provision?
Ms. Halbrooks. I do not have any view today, but we could
certainly look at that in more detail and provide you our
opinion.
INFORMATION FOR THE RECORD
We believe that 14 days should be a reasonable amount of
time for the contractor to review and comment on the
performance reviews that are done by the government contracting
officer representative and should not place an undue burden on
the contractor.
Mr. Geisel. I would like to look, as well, and give you
something in writing, but I would point out that you have used
a word repeatedly which I think is very useful, and--well, two
words which mean the same, actually, and that is waivers and
documentation. And that is really what we are looking for, yes.
A good law will always have provisions for what are we going to
do now, this is different, but it has to be documented. So many
people are much more inclined to do the right thing if they
have to sign their name to a piece of paper.
Senator McCaskill. Right. And besides that, it provides an
audit trail, right?
Mr. Geisel. Right. I like----
Senator McCaskill. I remember. I liked it when we found
documentation. This is a good day for an auditor.
Mr. Geisel. I like----
Senator McCaskill. When there is no documentation, it is a
problem.
Mr. Geisel. I like saying that to the former Auditor
General of Missouri.
Senator McCaskill. There you go.
What about you, Mr. Carroll, on past performance problems
and whether or not the contractor should be given time to
respond before it goes into a database?
Mr. Carroll. I think that they should. What the agency does
with that information is up to them. I would think 14 days, 30
days, there is really not a material difference there and I do
not think it would have a material impact on an agency, or on a
contractor or an agency, so I think giving them the benefit of
the doubt, giving them the extra 16 days, whatever it would be,
I do not see a downside to that.
Senator McCaskill. OK. For the State Department, the State
Department continues to say that it does not need the
structural or organizational changes envisioned by this
legislation. They have also said that they can meet any demands
that arise in a contingency by relying on the working capital
fund. Do you believe that they are correct, that they do not
need any organizational or structural changes, from your
position as the Inspector General for the Department?
Mr. Carroll. I definitely feel that they need tweaking. One
point that came out here that I would like to speak to them
more about is, for example, whether they need a separate
suspension and debarment official. What they have now, I agree
with what Under Secretary Kennedy said, that the current person
who is in charge of suspension and debarment does not have a
role in the acquisition except in the most general way. But I
think anything we can do to encourage the Department to focus
on suspension and debarment is good, and we have seen progress.
I think I would give the Department the benefit of the doubt,
but I would hold them accountable.
Senator McCaskill. OK. You all mentioned this in your
statements, and I assume that all of you think that it would be
a good idea to have a percentage-based funding requirement for
Inspector Generals in contingencies, just as we did for the
American Recovery and Reinvestment Act (ARRA), that we would
set aside sufficient resources to keep track of the money as we
appropriate the money.
Mr. Geisel. Madam Chairman, I would point out that when I
came to OIG on June 2, 2008, and since that time, thanks to
what I assume is the good work we have done, Congress has
doubled our resources. And as a result, we have been able to do
a much better job. And the best way to ensure that we do not
have what happened in Iraq, where there was a big delay until
we got the resources, to have an automatic mechanism, I think
serves everyone well. And it enables us to buildup, but it also
forces us to go down again when the----
Senator McCaskill. Right. That is what I like about it,
because it does not build the agency beyond the capacity that
is needed permanently. It does it as it relates to the
contingency, and it also allows you to really buildup a body of
expertise in this area, which has always been the argument for
SIGAR and SIGIR. I mean, I went around and around with some of
you about this in the past, that having that body of expertise,
having a special Inspector General for contingencies. But if
you did that, some of the people you hire in connection with
that are just by the nature of the agencies going to stay on
and would be there with some kind of history as it relates to
contingency contracting going forward. So I do think it makes
sense.
And we all know that for every dime we spend on auditors,
we get back a dollar----
Mr. Geisel. More.
Senator McCaskill. Or more. I just use dime and dollar
because it is safe and I am conservative because you have to be
able to back it up, right? So that is why I think it is very
important that we do not--as we cut the size of government and
spend less money in government, we have to make sure that we
maintain a robust oversight function in these agencies because,
frankly, it would be very hard for us to do our work without
you all. I do not think people realize that you are so many
times the communication that provides the oversight that
Congress performs.
Is there anything else that we have not addressed in the
legislation that you all want to speak to before we close the
hearing?
Mr. Carroll. If I could just go back to suspension and
debarment for a second, the IG by its very nature just loves
independence. I think that is what makes us so effective. And
so we do endorse--I know we are at odds with the agency on
this, but we think that the S and D official should, in fact,
be very independent of the political decisionmaking process in
the agency.
Senator McCaskill. Yes. I mean, with all due respect to
Secretary Kennedy, even if the person in charge of SDO at State
is not buying anything, they are helping write the policies
that are telling them how to buy it. So if those policies
failed and allowed some bad actors to be included in
contracting, I think it is harder sometimes to hold that mirror
up. So I am going to continue to push for that independence in
the Suspension and Debarment Office that I think that is
dictated by the legislation and that makes sense in terms of
functions of an SDO official.
Anybody else? Yes, Ms. Halbrooks.
Ms. Halbrooks. I just wanted to add that while I agree with
Acting Inspector General Geisel that funding is a critical
element to ensure that we get started in oversight quickly on a
contingency operation, I think that the parameters of the
legislation that require coordination and coordinated planning
and reporting by a lead IG will be effective, as well. As that
funding takes a while to gear up, the DOD IG, because of our
size, has the agility to immediately plug a trained group of
auditors into a contingency. So while the funding is critical,
the language in the legislation that I think in some ways
documents the coordination and collaboration and the lessons
learned in the past contingency operations oversight will go a
long way to ensuring that there is no gap in oversight when one
begins.
Senator McCaskill. Yes, Mr. Geisel.
Mr. Geisel. I, of course, agree with my colleague from DOD.
I would also point out that one other very important part of
the legislation should be our ability to use Title V and Title
XXII annuitants because they have just what you were talking
about, that very necessary experience. And if we can get them
quickly when we need them, it will be a great help to getting
the right people who can do the job.
Senator McCaskill. OK. And I think Mr. Carroll mentioned
that previously, that we needed to be able to get at that
workforce, which makes sense.
Well, I want to thank all three of you for your great work
and for being here today. I am continuing to work on this
legislation. If anything else you think we need to be working
on as we tweak it and adjust it and get it into final form that
hopefully we can get at least part of it enacted in the defense
authorization bill this year--that is our goal--so we continue
to improve it. I think we have some great input from you today.
I think it is very clear that we can make a change in terms of
how we provide for the lead Inspector General in contingencies
and I think that will work out very well.
So thank you very much for that, and onward. If you have
good reports coming, do not forget to let us know. Thank you.
Mr. Geisel. Thank you.
Senator McCaskill. The Subcommittee is adjourned.
[Whereupon, at 12:44 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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