[House Hearing, 113 Congress]
[From the U.S. Government Printing Office]
DHS ACQUISITION PRACTICES: IMPROVING OUTCOMES FOR TAXPAYERS USING
DEFENSE AND PRIVATE-SECTOR LESSONS LEARNED
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT
AND MANAGEMENT EFFICIENCY
of the
COMMITTEE ON HOMELAND SECURITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 19, 2013
__________
Serial No. 113-36
__________
Printed for the use of the Committee on Homeland Security
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Available via the World Wide Web: http://www.gpo.gov/fdsys/
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COMMITTEE ON HOMELAND SECURITY
Michael T. McCaul, Texas, Chairman
Lamar Smith, Texas Bennie G. Thompson, Mississippi
Peter T. King, New York Loretta Sanchez, California
Mike Rogers, Alabama Sheila Jackson Lee, Texas
Paul C. Broun, Georgia Yvette D. Clarke, New York
Candice S. Miller, Michigan, Vice Brian Higgins, New York
Chair Cedric L. Richmond, Louisiana
Patrick Meehan, Pennsylvania William R. Keating, Massachusetts
Jeff Duncan, South Carolina Ron Barber, Arizona
Tom Marino, Pennsylvania Dondald M. Payne, Jr., New Jersey
Jason Chaffetz, Utah Beto O'Rourke, Texas
Steven M. Palazzo, Mississippi Tulsi Gabbard, Hawaii
Lou Barletta, Pennsylvania Filemon Vela, Texas
Chris Stewart, Utah Steven A. Horsford, Nevada
Richard Hudson, North Carolina Eric Swalwell, California
Steve Daines, Montana
Susan W. Brooks, Indiana
Scott Perry, Pennsylvania
Mark Sanford, South Carolina
Greg Hill, Chief of Staff
Michael Geffroy, Deputy Chief of Staff/Chief Counsel
Michael S. Twinchek, Chief Clerk
I. Lanier Avant, Minority Staff Director
------
SUBCOMMITTEE ON OVERSIGHT AND MANAGEMENT EFFICIENCY
Jeff Duncan, South Carolina, Chairman
Paul C. Broun, Georgia Ron Barber, Arizona
Lou Barletta, Pennsylvania Donald M. Payne, Jr., New Jersey
Richard Hudson, North Carolina Beto O'Rourke, Texas
Steve Daines, Montana, Vice Chair Bennie G. Thompson, Mississippi
Michael T. McCaul, Texas (Ex (Ex Officio)
Officio)
Ryan Consaul, Subcommittee Staff Director
Deborah Jordan, Subcommittee Clerk
Tamla Scott, Minority Subcommittee Staff Director
C O N T E N T S
----------
Page
STATEMENTS
The Honorable Jeff Duncan, a Representative in Congress From the
State of South Carolina, and Chairman, Subcommittee on
Oversight and Management Efficiency:
Oral Statement................................................. 1
Prepared Statement............................................. 3
The Honorable Ron Barber, a Representative in Congress From the
State of Arizona, and Ranking Member, Subcommittee on Oversight
and Management Efficiency:
Oral Statement................................................. 5
Prepared Statement............................................. 7
The Honorable Michael T. McCaul, a Representative in Congress
From the State of Texas, and Chairman, Committee on Homeland
Security....................................................... 8
The Honorable Bennie G. Thompson, a Representative in Congress
From the State of Mississippi, and Ranking Member, Committee on
Homeland Security:
Prepared Statement............................................. 9
WITNESSES
Panel I
Mr. Rafael Borras, Under Secretary for Management, U.S.
Department of Homeland Security:
Oral Statement................................................. 11
Prepared Statement............................................. 13
Ms. Michele Mackin, Director, Acquisition and Sourcing
Management, U.S. Government Accountabiity Office:
Oral Statement................................................. 17
Prepared Statement............................................. 18
Ms. Anne L. Richards, Assistant Inspector General for Audits,
Office of Inspector General, U.S. Department of Homeland
Security:
Oral Statement................................................. 28
Prepared Statement............................................. 29
Panel II
Mr. William C. Greenwalt, Visiting Fellow, Marilyn Ware Center
for Security Studies, American Enterprise Institute:
Oral Statement................................................. 47
Prepared Statement............................................. 48
Mr. Stan Soloway, President and CEO, Professional Services
Council:
Oral Statement................................................. 53
Prepared Statement............................................. 56
Mr. David J. Berteau, Senior Vice President and Director of
International Security Program, Center for Strategic and
International Studies:
Oral Statement................................................. 60
Prepared Statement............................................. 63
APPENDIX
Questions From Chairman Jeff Duncan for Rafael Borras............ 83
Questions From Chairman Jeff Duncan for Michelle Mackin.......... 85
Questions From Chairman Jeff Duncan for Anne L. Richards......... 85
Questions From Chairman Jeff Duncan for William C. Greenwalt..... 87
Questions From Chairman Jeff Duncan for Stan Soloway............. 88
Questions From Chairman Jeff Duncan for David J. Berteau......... 89
DHS ACQUISITION PRACTICES: IMPROVING OUTCOMES FOR TAXPAYERS USING
DEFENSE AND PRIVATE-SECTOR LESSONS LEARNED
----------
Thursday, September 19, 2013
U.S. House of Representatives,
Subcommittee on Oversight and Management
Efficiency,
Committee on Homeland Security,
Washington, DC.
The subcommittee met, pursuant to call, at 2:03 p.m., in
Room 311, Cannon House Office Building, Hon. Jeff Duncan
[Chairman of the subcommittee] presiding.
Present: Representatives Duncan, McCaul, Barletta, Hudson,
Daines, Barber, and O'Rourke.
Mr. Duncan. The Committee on Homeland Security,
Subcommittee on Oversight and Management Efficiency will come
to order.
The purpose of this hearing is to examine the DHS's
acquisition practices to determine if the Department is
effectively implementing its policies and to assess whether DHS
could better leverage best practices and lessons learned from
DoD and the private sector.
Before we begin, I would like to express my sincere
sympathy and prayers for the victims and families of those
involved at the shooting here in Washington down at the Navy
Yard. Our hearts go out to those who lost loved ones and those
who were injured.
I now recognize myself for an opening statement.
The Department of Homeland Security's acquisitions programs
have major implications for the American taxpayer, as they
represent hundreds of billions of dollars in current and future
cost. As DHS looks to improve acquisition outcomes, it is
critical to examine lessons learned from the Department of
Defense and the private sector.
Although DoD is by no means perfect, the Government
Accountability Office has found that more DoD programs are
meeting cost and performance metrics, and 90 percent of major
defense acquisition programs have conducted analyses that have
resulted in cost savings.
The private sector also knows how to create successful
acquisition strategies through innovation and leadership. DHS
could use many of these principles. The Department plans to
spend about $170 billion on major acquisition programs to
develop new systems to protect the United States border and
critical infrastructure, improve disaster response, and secure
cyber infrastructure, among other important issues.
Since 2005, the GAO has placed DHS acquisition management
activities on its high-risk list for poor management that
results in programs coming in late, costing more, and doing
less than originally envisioned. Programs such as the Secure
Border Initiative Network, or SBInet, and the Coast Guard's
Deepwater program continue to haunt DHS leaders as examples of
colossal acquisition failures.
DHS has taken several positive steps since these failures
to improve. Instituting the Office of Program Accountability
and Risk Management, or PARM, issuing an acquisition policy
with several key program management practices, and developing a
way to synthesize cost, schedule and performance data for
senior decision-makers are all positive steps forward by DHS.
These initiatives have taken a great deal of effort by DHS, and
I commend them for their hard work.
Nevertheless, while it is important to have the right
policies and processes in place, those alone are not enough to
ensure good program management. Policies and processes mean
nothing if they are not followed.
Unfortunately, GAO has found that DHS routinely violated
its own policies. Specifically, DHS often allowed acquisition
programs to move forward without DHS approval of essential
planning documents. More than half of DHS acquisition programs
which GAO reviewed awarded contracts without DHS or component
approval for key planning documents.
How can DHS plan effectively if it does not know how much
programs cost, when they will be completed, or what they will
do? Out of 77 major acquisition programs--those costing
taxpayers more than $300 million--GAO found that only 12 had
met most of DHS's criteria for reliable cost estimates in 2011.
Thirty-two programs had none of their required documentation to
measure cost, schedule, and performance. The result in 2012 was
that 42 programs that experienced cost growth, schedule delays,
or both. From 2008, the cost of 16 of these 42 programs grew
almost $20 billion to over $50 billion in 2011.
Think about that. From 2008, the cost of 16 of the 42
programs grew from $20 billion to over $50 billion. That is
fairly significant. That is an aggregate increase of 166
percent. What business in America could manage its finances
that way and survive?
During August, I toured factories for BMW, Electrolux, and
Michelin, in my district, among others, and met with numerous
small-business owners back home in South Carolina. You don't
produce the ``ultimate driving machine'' or survive as a small
business by mismanagement. You don't become successful in the
private sector by gambling away investor dollars. DHS needs to
learn from private-sector best practices rather than ignore
them.
DHS often states these challenges are behind them, but
these are not just old problems. Within this year alone,
Congressional watchdogs have documented significant
acquisitions problems. In March, GAO found 21 IT programs
experiencing cost or schedule shortfalls. These programs are
estimated to cost over $1 billion.
In May, the Office of Inspector General released a report
on DHS's H-60 helicopter fleet. The report described how CBP
and Coast Guard failed to coordinate and found that DHS-level
oversight of aviation assets was sporadic, and in some cases
ineffective. Although the Coast Guard successfully converted 27
helicopters at a cost of about $190 million, CBP converted only
2 in 4 years at a cost of $44.5 million.
Also in May, GAO found that TSA did not fully follow DHS
acquisition policies when acquiring its body scanners. In
August, the IG released another scathing report with
acquisition failures, this time on DHS radio communications.
The report found DHS has mismanaged a $3 billion effort to
improve the Department's radio systems. This was first brought
to my attention as I visited the CBP down in Mr. Barber's
district in Arizona.
The report described how DHS lacked information on radio
systems in its inventory. Over 8,000 radio items collected dust
in warehouses over a year despite radio shortages in some
locations.
Thank you.
Beyond an apathetic management approach to its radios,
these examples show a total disrespect to taxpayers. At a time
when we are over $17 trillion in debt, it is unacceptable for
DHS to continue to allow such mismanagement. Yet, DHS
management recently absolved numerous programs from past
acquisition malpractice.
In May 2013, Under Secretary Borras directed the component
acquisition executives to waive the acquisition documentation
requirements for the 42 major acquisition programs that were in
the sustainment phase prior to 2008, when DHS's acquisition
policy was issued. The 42 programs listed in this memorandum
have been allowed to proceed, despite the fact that most
program costs can occur during this phase, thereby increasing
risks to taxpayer dollars.
The memorandum includes several programs that have been
highlighted by Congressional watchdogs for past failures, such
as TSA's Transportation Worker Identification Credential, or
TWIC, and Secure Flight programs, as well as efforts where much
more work remains until completion, including TSA and U.S.
Secret Service's IT modernization efforts.
By condoning past mismanagement, I believe this decision
allows taxpayer dollars to be put at high risk in the future. I
am deeply concerned at this message this sends to program
managers throughout DHS. The American people deserve better.
This hearing will examine these issues in-depth today.
[The statement of Chairman Duncan follows:]
Statement of Chairman Jeff Duncan
September 19, 2013
The purpose of this hearing is to examine DHS's acquisition
practices to determine if the Department is effectively implementing
its policies and to assess whether DHS could better leverage best
practices and lessons learned from DoD and the private sector. Before
we begin, I'd like to express my sincere sympathy and prayers for the
victims and families of those involved at the shooting at the
Washington Navy Yard. Our hearts go out to those who lost loved ones
and those injured. I now recognize myself for an opening statement.
The Department of Homeland Security's acquisitions programs have
major implications for the American taxpayer as they represent hundreds
of billions of dollars in current and future costs. As DHS looks to
improve acquisition outcomes, it's critical to examine lessons learned
from the Department of Defense (DoD) and the private sector. Although
DoD is by no means perfect, the Government Accountability Office (GAO)
has found more DoD programs are meeting cost and performance metrics
and 90% of major defense acquisition programs have conducted analyses
that have resulted in cost savings. The private sector also knows how
to create successful acquisition strategies through innovation and
leadership.
DHS could use many of these principles. The Department plans to
spend about $170 billion on major acquisition programs to develop new
systems to protect the U.S. border and critical infrastructure, improve
disaster response, and secure cyber infrastructure, among other
important missions. Since 2005, however, GAO has placed DHS Acquisition
Management activities on its ``High-Risk List'' for poor management
that results in programs coming in late, costing more, and doing less
than envisioned.
Programs such as the Secure Border Initiative Network and the Coast
Guard's Deepwater program continue to haunt DHS leaders as examples of
colossal acquisition failures. DHS has taken several positive steps
since these failures to improve. Instituting the Office of Program
Accountability and Risk Management (PARM), issuing an acquisition
policy with several key program management practices, and developing a
way to synthesize cost, schedule, and performance data for senior
decision makers are all positive steps forward by DHS. These
initiatives have taken a great deal of effort by DHS; I commend them
for their hard work.
Nevertheless, while it is important to have the right policies and
processes in place, those alone are not enough to ensure good program
management. Policies and processes mean nothing if they are not
followed. Unfortunately, GAO has found that DHS routinely violated its
own policies. Specifically, DHS often allowed acquisition programs to
move forward without DHS approval of essential planning documents. More
than half of the DHS acquisition programs GAO reviewed awarded
contracts without DHS or component approval for key planning documents.
How can DHS plan effectively if it does not know how much programs
cost, when they will be completed, or what they will do?
Out of 77 major acquisition programs (those costing taxpayers more
than $300 million), GAO found that only 12 had met most of DHS's
criteria for reliable cost estimates in 2011. Thirty-two programs had
none of the required documentation to measure cost, schedule, and
performance. The result in 2012 was 42 programs that experienced cost
growth, schedule delays, or both. From 2008, the cost of 16 of these 42
programs grew from almost $20 billion to over $50 billion in 2011. This
was an aggregate increase of 166%. What business in America could
manage its finances that way and survive?
During August, I toured factories for BMW, Electrolux, and
Michelin, among others, and met with numerous small business owners
back home in South Carolina. You don't produce ``the ultimate driving
machine'' or survive as a small business by mismanagement. You don't
become successful in the private sector by gambling away investor
dollars. DHS needs to learn from private-sector best practices rather
than ignore them. DHS often states these challenges are behind them,
but these are not just old problems. Within this year alone,
Congressional watchdogs have documented significant acquisitions
problems. In March, GAO found 21 IT programs experiencing cost or
schedule shortfalls. These programs are estimated to cost over $1
billion.
In May, the Office of Inspector General released a report on DHS's
H-60 helicopter fleet. The report described how CBP and Coast Guard
failed to coordinate and found DHS-level oversight of aviation assets
was ``sporadic,'' and in some cases was ``ineffective.'' Although the
Coast Guard successfully converted 27 helicopters at a cost of about
$190 million, CBP converted only 2 in 4 years at a cost of $44.5
million.
Also in May, GAO found that TSA did not fully follow DHS
acquisition policies when acquiring its ``body scanners''. In August,
the Inspector General released another scathing report with acquisition
failures, this time on DHS radio communications. The report found DHS
has mismanaged a $3 billion dollar effort to improve the Department's
radio systems. The report described how DHS lacked information on radio
systems in its inventory. Over 8,000 radio items collected dust in
warehouses for over a year despite radio shortages in some locations.
Beyond an apathetic management approach to its radios, these examples
show a total disrespect to taxpayers.
At a time when we are over $17 trillion in debt, it is unacceptable
for DHS to continue to allow such mismanagement. And yet, DHS
management recently absolved numerous programs from past acquisition
malpractice. In May 2013, Under Secretary Borras directed the Component
Acquisition Executives to waive the acquisition documentation
requirements for the 42 major acquisition programs that were in the
sustainment phase prior to 2008 when DHS's acquisition policy was
issued. The 42 programs listed in this memorandum have been allowed to
proceed despite the fact that most program costs can occur during this
phase thereby increasing risks to taxpayer dollars.
The memorandum includes several programs that have been highlighted
by Congressional watchdogs for past failures, such as TSA's
Transportation Worker Identification Credential (TWIC) and Secure
Flight programs, as well as, efforts where much more work remains until
completion including TSA and U.S. Secret Service's IT modernization
efforts. By condoning past mismanagement, I believe this decision
allows taxpayer dollars to be put at high risk in the future. I am
deeply concerned at the message this sends to program managers
throughout DHS. The American people deserve better. This hearing will
examine these issues in-depth.
Mr. Duncan. So the Chairman will now recognize the Ranking
Minority Member of the subcommittee, the gentleman from
Arizona, my friend, Mr. Barber, for any statement he may have.
Mr. Barber. Thank you, Mr. Chairman. Thank you for holding
this hearing.
Before we begin, though, I, too, would like to join with
you in extending our condolences to the families who lost loved
ones on Monday. To those survivors, you know, as a person who
has been through a mass shooting myself and see the impact it
can have on everyone, whether you are injured or not, I know
what those families are dealing with right now, and I just
think all of us should be extending our good wishes, our
prayers and thoughts to them as they deal with this terrible,
shocking tragedy. So let's remember them always as we think
about how this situation is going to unfold.
Now, let me go to the point of today's hearing. I think it
is important that we have this discussion about how it is that
the Department of Homeland Security manages its acquisitions so
that we can find solutions to improve the Department's ability
to carry out its mission and, I think very importantly, that it
do so in a cost-effective and highly accountable manner.
When the Department was stood up almost--a little over 10
years ago, it was understood that combining 22 different
agencies into one department could be very challenging and that
we might, in fact, see 22 silos emerge within a department. I
think we have certainly seen evidence that that has been an on-
going challenge for the Department.
In 11 years and later almost, we are still trying to create
one cohesive Department of Homeland Security. Over the past 3
years, I do believe the Department has worked to improve its
acquisition practices and policies and create a more
streamlined framework aimed at saving costs and requiring each
component to operate by the same set of rules. While the
framework may be in place, it is clear that there remain many
challenges and that we must make sure that these--the
framework, this framework is fully implemented.
Without an acquisition strategy that is adhered to by all
DHS components, the Department simply is not able to achieve
the economies of scale that help reduce costs and ultimately
make effective use of our resources and save the taxpayer
money.
Now, this is a bit of dated example, but I will--I remember
early on, when I was working for Congresswoman Giffords, we
learned that one of the most effective tools that the Border
Patrol had was the mobile surveillance systems. Yet when we
looked into it further, we found that 50 percent of them in
Arizona were out of commission. Why? Because they weren't tough
enough to withstand the environmental conditions in the harsh
desert climate.
It seems to me that at that time--and even still today--we
could learn a lot about the technology that we intend to use in
those kinds of environments by looking at what is going on, for
example, in Afghanistan, where similar conditions in terms of
the climate exist, and be able to replicate the right kind of
technology for a desert environment. We didn't do it then, but
we must continue to try to do better.
In a recent Office of Inspector General report, it was
revealed that two components had purchased the same radio
equipment that was sitting idly in a storage facility, while a
third component needed the same equipment. The end result was
one of the components could not get the resources they needed,
even though they were obviously available. This is just
unacceptable. When the Department and the Federal Government
has limited resources, and the taxpayer is watching every penny
we spend--as they should--we cannot afford to waste these
resources.
But while the Department has made some strides in saving
taxpayer funds through economies of scale, as indicated in this
OIG report, there is still a long way to go. The most effective
way to achieve uniformity is to ensure that the Department
headquarters has the authority to enforce Department-wide
policies that are aimed at improving governance and efficiency.
Moreover, it is clear that in order for the Department to
mature into a gold standard among Federal agencies, its
acquisition problems must be addressed top-down from
headquarters and to each component. Additionally, in addressing
these concerns, I believe it is important for the Department to
search for best practices, both inside the Government, but also
in the private sector.
When working with the private sector, the Department should
be transparent and user-friendly by making its procurement
processes clear and easy to follow. This is a key to good
governance. I can tell you countless times when I have been
approached by contractors and providers or potential providers
who have said over and over again how difficult it is to access
the Department's procurement process.
For this to work, there must be a buying-in at the
component level. There must be Department-wide understanding
that each component is a part of the overall mission to use
resources efficiently in order to be effectively secure--to
effectively secure the homeland. I think it is important that
as we look at using the Department of Defense as a model for
DHS, as suggested by the title of today's hearing, we must also
recognize that both the mission and structure of the agencies
are somewhat different.
In many cases, the Department of Homeland Security has
implemented procurement practices that have been successful in
DoD. But given the differences between these two departments,
it is also important that DHS examine its current framework and
system and develop a process that takes best practices from
both Government and private entities into account. DHS must
have a system that works for its specific needs and mission and
one that improves upon its flaws and implements OIG and GAO
recommendations.
As a representative of a district that shares over 80 miles
of border with Mexico, I am very familiar with the amount of
money that has been spent by the Department on technologies and
assets that have been procured in an effort to secure the
border. I am also aware of some of the waste that has gone on
through those purchases.
We must ensure that these assets are used to best fulfill
their mission. We must do this as responsible stewards of the
American taxpayer. The Department cannot continue to stick the
American people with the bill for failed technologies and
poorly-distributed resources.
The Department should develop, I believe, a central
acquisition process that fits the needs and mission of the
Department and its components, one that incorporates the best
practices both from industry and Government, and the
Department's acquisition and procurement system should be
tailored to meet the Department's unique mission, should enable
the Department to take advantage of economies of scale, to
ensure that the Department pays a reasonable price and should
allow us to be responsible, all of us, stewards of taxpayer
dollars.
I look forward to hearing from our witnesses and thank them
for being here today. I look forward to hearing your statements
and then to have questions.
Thank you, Mr. Chairman. I yield back the balance of my
time.
[The statement of Ranking Member Barber follows:]
Statement of Ranking Member Ron Barber
September 19, 2013
Thank you for holding this very important hearing to discuss the
manner in which the Department of Homeland Security manages its
acquisitions and to find solutions that can improve the Department's
ability to carry out its mission.
When the Department was stood up more than a decade ago, it was
understood that combining 22 different agencies into one department
could create stovepipes and silos.
Some 11 years later, we are still trying to create one cohesive
Department of Homeland Security.
Over the last 3 years, the Department has worked to improve its
acquisition policies and create a more streamlined framework aimed at
saving costs and requiring each component to operate by the same rules.
While the framework may be in place, there remain challenges that
exist in making sure it is implemented.
Without an acquisition strategy that is adhered to by all DHS
components, the Department is not able to achieve economies of scale
that help reduce costs and, ultimately, make effective use of our
resources and save the taxpayers' money.
In a recent Office of Inspector General (OIG) report, it was
revealed that two components had purchased the same radio equipment
that was sitting idly in a storage facility while a third component
needed that same equipment. The end result, one of your components
couldn't get the resources it needed even though they were available.
This is unacceptable. When the Department has limited resources we
cannot afford to waste them.
While the Department has made some strides in saving taxpayer funds
through economies of scale, as indicated by this OIG report, they still
have a ways to go.
The most effective way to achieve uniformity is to ensure that
Department headquarters has the authority to enforce Department-wide
polices that are aimed at improving governance and efficiency.
Moreover, it is clear that in order for the Department to mature
into a gold standard among Federal agencies, its acquisition challenges
should be addressed top-down from headquarters to each component.
Additionally, in addressing these challenges, I believe it is
important that the Department search for best practices, both inside
the Government but also in the private sector.
And when working with the private sector, the Department should be
transparent and ``user-friendly,'' by making its procurement processes
clear and easy to follow. This is key to good governance.
For this to work, there must be ``buy-in'' at the component level.
There must be Department-wide understanding that each component is part
of the overall mission to use resources efficiently in order to
effectively secure the homeland.
I think it's important that as we look at using the Department of
Defense (DoD) as a model for DHS--as suggested by the title of today's
hearing--we must recognize that both the mission and structure of the
agencies are different.
In many instances the Department has implemented procurement
practices that have been successful at DoD.
But given the differences between these two departments, it is also
important that DHS examine its current framework and system and develop
a process that takes best practices that make sense for DHS from both
Government and private entities into account. DHS must have a system
that works for its specific needs and mission, one that improves upon
its flaws and implements OIG and GAO recommendations.
As a Representative of a District that shares over 80 miles of
border with Mexico, I am familiar with the amount of money that has
been spent by the Department on technologies and assets that have been
procured in an effort to secure border.
We must ensure that these assets are used to best to fulfill their
mission. We must do this to be responsible stewards of the American
taxpayer. The Department cannot continue to stick the American people
with the bill for failed technologies and poorly-distributed resources.
I would argue that the Department should develop a central
acquisition process that fits the needs and mission of the Department
and its components, one that incorporates best practices from both
industry and Government.
The Department's acquisition and procurement system should be
tailored to meet the Department's unique mission, should enable the
Department to take advantage of economies of scale to ensure the
Department pays a reasonable price, and should allow us to be
responsible stewards of taxpayer dollars.
I look forward to hearing from our witnesses on these and other
issues as we discuss the Department's challenges in fully implementing
its acquisition management initiatives.
Mr. Duncan. I thank the gentleman from Arizona.
The Chairman will now welcome and recognize the Chairman of
the full committee, gentleman from Texas, Chairman McCaul, for
any statement he may have.
Mr. McCaul. I thank the Chairman for having this hearing,
Ranking Member Barber. Let me say, also, I join with the
Chairman--our thoughts and prayers are with the victims of the
Navy Yard tragedy. I have talked to Chairman Duncan about
holding hearings on the issue of clearances within the Federal
Government, and the idea that somebody of that caliber could
hold a clearance and infiltrate our military installations is
certainly a homeland security issue, as well.
One of the top priorities I had coming in as the new
Chairman was management reform. I believe we can do better. I
believe we can save money. This hearing also fits nicely with
the work of the Subcommittee on Transportation Security that
Chairman Hudson has done. Before the August recess, they marked
up the Transportation Security Acquisition Reform Act that will
reform the TSA to develop a long-term acquisition plan to
better deploy proven technology and encourage innovation. I
expect the full committee to mark up that bill and that
legislation soon.
DHS acquisition programs play a critical role in protecting
the homeland. They include surveillance systems, watching
terrorists, drug traffickers along our borders, machines
screening airport passengers for potential threats. These
programs represent a significant investment for the American
taxpayer.
To its credit, DHS has issued a number of directives
intended to ensure acquisition programs demonstrate critical
knowledge and documentation at key points in the life cycle of
a program. However, time and again, we hear that billions of
taxpayer dollars have been put at high risk, and multiple key
programs do not fully meet the Department's needs. This must
stop.
The GAO has found that DHS has often not followed its own
policies. The policy, even a good one, that incorporates best
practices isn't effective if people are not held accountable
and that doesn't lead to positive outcomes. Overcoming this
challenge takes strong leadership, something that, in short, is
in short supply, unfortunately, at times at DHS.
Eighteen out of the top 44 positions at DHS are vacant or
are under some sort of temporary leadership. Not included in
that count, but relevant for purposes of today's hearing is the
status of the executive director of the Office of Programs
Accountability and Risk Management. For as often as we are
likely to hear about that office today, what message does it
send to the rest of DHS and Congress when it has been under
acting leadership for nearly a year-and-a-half?
People are the Department's greatest resource. An
insightful report released last week by the Professional
Services Council on Government-wide acquisitions stresses the
importance of a quality acquisition workforce. So I am looking
forward to hearing more from the Professional Services Council
and the testimony here today, and I appreciate you being here.
I believe it is important for DHS to get beyond viewing
acquisition as a series of procurement transactions to be
managed, but rather as investments in capabilities that align
with the strategic plan that builds capabilities to mitigate
risk to the homeland.
I understand that DHS is beginning to bring this approach
to cybersecurity, biodefense, and screening, but more should be
done across the board. DHS will always need to procure goods
and services to achieve their mission, and we need a strong and
effective department doing what it was created and intended to
do.
With that, I yield back.
Mr. Duncan. I thank the Chairman for being here. I
understand he had to interrupt a lunch with his beautiful wife
in order to make it in time, so we are glad he is interested in
the topic enough to come. If other Members of the----
Mr. McCaul. That is how important this hearing is to me.
Mr. Duncan. That is right. We understand that. So, thank
you, sir.
Other Members of the subcommittee are reminded that opening
statements may be submitted for the record.
[The statement of Ranking Member Thompson follows:]
Statement of Ranking Member Bennie G. Thompson
September 19, 2013
Each year, the Department of Homeland Security spends approximately
one-fourth of its entire budget on procuring goods and services.
Last fiscal year, the Department spent over $12 billion on almost
100,000 transactions.
Although they are on track to spend slightly less this fiscal year,
the manner in which the Department utilized taxpayer funds to procure
goods and services are of utmost concern.
Since its inception, acquisition management has been a challenge
for the Department.
It has come a long way but until its systems become more
integrated, stronger line authority exists between headquarters and the
components, and planning on the front end is improved, the Department
will continue to face challenges and impede its ability to be removed
from the Government Accountability Office (GAO) High-Risk List.
There are approximately 135 programs that are defined by the
Department as ``major acquisitions.''
Of these 135 programs, 75% have an estimated life-cycle cost of
more than $300 million each.
Moreover, 37 of its major acquisitions are estimated to incur over
$1 billion each over the course of its life cycle.
Given these high costs, particular attention must be paid to the
success of these programs and, where problems exist--and it appears as
if the Department is continuing to throw good money after bad--programs
should be immediately stopped to determine the best path forward.
As we are all aware, the homeland security budget is scarce, and
with the on-going sequester, the Federal Government has been required
to do more with less.
As a result, we must ensure that each dollar is spent wisely, can
be accounted for, and advances the homeland security mission.
While I understand that acquisition challenges exist, I do believe
that for the first time a framework for improvement is in place.
Yet, this framework will only yield success if silos are eliminated
and the enforcement mechanisms are in place.
In 2011, the Department created a new office, the Office of Program
Accountability and Risk Management (PARM) to ensure that the Department
does just that.
The rules and policies created by this new office, however, are
only as good as the paper they are written on if they are not fully
implemented throughout the Department and if there are no repercussions
in place for those offices and components that fail to fall in line.
According to the Department's Office of Inspector General (OIG),
PARM has not effectively overseen and managed each acquisition under
its purview and in some instances when it did, PARM was simply ignored.
Moreover, for the past 18 months PARM has operated without a
permanent Executive Director.
As a result, based on its date of creation, it has functioned
without permanent leadership guiding its path for longer than it did
with an Executive Director in place.
I would urge the Under Secretary to move quickly in filling this
vacancy.
As suggested by the hearing title, the Majority has advanced the
notion that if the Department would follow Department of Defense (DoD)
and private-sector practices, it could improve the effectiveness of its
acquisitions practices.
I disagree that DoD and the private sector are the appropriate
models.
While there may be some Government-wide procurement practices that
DoD has successfully deployed that the Department could benefit from,
given the differences in both mission and structure, I do not believe
that DoD is the gold standard.
Likewise, outsourcing and privatizing Government functions could
lead to further dysfunction, and even higher costs.
Both GAO and the OIG have provided the Department with sound
recommendations for moving forward and building upon its recent
efforts. I look forward to hearing from them on what the Department has
achieved and where it should focus its attention.
Mr. Duncan. We are pleased today to have two distinguished
panels of witnesses on this important topic. Let me remind the
witnesses that their entire written statement will appear in
the record, and I will introduce each of you first and then
recognize you for your testimony.
So for the first panel, we have the honorable Rafael
Borras. He is the under secretary for management at the U.S.
Department of Homeland Security. He joined the Department in
April of 2010. Mr. Borras exercises leadership authority over
all aspects of the Department's management programs and serves
as the chief management officer and chief acquisition officer.
As the chief management officer, Mr. Borras oversees
management of DHS's nearly $60 billion budget. As chief
acquisition officer, he administers control over approximately
$19 billion in procurement. Mr. Borras has more than 30 years'
management experience, including over 20 years on Federal and
city government and 10 years in the private sector.
Ms. Michele Mackin is the director of the U.S. Government
Accountability Office, GAO, and acquisition and sourcing
management team. Ms. Mackin joined the GAO in 1988 as an
evaluator in the National security and international affairs
division, focusing largely on military airlift issues. She has
led complex reviews of Federal contracting issues, including
high-risk contract types, the Coast Guard's Deepwater
recapitalization project, and Navy shipbuilding programs.
Ms. Anne Richards is the assistant inspector general for
the Office of Audits in the Office of Inspector General at the
U.S. Department of Homeland Security. Ms. Richards focuses on
promoting effectiveness, efficiency, and economy in DHS's
programs and operations. She joined the Office of Inspector
General in 2007 after serving as assistant inspector general
for audits at the U.S. Department of Interior from 2005 through
2007, regional audit manager for the central region office in
Denver, Colorado. She also served in a number of positions with
the United States Army Audit Agency.
So I want to thank each of you for being here. I will now
recognize Mr. Borras to testify, and thank you, and the time is
yours, sir.
STATEMENT OF RAFAEL BORRAS, UNDER SECRETARY FOR MANAGEMENT,
U.S. DEPARTMENT OF HOMELAND SECURITY
Mr. Borras. Thank you, Chairman Duncan, Ranking Member
Barber, and other distinguished Members of the committee.
I thank you for the opportunity to appear here today before
you to discuss how the Department identifies, evaluates, and
adopts best practices in acquisition. I am pleased to be joined
by my colleagues from the Government Accountability Office and
the Office of Inspector General. We continue to meet regularly
with both the GAO and the IG to better understand how we are
methodically making positive changes to improve acquisition
management at DHS. I am gratified by their recent comments and
actions that we have made progress and that we expect to
sustain progress, given the changes, to make a solid management
infrastructure, which includes policies, delegations, business
intelligence, and governance.
Last year, in fiscal year 2012, the Department procured
over $12.4 billion in goods and services directly linked to the
DHS mission to prevent terrorism and enhance security, secure
and manage our borders, enforce and administer our new
immigration laws, and many others, to provide essential support
to the National and economic security of this country.
I will be talking about some of the best practices that we
have adopted from private sector and from other Government
agencies as I proceed. Regarding competition, it is very
important. I am pleased to report that last year over 72
percent of our eligible contracts were awarded competitively,
which far exceeded the Government-wide average of 63 percent.
We continue to award many of our contracts to small and
minority businesses. The Small Business Administration recently
announced that DHS earned its fourth consecutive A rating,
which makes DHS the only agency among the top 7 Federal
spenders to achieve that feat.
Another best practice we have institutionalized is
strategic sourcing, which improves efficiency by standardizing
purchases for common goods and services. We are recognized as a
leader in Federal strategic sourcing by the GAO, OMB, and
Congress. We have achieved over $1.7 billion of savings from
strategically sourcing products and services all across DHS.
Now, over the past 4 years, DHS has adopted many best
management practices. From the private sector, we have
institutionalized principles like risk-based oversight,
evaluation of major investments through portfolio management,
and access to reliable data from mature business intelligence
to track the performance and the progress of our investments
through the life cycle.
We have a unified acquisition structure for all of our
major programs, which includes PARM, as well as the CIO and the
Office of Science and Technology's Office of Test and
Evaluation. Together, we provide independent assessments and
monitoring of programs between formal reviews of major
acquisition programs to identify issues that emerge and be able
to address them at our acquisition review boards.
To date, this enhanced oversight has resulted in 136
acquisition review boards, 250 acquisition decision
memorandums--these are specific decisions that are a result of
those acquisition review board meetings, which result in
specific actions that the programs and the components must take
in order to proceed. We have canceled three major programs and
have paused eight. We have also required a change in leadership
in many programs, as well.
Since 2011, we have tracked approximately 88 major programs
at any given time, and I am pleased to report that nearly 42
percent of those once-troubled programs are now operating
within an acceptable cost and schedule variance. With regard to
the 21 IT programs referenced by GAO in their 2012 audit, we
have worked very closely to address that. Nearly 30 percent of
these programs are now operating within the acceptable cost and
variance schedule. Each of the remaining programs has a
specific comprehensive action plan to reach the acceptable
targets and goals. We will continue to monitor that through the
ARB process.
Regarding best practices from DoD, we have a long history
of partnering with DoD to leverage best practices and
methodologies. I have outlined in my written testimony about 15
or so specific examples. I won't go into them now. But there
are cases where technology from DoD and other materials have
proved quite useful to DHS, but not all assets are deemed
suitable, given the costs and the time it takes to customize it
for non-combat use.
I look forward to answering your questions. I think the
Department has made continued progress in the acquisition
management discipline. We do have more work to do, but we feel
that the infrastructure enhancements that we have made to date
have resulted in considerable progress and have laid a
foundation which will allow us to continue to improve and
provide a better return on behalf of the taxpayers.
So once again, I thank you for the opportunity to be here
for you today. I, too, have a cold. I actually have bronchitis,
Mr. Chairman. I look forward to answering your questions.
[The prepared statement of Mr. Borras follows:]
Prepared Statement of Rafael Borras
September 19, 2013
Chairman Duncan, Ranking Member Barber, and other distinguished
Members of the committee, I thank you for the opportunity to appear
before you today to discuss how the Department identifies, evaluates,
and adopts acquisition best practices.
I wish to express appreciation to my colleagues from the Government
Accountability Office (GAO) for their work to support the
transformation of the Department of Homeland Security (DHS). Over the
past 4 years, we have forged good working relationships and reached
common ground on many issues. We continue to meet regularly to provide
GAO officials with a better understanding of how we are methodically
making positive change to improve acquisition management at DHS. I am
gratified by their recent comments and actions that recognized the
substantial progress made and we expect to sustain that progress given
the changes made to solidify our management infrastructure, which
includes policies, delegations, business intelligence, and governance.
To best illustrate the significant progress made in the past 4
years, the GAO in its 2009 High-Risk report cited the Department as
High-Risk because it had not developed a ``comprehensive plan to
address the transformation, integration, management, and mission
challenges GAO identified in 2003.'' Since 2009, not only have we
forged a comprehensive integration strategy, we have also demonstrated
substantial progress, which led GAO to acknowledge in their 2013 High-
Risk report that, ``Significant progress has been made to transform and
integrate the Department into a more cohesive unit.'' As such, GAO
decided to narrow the scope of the Department's High-Risk designation.
In fact, they stated in December 2012 that, ``the Department has made
substantial progress in many areas and if their Integrated Strategy is
fully implemented, they are on a path to be removed from the High-Risk
List.'' Any progress we have made is the direct result of an across-
the-board commitment by Operational Components and Headquarters offices
to follow a clear and logical strategy. This progress has been
reinforced by the willingness of our components and Line-of-Business
Chiefs to leverage best practices in both the procurement and program
management disciplines.
overview of dhs procurement portfolio
In fiscal year 2012, the Department procured over $12.4 billion in
goods and services directly linked to the DHS mission--to prevent
terrorism and enhance security, secure and manage our borders, enforce
and administer our immigration laws, safeguard and secure cyberspace,
and ensure resilience to disasters--all of which provide essential
support to National and economic security. Among the best acquisition
practices we have adopted from world-class organizations include:
Increasing the competition rate, enhancing the Nation's industrial base
by investing in small businesses, and finally, standardizing our
commodities and services through strategic sourcing.
Competition
I am pleased to report that in fiscal year 2012 over 72 percent of
our eligible contracts were awarded competitively, which far exceeded
the Government-wide average of 63 percent. We were able to do this by
strengthening the Competition Advocacy structure across the Department,
establishing annual component goals for increased use of competitive
processes, carefully monitoring progress against those goals, and
expanding communications with industry to ensure thorough market
research is accomplished.
Awards to Small Businesses
We also continue to award many of our contracts to small and
minority-owned businesses. The Small Business Administration (SBA)
recently announced that DHS earned its fourth consecutive ``A'' rating,
which makes DHS the only agency among the top 7 Federal spenders to
achieve that feat. In fiscal year 2012 alone, DHS awarded $3.94 billion
in small business contracts. This included $880 million in contracts to
veteran-owned small businesses, including $684 million to service
disabled veteran-owned businesses. DHS also has a strong record of
supporting small disadvantaged businesses. In fiscal year 2012 alone,
the Department awarded $1.7 billion in contracts to African American,
Hispanic, Native American, Asian Pacific, and Subcontinent Asian-owned
small businesses, including $762 million in awards under the 8(a)
Business Development Program.
Strategic Sourcing
Another best practice we have institutionalized is strategic
sourcing, which improves efficiency by standardizing purchases for
common goods and services. I recognize that in this budget constrained
environment, it is increasingly important that agencies focus on fiscal
responsibility and ensure the Federal Government utilizes taxpayer
dollars in the most efficient manner possible. Strategic sourcing
enables this goal and saves the Federal Government money by leveraging
purchasing volume and focusing on reducing the total cost of ownership.
The administrator of the Office of Management and Budget's (OMB)
Office of Federal Procurement Policy recently stated that strategic
sourcing is the administration's top priority for procurement. DHS is
recognized as a leader in the Federal strategic sourcing space by GAO,
OMB, and Congress. DHS has achieved savings of over $1.7 billion from
strategically sourcing products and services across all DHS components.
DHS has implemented 56 strategic sourcing initiatives, covering over
450 separate contracts. Fourteen of these initiatives were awarded in
fiscal year 2012. This year, DHS has awarded another 12 new
initiatives. Our strategic sourcing program also benefits small
business. In fiscal year 2012, over 3,000 strategic sourcing contracts
were awarded to small businesses, totaling $381 million. This dollar
value represents 34 percent of the total strategic sourcing dollars
awarded by DHS, which exceeds the goal established by the SBA.
DHS shares the strategic sourcing concept of operations, reporting
and analysis methodologies, and templates, tools, techniques, and other
best practices learned from our many years of experience and strategic
sourcing successes. This serves not only as a savings multiplier, but
it also grows the strategic sourcing capability and knowledge base
across the entire Federal Government.
acquisition program management
Over the past 4 years, DHS has adopted many program management best
practices. From the private sector, we've institutionalized principles
like risk-based oversight, evaluation of major investments through
portfolio management, and access to reliable data from matured business
intelligence to track the progress of investments throughout their life
cycle.
Each of these principles has resulted in the advancement of
Integrated Investment Life Cycle Management (IILCM). IILCM is a
transformational concept to integrate all phases of the Department's
multi-billion-dollar budget and investment/acquisition management
process. The framework provides critical linkages between Strategy,
Capabilities and Requirements, Programming and Budgeting, and
Investment Oversight phases to ensure the effective execution of
Federal funds to support strategic priorities.
IILCM was signed into policy by Secretary Napolitano in February
2013 and the framework is being piloted through March 2014 using the
cybersecurity, biodefense, and common vetting portfolios. The best
practices gained from the pilot experience will inform the Management
Directives and Instructions that will institutionalize IILCM across the
Department for the future.
In order to strengthen Department-wide program management, the
Office of Program Accountability and Risk Management (PARM) was created
in 2011 and modeled after best practices in the private sector. It
continues to provide centralized oversight for all major acquisition
programs. To date, this oversight has resulted in:
136 Acquisition Review Boards (ARB);
249 Acquisition Decision Memoranda (ADM);
Three (3) cancelled major acquisition programs and eight (8)
paused programs.
PARM also provides independent assessments and monitoring of
programs between formal reviews of major acquisition programs to
identify any emerging issues that the ARB needs to address to keep the
programs on track. Finally, PARM works with the Business Intelligence
program management office to enhance business intelligence and improve
ARB decision making.
Management Directive (MD) 102-01 has been institutionalized and is
recognized by all component executives as the standard acquisition
policy roadmap to manage their programs. The ARB has a broad span-of-
control and has authorized low-risk/high-impact programs the authority
to proceed. The ARB has institutionalized an effective Component
Acquisition Executive (CAE) structure that serves as the single point
of accountability for programs within the components and also guides
managers of major investments through the acquisition governance
process.
One of the top priorities during my tenure is to ensure best
practices are properly evaluated and tested, but only adopted if they
prove to be cost-effective and contribute to improved efficiency. The
Department has a long history of partnering with DoD to leverage best
practices and methodologies to help guide the development of our
policies, processes, and structures. Further, we have also established
mechanisms to evaluate the effectiveness of assets and technologies
that were deemed by DoD to be obsolete or excess for complex military
usage. In fact, while many DoD processes, assets, and technologies have
proven quite useful to DHS, in some cases, not all assets and
technologies are deemed suitable given the cost and time it takes to
customize it for non-combat use. Before committing to a technology
exchange or asset transfer, DHS conducts detailed operational
assessments and cost analyses to understand the cost and technical
impact(s) these technologies would have on the DHS operations and
support chain.
Another aspect of assessing cost impact is to fully understand the
total cost of ownership, which includes maintenance, operations, and
upgrades during the remaining operational life of the asset. For
example, evaluation teams at U.S. Customs and Border Protection (CBP)
revealed additional unfunded costs associated with recoding software,
modifying technology, and retrofitting certain assets before deploying
border sensor equipment. Accordingly, DHS determined the exchange from
DoD would not be cost-efficient given the externalities involved.
While DHS and DoD have many similarities, there are key mission-
related differences. For example, DoD's mission is designed to operate
in hostile combat theaters around the world and, therefore, their
standards, processes, hardware, and systems often require a more
rigorous ``military hardening'' standard. Researchers and analysts from
the Science and Technology (S&T) Directorate have discovered that the
``military hardening'' standard inherent for the designs and tolerances
for military ships, aircraft, unmanned aerial systems (UAS), and border
sensor equipment, sometimes makes what appears to be a simple transfer
of these assets extremely complex and inordinately expensive.
Another example of a key difference with DoD is the way people are
trained and assigned to operate systems. DHS uses front-line Border
Patrol Agents to operate systems because they know the operational
environment and can best communicate with the agents responding in the
field. DHS finds it most effective to have agents who can go back and
forth between typical agent duties in the field and technology operator
duties at a station. For high-technology systems, DoD often creates
specialty codes with specialist training that can last several months.
This approach does not align with the Department's needs. As a result,
a part of the DHS evaluation involves determining how operational
components can adapt the systems so that agents can operate them
without extensive specialization and training. The following list
identifies the best practices adopted from DoD by DHS:
(1) The Chief Acquisition Executive (CAE) model comes directly from
DoD's Service Acquisition Executive (SAE) concept.
(2) The MD-102-01 is modeled after DoD's 5000 series publication.
(3) DHS' governance structure (ARB/IRB) is modeled directly after
DoD's Defense Acquisition Board (DAB) process.
(4) DHS' acquisition documents (Operational Requirements Document
(ORD), Integrated Logistics Support Plan (ILSP), Test and
Evaluation Master Plan (TEMP), Analysis of Alternatives (AoAs),
Life Cycle Cost Estimates (LCCEs), etc.) come directly from DoD
best practices and document the planning and analysis that is
required.
(5) DHS' requirements approval process is modeled directly after
DoD practices. For example, ORDs go to our equivalent of DoD's
Joint Requirements Oversight Council (JROC). As IILCM is
deployed, investment management will expand beyond acquisitions
to include; people, structures, systems, and all capital
assets.
(6) The Department's requirement for independent oversight of the
Office of Test and Evaluation (OT&E) comes directly from DoD
best practices.
(7) CBP created an operational requirements and OT&E staff
organization, modeled after joint staff processes, and
interacted directly with DoD personnel to help design the
organization and processes.
(8) CBP participated with DoD in a variety of technology
demonstrations to help identify potential systems and assess
their effectiveness. One example of this is DoD's Thunderstorm
Program. Most recently, joint DHS/DoD demonstrations of various
surveillance and C2 technologies were conducted in and around
the coast off of the Rio Grande Valley in south Texas.
(9) The USM, DHS Under Secretary for Science and Technology, and
DoD's USD Acquisition Technology and Logistics (AT&L) co-chair
the Capability Development Working Group (CDWG), which provides
oversight and strategic direction for joint DoD/DHS R&D and
acquisition activities. It also allows for sharing and
collaboration on best practices--which is a two-way exchange.
For example, DHS is providing enhanced capability related to
cost-estimating practices to DoD.
(10) CBP modeled initial Analysis of Alternatives (AoA) activities
(especially for SBInet and the successor Arizona Technology
Plan) on DoD practices, and had the U.S. Air Force's (USAF's)
AoA center of excellence review and assess the completeness and
effectiveness of our process and results.
(11) U.S. Coast Guard (USCG) procures C-130Js through the USAF and
equips them with communications and sensor packages that are
suitable for the USCG mission set. This enables the USCG to
achieve economies of scale with the airframe and follow-on
logistics support and parts, while achieving the required
capability.
(12) Acquisition workforce training is an area where implementing
DoD models can be a challenge. While DoD has access to the
defense acquisition workforce development funds (DWDF) and is
subject to DAWIA, civilian agencies have not been resourced at
the same level. Additionally, the acquisition certification
requirements are diverging between defense and civilian
employees.
(13) The USCG MSAM, DHS D102, Systems Engineering Life Cycle
(SELC), Workforce Certification processes are derived from DoD
model and tailored to USCG/DHS-specific needs. In addition,
USCG leverages DoD best practices for guides and processes,
including CG Risk Management (DoD RM guide) and Systems Safety
(MIL-STD 882).
(14) USCG Project Resident Offices (on-site contract oversight) are
based on similar Defense Contract Management Agency (DCMA)
offices.
(15) In addition, USCG uses formal agreements (MOAs/MOUs) to obtain
U.S. Navy, USAF, U.S. Army (USA), and Defense Agency expertise,
practices, and capabilities.
Examples of these include:
C-130 contracting for new and upgraded HC-130s with the Air
Force.
NSC Weapons Systems certification from Naval Sea Systems
Command (NAVSEA).
FRC and HC-144A OT&E with Navy Commander Operational Test
and Evaluation Force (COMOPTEVFOR).
RB-M/RB-S & Cutter Boats T&E with Naval Surface Warfare
Center, Carderock Division.
H-60/H-65 Avionics expertise and contracts for equipment
purchases from the USA.
NSC, FRC & OPC life-cycle cost estimates from NAVSEA.
C4ISR \1\ expertise from the Navy Space and Naval Warfare
Systems Command.
---------------------------------------------------------------------------
\1\ C4ISR--Command, Control, Communications, Computers,
Intelligence, Surveillance, and Reconnaissance.
---------------------------------------------------------------------------
Unmanned Aircraft Systems (UAS) development, and aircraft
certification from Naval Air Systems Command (NAVAIR).
conclusion
The Department has made steady progress to improve the acquisition
management discipline. While there is still additional work to do, we
feel that the infrastructure enhancements position the Department to
sustain the significant progress made over the past 4 years. As
indicated by GAO in the February 2013 report, the Department is clearly
more integrated and operating as a single unit. We will continue to
focus on reducing risk, building quality controls into our oversight
function, and leveraging business intelligence to identify problem
areas before they reach a critical state.
Once again, I thank you for the opportunity to appear before you
today, and I look forward to answering your questions.
Mr. Duncan. Thank you so much, Mr. Borras.
The Chairman will now recognize Ms. Mackin for her
testimony.
STATEMENT OF MICHELE MACKIN, DIRECTOR, ACQUISITION AND SOURCING
MANAGEMENT, U.S. GOVERNMENT ACCOUNTABIITY OFFICE
Ms. Mackin. Mr. Chairman, Ranking Member Barber, and
Members of the subcommittee, good afternoon. I am pleased to be
here today to discuss the Department of Homeland Security's
acquisition management. As was mentioned earlier, DHS plans to
invest almost $170 billion in major programs, and almost every
component in the Department has at least some of these major
acquisitions underway.
Along the lines of the subject of today's hearings, in
conjunction with our reviews at the Defense Department, we have
identified best practices of leading commercial firms with
regard to their acquisition management. The critical component
is, really, knowledge. By knowledge, I am talking about having
clear and well-defined requirements up front and a solid
understanding of anticipated costs, the capabilities to be
delivered to the end-user, and the time frame it will take to
get there. For these leading firms, if programs don't
demonstrate these key knowledge points, they don't proceed.
Now, we have reported since 2005 that DHS's acquisition
policy does, in fact, reflect this knowledge-based approach, so
the programs really do stem from execution. For example, one of
the most critical acquisition documents is the acquisition
program baseline. This represents the program manager's
agreement with the Department about the cost, schedule, and
performance parameters of a program, and this is important,
because it allows DHS and Congress to track progress and hold
programs accountable for outcomes.
We reported, however, that many of the major programs
lacked approved baselines. Last year, we reported only about a
third of 63 major programs had approved acquisition baselines.
This situation doesn't put the Department in a good position to
effectively manage its acquisitions. It also complicates
efforts to track cost and schedule growth.
As was mentioned, we reported last year that 16 major
programs had 166 percent cost increase over 3 years. That
equates to about $30 billion. But perhaps more important was
that we couldn't make such an assessment of many more programs
because the underlying data wasn't valid.
Now, DHS is taking steps to increase the number of approved
acquisition baselines, and we will continue to work with them
to assess their progress. In addition, DHS in May of this year
waived the requirement for acquisition documents for 42 major
programs that are in the sustainment phase, meaning the systems
have been fielded for operational use. I would note, however,
that 60 percent to 70 percent of a program's total costs can be
in the sustainment phase. So to the extent that those programs
didn't have these, for example, validated cost estimates or
approved sustainment plans, they run the risk of running into
trouble down the road.
DHS also faces a strategic challenge. Last December, the
chief financial officer identified a 30 percent gap between the
money DHS needs to carry out its major acquisitions and the
funding it expects to receive. I view this acknowledgement as
positive, and DHS initiated some actions to help mitigate that
gap.
For example, it is piloting an overarching model intended
to help match resource requirements with the Department's
missions. It is establishing a requirements oversight council,
intended to make trade-off decisions among individual programs.
The Defense Department has a similar requirements body in
place. In fact, we have recommended for several years that DHS
reinstitute such a body. It could help align the Department's
portfolio of major investments with its available funding.
In fact, the focus of our on-going work for this
subcommittee is to assess DHS's management of its portfolio of
investments and to determine how individual programs might be
affected by funding instability that could be caused, at least
in part, from this 30 percent funding gap the CFO identified.
In conclusion, DHS has made progress in managing its major
acquisitions, but we believe they still have a long way to go
in gaining a clear understanding in practice and on an on-going
basis of basic costs, schedule, and performance information of
its major acquisitions. Without this knowledge, DHS's efforts
to effectively manage its portfolio of investments may be
impeded.
Mr. Chairman, this concludes my statement. I would be happy
to answer any questions.
[The prepared statement of Ms. Mackin follows:]
Prepared Statement of Michele Mackin
September 19, 2013
gao highlights
Highlights of GAO-13-846T, a testimony before the Subcommittee on
Oversight and Management Efficiency, Committee on Homeland Security,
House of Representatives.
Why GAO Did This Study
GAO has highlighted DHS acquisition management issues on its high-
risk list, and over the past several years, GAO's work has identified
significant shortcomings in the Department's ability to manage an
expanding portfolio of major acquisitions. It is important for DHS to
address these shortcomings because the Department invests extensively
in acquisition programs to help it execute its many critical missions.
DHS is acquiring systems to help secure the border, increase marine
safety, enhance cybersecurity, and execute a wide variety of other
operations. In 2011, DHS reported to Congress that it planned to
ultimately invest $167 billion in its major acquisition programs. In
fiscal year 2013 alone, DHS reported it was investing more than $9.6
billion.
This statement discusses: (1) DHS's acquisition policy and how it
has been implemented; and (2) DHS's mechanisms for managing emerging
affordability issues. The statement is based on GAO's prior work on DHS
acquisition management and leading commercial companies' knowledge-
based approach to managing their large investments. It also reflects
observations from on-going work for this subcommittee. For that work,
GAO is reviewing key documentation, and interviewing headquarters and
component-level acquisition and financial management officials.
What GAO Recommends
GAO is not making any new recommendations in this statement. It has
made numerous recommendations in its prior work to strengthen
acquisition management, and DHS is taking steps to address them.
homeland security.--observations on dhs's oversight of major
acquisitions and efforts to match resources to needs
What GAO Found
GAO has previously established that the Department of Homeland
Security's (DHS) acquisition policy reflects many sound program
management practices intended to mitigate the risks of cost growth and
schedule slips. The policy largely reflects the knowledge-based
approach used by leading commercial firms, which do not pursue major
investments without demonstrating, at critical milestones, that their
products are likely to meet cost, schedule, and performance objectives.
DHS policy requires that important acquisition documents be in place
and approved before programs are executed. For example, one key
document is an acquisition program baseline, which outlines a program's
expected cost, schedule, and the capabilities to be delivered to the
end-user. However, in September 2012, GAO found that the Department did
not implement the policy consistently, and that only 4 of 66 programs
had all of the required documents approved in accordance with DHS's
policy. GAO made five recommendations, which DHS concurred with,
identifying actions DHS should take to mitigate the risk of poor
acquisition outcomes and strengthen management activities. Further, GAO
reported that the lack of reliable performance data hindered DHS and
Congressional oversight of the Department's major programs. Officials
explained that DHS's culture had emphasized the need to rapidly execute
missions more than sound acquisition management practices. GAO also
reported that most of the Department's major programs cost more than
expected, took longer to deploy than planned, or delivered less
capability than promised. DHS has taken steps to improve acquisition
management, but as part of its on-going work, GAO found that DHS
recently waived documentation requirements for 42 programs fielded for
operational use since 2008. DHS explained it would be cost-prohibitive
and inefficient to recreate documentation for previous acquisition
phases. GAO plans to obtain more information on this decision and its
effect on the management of DHS's major acquisitions. DHS's July 2013
status assessment indicated that, as of the end of fiscal year 2012,
many major programs still face cost and schedule shortfalls. DHS
expects to provide another update in the near future.
In December 2012, DHS's Chief Financial Officer reported that the
Department faced a 30 percent gap between expected funding requirements
for major acquisition programs and available resources. DHS has efforts
underway to develop a more disciplined and strategic approach to
managing its portfolio of major investments, but the Department has not
yet developed certain policies and processes that could help address
its affordability issues. In September 2012, GAO reported that DHS
largely made investment decisions on a program-by-program and
component-by-component basis and did not have a process to
systematically prioritize its major investments. In GAO's work at the
Department of Defense, it has found this approach hinders efforts to
achieve a balanced mix of programs that are affordable and feasible and
that provide the greatest return on investment. DHS's proposed
Integrated Investment Life Cycle Model (IILCM) is intended to improve
portfolio management by ensuring mission needs drive investment
decisions. For example, a high-level oversight body would identify
potential trade-offs among DHS's component agencies. GAO has
recommended such an oversight body for several years. Full
implementation of the IILCM may be several years away. GAO will
continue to assess the Department's progress in its on-going work.
Chairman Duncan, Ranking Member Barber, and Members of the
subcommittee: Thank you for the opportunity to discuss acquisition
management at the Department of Homeland Security (DHS), as well as to
discuss some lessons learned from our prior work comparing the
Department of Defense's (DoD) acquisition practices to those of leading
commercial companies. As you know, we have highlighted DHS acquisition
management issues in our high-risk list since 2005.\1\ Over the past
several years, our work has identified significant shortcomings in the
Department's ability to manage an expanding portfolio of major
acquisitions, and in response to our recommendations, DHS has taken
steps to improve acquisition management.\2\ We believe it is important
for DHS to continue to address these shortcomings because the
Department invests extensively in acquisition programs to help it
execute its many critical missions. DHS and its underlying components
are acquiring systems to help secure the border, increase marine
safety, screen travelers, enhance cybersecurity, improve disaster
response, and execute a wide variety of other operations. In 2011, DHS
reported to Congress that it planned to ultimately invest $167 billion
in its major acquisition programs. In fiscal year 2013 alone, DHS
reported it planned to spend more than $9.6 billion on these programs.
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\1\ GAO, High-Risk Series: An Update, GAO-05-207 (Washington, DC:
January 2005).
\2\ For examples, see GAO, Department of Homeland Security:
Billions Invested in Major Programs Lack Appropriate Oversight, GAO-09-
29 (Washington, DC: Nov. 18, 2008); Department of Homeland Security:
Assessments of Selected Complex Acquisitions, GAO-10-588SP (Washington,
DC: June 30, 2010); Homeland Security: DHS Requires More Disciplined
Investment Management to Help Meet Mission Needs, GAO-12-833
(Washington, DC: Sept. 18, 2012).
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My statement today draws from our prior work on DHS acquisition
management and leading commercial companies' approach to managing their
large investments, work we have done in the context of DoD's approach
to managing its large acquisitions.\3\ The statement also includes
observations from our on-going review of DHS's acquisition funding
process, which we are conducting at the request of this subcommittee.
This statement discusses: (1) DHS's acquisition policy and how it has
been implemented; and (2) DHS's mechanisms for managing emerging
affordability issues. For our prior work, we surveyed all 77 major
acquisition program offices that DHS identified in 2011 and achieved a
92 percent response rate.\4\ We also reviewed all available Department-
level acquisition decisions from November 2008 to April 2012 and
interviewed acquisition officials at DHS headquarters and components.
To determine the extent to which DHS has policies in place to
effectively manage individual acquisition programs, as well as the
Department's acquisition portfolio as a whole, we compared our key
acquisition management practices to DHS acquisition policy, and
identified the extent to which DHS has implemented its policy.\5\ More
detailed information on our scope and methodology for our prior work
can be found in the relevant reports. To support our on-going audit,
from March to September 2013, we reviewed key documentation and
interviewed acquisition and financial management officials at DHS
headquarters and components to understand DHS's affordability issues
and the Department's plans to address these issues. We are also
following up on prior recommendations.
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\3\ GAO, Best Practices: An Integrated Portfolio Management
Approach to Weapon System Investments Could Improve DoD's Acquisition
Outcomes, GAO-07-388, (Washington, DC: March 30, 2007); GAO-09-29; GAO-
10-588SP; Defense Acquisitions: Assessments of Selected Weapon
Programs, GAO-11-233SP (Washington, DC: March 29, 2011); GAO-12-833.
\4\ DHS originally identified 82 major acquisition programs in the
2011 major acquisition oversight list, but five of those programs were
subsequently canceled in 2011. Seventy-one program managers responded
to the survey.
\5\ Appendix II of GAO-12-833 identifies key acquisition management
practices established in our previous reports examining DHS, the
Department of Defense, National Aeronautics and Space Administration,
and private-sector organizations.
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The work underlying this statement was conducted in accordance with
generally-accepted Government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
background
DHS Acquisition Management Directive 102-01 (MD 102) and an
accompanying instruction manual establish the Department's policies and
processes for managing major acquisition programs. While DHS has had an
acquisition management policy in place since October 2004, the
Department issued the initial version of MD 102 in 2008.\6\ Further,
senior leaders in the Department are responsible for acquisition
management functions, including managing the resources needed to fund
major programs.
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\6\ The interim version of MD 102 replaced Management Directive
1400, which had governed major acquisition programs since 2006. DHS
originally established an investment review process in 2003 to provide
Departmental oversight of major investments throughout their life
cycles, and to help ensure that funds allocated for investments through
the budget process are well-spent. DHS issued an updated version of MD
102 in January 2010 and subsequently updated the guidebook and
appendices.
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DHS's Chief Acquisition Officer--currently the Under
Secretary for Management (USM)--is responsible for the
management and oversight of the Department's acquisition
policies and procedures.\7\
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\7\ The Secretary of DHS designated the USM the Department's Chief
Acquisition Officer in April 2011.
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The Acquisition Decision Authority is responsible for
approving the movement of programs through the acquisition life
cycle at key milestone events.\8\ The USM or Deputy Secretary
serve as the decision authority for programs with life-cycle
cost estimates of $1 billion or greater, while the cognizant
component acquisition executive may serve as the decision
authority for a program with a lower-cost estimate.
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\8\ See GAO-12-833 for descriptions of the four phases of the
acquisition life cycle and the documents requiring Department-level
approval at Acquisition Decision Events.
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The DHS Acquisition Review Board (ARB) supports the
Acquisition Decision Authority by reviewing major acquisition
programs for proper management, oversight, accountability, and
alignment with the Department's strategic functions at the key
acquisition milestones and other meetings as needed.
The ARB is supported by the Office of Program Accountability
and Risk Management (PARM), which reports to the USM and is
responsible for DHS's overall acquisition governance process.
In March 2012, PARM issued its first Quarterly Program
Accountability Report (QPAR), which provided an independent
evaluation of major programs' health and risks. Since that
time, PARM has issued two additional QPARs, most recently in
July 2013, and plans to issue a fourth by the end of September
2013. PARM also prepares the Comprehensive Acquisition Status
Reports, which are to be submitted to the appropriations
committees with the President's budget proposal and updated
quarterly.\9\
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\9\ Consolidated and Further Continuing Appropriations Act, 2013,
Pub. L. No. 113-6, 127 Stat. 198, 343.
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The Office of Program Analysis and Evaluation (PA&E), within
the Office of the Chief Financial Officer, is responsible for
advising the USM, among others, on resource allocation issues.
PA&E also oversees the development of the Future Years Homeland
Security Program (FYHSP). The FYHSP is DHS's 5-year funding
plan for programs approved by the Secretary that are to support
the Department's strategic plan.\10\
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\10\ 6 U.S.C. 454.
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sound acquisition management policy has not been implemented
consistently and many programs have performed poorly
DHS acquisition policy reflects many key program management
practices intended to mitigate the risks of cost growth and schedule
slips.\11\ However, we previously found that the Department did not
implement the policy consistently. Officials explained that DHS's
culture emphasized the need to rapidly execute missions more than sound
acquisition management practices, and we found that senior leaders did
not bring to bear the critical knowledge needed to accurately track
program performance. Most notably, we found that most programs lacked
approved acquisition program baselines, which are critical management
tools that establish how systems will perform, when they will be
delivered, and what they will cost. We also reported that most of the
Department's major programs were at risk of cost growth and schedule
slips as a result.
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\11\ The reference to DHS acquisition policy, for purposes of this
testimony, consists of MD 102-01, and an associated guidebook.
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dhs acquisition policy generally reflects key program management
practices identified at commercial organizations
In our past work examining DoD weapon acquisition issues and best
practices for product development, we have found that leading
commercial firms pursue an acquisition approach that is anchored in
knowledge, whereby high levels of product knowledge are demonstrated by
critical points in the acquisition process.\12\ While DoD's major
acquisitions have unique aspects, our large body of work in this area
has established knowledge-based principles that can be applied to
Government agencies and can lead to more effective use of taxpayer
dollars.
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\12\ GAO-11-233SP.
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A knowledge-based approach to capability development allows
developers to be reasonably certain, at critical points in the
acquisition life cycle, that their products are likely to meet
established cost, schedule, and performance objectives. This knowledge
provides them with information needed to make sound investment
decisions. Over the past several years, our work has emphasized the
importance of obtaining key knowledge at critical points in major
system acquisitions and, based on this work, we have identified eight
key practice areas for program management. These key practice areas are
summarized in table 1, along with our assessment of DHS's acquisition
policy.
TABLE 1.--GAO ASSESSMENT OF DHS'S ACQUISITION POLICY COMPARED TO KEY PROGRAM-MANAGEMENT PRACTICES
----------------------------------------------------------------------------------------------------------------
GAO Assessment of
GAO Key Practice Area Summary of Key Practices DHS's Acquisition
Policy
----------------------------------------------------------------------------------------------------------------
Identify and validate needs...... Current capabilities should be identified to determine DHS policy reflects
if there is a gap between the current and needed key practices.
capabilities. A need statement should be informed by a
comprehensive assessment that considers the
organization's overall mission.
Assess alternatives to select Analyses of Alternatives should be conducted early in DHS policy reflects
most appropriate solution. the acquisition process to compare key elements of key practices.
competing solutions, including performance, costs, and
risks. Moreover, these analyses should assess many
alternatives across multiple concepts.
Clearly establish well-defined Requirements should be well-defined and include input DHS policy reflects
requirements. from operators and stakeholders. Programs should be key practices.
grounded in well-understood concepts of how systems
would be used and likely requirements costs.
Develop realistic cost estimates A cost estimate should be well-documented, DHS policy reflects
and schedules. comprehensive, accurate, and credible. A schedule key practices.
should identify resources needed to do the work and
account for how long all activities will take.
Additionally, a schedule should identify relationships
between sequenced activities.
Secure stable funding that Programs should make trade-offs as necessary when DHS policy reflects
matches resources to working in a constrained budget environment. key practices.
requirements.
Demonstrate technology, design, Capabilities should be demonstrated and tested prior to DHS policy partially
and manufacturing maturity. system development, making a production decision, and reflects key
formal operator acceptance. practices.
Utilize milestones and exit Milestones and exit criteria--specific accomplishments DHS policy
criteria. that demonstrate progress--should be used to determine substantially
that a program has developed required and appropriate reflects key
knowledge prior to a program moving forward to the practices.
next acquisition phase.
Establish an adequate workforce.. Acquisition personnel should have appropriate DHS policy partially
qualifications and experience. Program managers should reflects key
stay on until the end of an acquisition life-cycle practices.
phase to assure accountability. Government and
contractor staff should also remain consistent.
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of DHS acquisition policy.
As indicated in table 1, DHS acquisition policy establishes several
key program-management practices through document requirements. MD 102
requires that major acquisition programs provide the ARB documents
demonstrating the critical knowledge needed to support effective
decision making before progressing through the acquisition life cycle.
Figure 1 identifies acquisition documents that must be approved at the
Department-level and their corresponding key practice areas.
FIGURE 1.--DHS ACQUISITION DOCUMENTS REQUIRING DEPARTMENT-LEVEL APPROVAL
------------------------------------------------------------------------
Key Acquisition
Documents Required Phase For Which
GAO Key Practice Area by DHS Acquisition Document Is
Policy Required
------------------------------------------------------------------------
Identify and Validate Needs..... Mission Need Analyze/Select.
Statement.
Clearly established well-defined Operational Obtain.
requirements. Requirements
Document.
Secure stable funding that Acquisition Obtain.
matches resources to Program Baseline.
requirements.
Develop realistic cost estimates Integrated Obtain.
and schedules. Logistics Support
Plan.
Demonstrate technology, design, Test and Produce/Deploy/
and manufacturing maturity. Evaluation Master Support.
Plan.
------------------------------------------------------------------------
Source.--GAO analysis of DHS acquisition policy.
DHS Has Not Consistently Implemented Its Acquisition Policy
DHS acquisition policy has required these documents since November
2008, but in September 2012, we reported that the Department generally
had not implemented this policy as intended, and had not adhered to key
program management practices. For example, we reported that DHS had
only approved 4 of 66 major programs' required documents in accordance
with the policy. See figure 2.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In September 2012, we reported that DHS leadership had, since 2008,
formally reviewed 49 of the 71 major programs for which officials had
responded to our survey. Of those 49 programs, DHS permitted 43
programs to proceed with acquisition activities without verifying the
programs had developed the knowledge required under MD 102.
Additionally, we reported that most of DHS's major acquisition programs
lacked approved acquisition program baselines, as required. These
baselines are critical tools for managing acquisition programs, as they
are the agreement between program-, component-, and Department-level
officials, establishing how systems will perform, when they will be
delivered, and what they will cost.\13\ Officials from half of the
eight components' acquisition offices we spoke with, as well as PARM
officials, noted that DHS's culture had emphasized the need to rapidly
execute missions more than sound acquisition management practices. PARM
officials explained that, in certain instances, programs were not
capable of documenting knowledge, while in others, PARM lacked the
capacity to validate that the documented knowledge was adequate.
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\13\ DHS Acquisition Instruction/Guidebook 102-01-001: Appendix K,
Acquisition Program Baseline; October 1, 2011.
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As a result, we reported that senior leaders lacked the critical
knowledge needed to accurately track program performance, and that most
of the Department's major programs were at risk of cost growth and
schedule slips. We also reported that DHS's lack of reliable
performance data not only hindered its internal acquisition management
efforts, but also limited Congressional oversight. We made five
recommendations to the Secretary of Homeland Security at that time,
identifying specific actions DHS should take to mitigate the risk of
poor acquisition outcomes and strengthen the Department's investment
management activities. DHS concurred with all five recommendations, and
is taking steps to address them, most notably through policy updates.
Since that time, we have continued to assess DHS's acquisition
management activities and the reliability of the Department's
performance data. We currently have a review underway for this
subcommittee assessing the extent to which DHS is executing effective
executive oversight and governance (including the quality of the data
used) of a major effort to modernize an information technology system,
TECS. TECS is a major border enforcement system used for preventing
terrorism, providing border security and law enforcement information
about people who are inadmissible or may pose a threat to the security
of the United States. We are: (1) Determining the status of the
modernization effort, including what has been deployed and implemented
to date, as well as the extent to which the modernization is meeting
its cost and schedule commitments, including the quality of schedule
estimates; and (2) assessing requirements management and risk
management practices. We plan to issue our report in early November.
According to DHS officials, its efforts to implement the
Department's acquisition policy were complicated by the large number of
programs initiated before the Department was created, including 11
programs that PARM officials told us in 2012 had been fielded and were
in the sustainment phase when MD 102 was signed.\14\ As part of our on-
going work, we found that, in May 2013, the USM waived the acquisition
documentation requirements for 42 major acquisition programs that he
identified as having been already fielded for operational use when MD
102 was issued in 2008. In a memo implementing the waiver, the USM
explained that it would be cost-prohibitive and inefficient to recreate
documentation for previous acquisition phases. However, he stated that
the programs will continue to be monitored, and that they must comply
with MD 102 if any action is taken that materially impacts the scope of
the current program, such as a major modernization or new acquisition.
We plan to obtain more information on this decision and its effect on
the Department's management of its major acquisitions.
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\14\ Sustainment begins when a capability has been fielded for
operational use, and it involves the supportability of fielded systems
through disposal, including maintenance and the identification of cost
reduction opportunities. System operations, support, and sustainment
costs tend to approach up to 70 percent of life-cycle costs.
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Most DHS Major Acquisition Programs Have Experienced Cost Overruns or
Schedule Delays
In September 2012, we reported that most of DHS's major acquisition
programs cost more than expected, took longer to deploy than planned,
or delivered less capability than promised. We reported that these
outcomes were largely the result of DHS's lack of adherence to key
knowledge-based program management practices. As part of our on-going
work, we analyzed a recent PARM assessment that suggests many of the
Department's major acquisition programs are continuing to struggle. In
its July 2013 quarterly program assessment, PARM reported that it had
assessed 112 major acquisition programs. PARM reported that 37 percent
of the programs experienced no cost variance at the end of fiscal year
2012, but it also reported that a large percentage of the programs were
experiencing cost or schedule variances at that time. See table 2.
TABLE 2.--PARM'S ASSESSMENT OF 112 MAJOR ACQUISITION PROGRAMS AS OF THE
END OF FISCAL YEAR 2012
------------------------------------------------------------------------
Percentage of
Percentage of Programs With
Programs With Schedule
Cost Variance Variance
------------------------------------------------------------------------
None.................................... 37 21
Minimal (1-3 percent)................... 12 9
Moderate (3-8 percent).................. 14 21
High (8-10 percent)..................... 2 2
Significant (over 10 percent)........... 36 47
------------------------------------------------------------------------
Source.--GAO analysis of PARM data.
Note.--Percentages do not add to 100 due to rounding. PARM established
the variance categories in the July 2013 QPAR.
However, as we reported in September 2012, DHS acquisition programs
generally did not have the reliable cost estimates and realistic
schedules needed to accurately assess program performance. We will
continue to track DHS's efforts to improve the quality of its program
assessments moving forward.
dhs is in early stages of developing a portfolio management approach to
mitigate gap between resources and needs
We have previously reported that cost growth and schedule slips at
the individual program level complicated DHS's efforts to manage its
investment portfolio as a whole. When programs encountered setbacks,
the Department often redirected funding to troubled programs at the
expense of others, which in turn were more likely to struggle. DHS's
Chief Financial Officer recently issued a memo stating that DHS faced a
30 percent gap between funding requirements for major acquisition
programs and available resources. DHS has efforts underway to develop a
more disciplined and strategic portfolio management approach, but the
Department has not yet developed key portfolio management policies and
processes that could help the Department address its affordability
issues, and DHS's primary portfolio management initiative may not be
fully implemented for several years.
The DHS Major Acquisition Portfolio Is Unaffordable
In September 2012, we noted that DHS's acquisition portfolio may
not be affordable. That is, the Department may have to pay more than
expected for less capability than promised, and this could ultimately
hinder DHS's day-to-day operations.\15\ As part of our on-going work,
we learned that DHS's Chief Financial Officer issued an internal memo
in December 2012, shortly after our report was issued, stating that the
aggregate 5-year funding requirements for major acquisitions would
likely exceed available resources by approximately 30 percent. This
acknowledgment was a positive step toward addressing the Department's
challenges, in that it clearly identified the need to improve the
affordability of the Department's major acquisition portfolio.
Additionally, the Chief Financial Officer has required component senior
financial officers to certify that they have reviewed and validated all
current, prior, and future-year funding information presented in ARB
materials, and ensure it is consistent with the FYHSP. Additionally,
through our on-going work, PA&E officials told us that the magnitude of
the actual funding gap may be even greater than suggested because only
a small portion of the cost estimates that informed the Chief Financial
Officer's analysis had been approved at the Department level, and
expected costs may increase as DHS improves the quality of the
estimates. This is a concern we share. While holding components
accountable is important, without validated and Department-approved
documents--such as acquisition program baselines and life-cycle cost
estimates--efforts to fully understand and address the Department's
overall funding gap will be hindered.
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\15\ GAO-12-833.
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DHS Policy and Process Initiatives Are Intended to Improve Portfolio
Management Efforts and Help Address Affordability Issues
In September 2012, we reported that DHS largely made investment
decisions on a program-by-program and component-by-component basis. DHS
did not have a process to systematically prioritize its major
investments to ensure that the Department's acquisition portfolio was
consistent with anticipated resource constraints. In our work at DoD,
we have found this approach hinders efforts to achieve a balanced mix
of programs that are affordable and feasible and that provide the
greatest return on investment.\16\
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\16\ GAO-07-388.
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In our past work focused on improving weapon system acquisitions,
we found that successful commercial companies use a disciplined and
integrated approach to prioritize needs and allocate resources.\17\ As
a result, they can avoid pursuing more projects than their resources
can support, and better optimize the return on their investment. This
approach, known as portfolio management, requires companies to view
each of their investments as contributing to a collective whole, rather
than as independent and unrelated.
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\17\ GAO-07-388.
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With an enterprise perspective, companies can effectively: (1)
Identify and prioritize opportunities, and (2) allocate available
resources to support the highest priority--or most promising--
investment opportunities. Over the past several years, we have examined
the practices that private and public-sector entities use to achieve a
balanced mix of new projects, and based on this work, we have
identified key practice areas for portfolio management. One I would
like to highlight today is that investments should be ranked and
selected using a disciplined process to assess the costs, benefits, and
risks of alternative products to ensure transparency and comparability
across alternatives.
In this regard, DHS established the Joint Requirements Council
(JRC) in 2003, to identify cross-cutting opportunities and common
requirements among DHS components and help determine how DHS should use
its resources. But the JRC stopped meeting in 2006 after the chair was
assigned to other duties within the Department.\18\ In 2008, we
recommended that it be reinstated, or that DHS establish another joint
requirements oversight board, and DHS officials recognized that
strengthening the JRC was a top priority. Through our on-going work, we
have identified that DHS recently piloted a Capabilities and
Requirements Council (CRC) to serve in a similar role as the JRC. The
CRC began reviewing a portfolio of cyber capabilities in the summer of
2013. The pilot is intended to inform the Department's fiscal year 2015
budget request; therefore, it is too soon to assess the outcomes of
this new oversight body. It is also unknown at this time how DHS will
sustain the CRC over time or what its outcomes will be.
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\18\ GAO-09-29.
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In addition to private and public-sector practices, which we
discuss above, our prior work at DoD has identified an oversight body
similar to the CRC's expected function. The Joint Requirements
Oversight Council (JROC) has a number of statutory responsibilities
related to the identification, validation, and prioritization of joint
military requirements. This body, which has been required by law since
1997, and its supporting organizations review requirements documents
several times per year, prior to major defense acquisition programs'
key milestones. Through these reviews, proposed acquisition programs
are scrutinized prior to their initiation and before decisions are made
to begin production. The JROC also takes measures to help ensure the
programs are affordable. In 2011, we reported that the JROC required
the military services to show that their proposed programs were fully
funded before it validated requirements for 5 of the 7 proposed
programs we reviewed.\19\ The two other proposed programs were funded
at more than 97 and 99 percent, respectively.\20\ This full funding
requirement is similar to the funding certification requirement DHS's
CFO established in December 2012. While some DoD acquisition programs
continue to experience cost growth and schedule delays, as identified
in our annual report on weapon systems acquisitions, the Department
does have in place mechanisms that DHS could adopt to improve the
affordability of its acquisition portfolio, and put its acquisition
programs in a better position to achieve successful outcomes.\21\
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\19\ GAO, DoD Weapon Systems: Missed Trade-off Opportunities During
Requirements Reviews, GAO-11-502, (Washington, DC: June 16, 2011).
\20\ In this context, full funding referred to a budgetary
allocation in the future-years defense program.
\21\ GAO, Defense Acquisitions: Assessments of Selected Weapon
Programs, GAO-13-249SP, (Washington, DC: March 28, 2013).
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In September 2012, we reported that the CRC is one of several new
councils and offices that DHS would establish as part of its Integrated
Investment Life Cycle Model (IILCM), which is intended to improve
portfolio management at DHS through the identification of priorities
and capability gaps. This model, which the Department proposed in
January 2011, would provide a framework for information to flow between
councils and offices responsible for strategic direction, requirements
development, resource allocation, and program governance. DHS explained
that the IILCM would ensure that mission needs drive investment
decisions.
While the IILCM, as envisioned, could improve DHS management
decisions by better linking missions to acquisition outcomes, our on-
going work indicates that its full implementation may be several years
away. From January 2011 to June 2012, the schedule for initiating IILCM
operations slipped by a year, and in May 2013, a DHS official
responsible for the IILCM told us he was unsure when the IILCM would be
fully operational. We also found that some component acquisition
officials are not aware of how the IILCM would apply to their own
acquisition portfolios. Some of the officials we interviewed told us
that DHS leadership needs to conduct more outreach and training about
the IILCM and how it is expected to work, and a DHS headquarters
official told us that the Department is in the process of implementing
an initial Department-wide IILCM communications strategy. We will
continue to assess the Department's progress in implementing what it
views as a very important management model.
Chairman Duncan, Ranking Member Barber, and Members of the
subcommittee, this completes my prepared statement. I would be pleased
to respond to any questions that you may have at this time.
Mr. Duncan. Well, thank you so much for that.
The Chairman will now recognize Ms. Richards for her
testimony. Then we will begin our line of questioning. Ms.
Richards.
STATEMENT OF ANNE L. RICHARDS, ASSISTANT INSPECTOR GENERAL FOR
AUDITS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF
HOMELAND SECURITY
Ms. Richards. Good afternoon, Chairman Duncan, Ranking
Member Barber, and Members of the subcommittee. Thank you for
inviting me here today to discuss the Department of Homeland
Security's acquisition practices.
Acquisition management is a complex, but critical, process
made more challenging by the magnitude and diversity of the
Department's procurements. Effective acquisition management
requires careful planning and oversight. DHS is making progress
creating a comprehensive acquisition framework to ensure that
procured goods and services are cost-efficient and meet mission
needs. Nevertheless, the Department continues to be challenged
in implementing sound acquisition practices.
DHS has issued an acquisition management policy and has
established the Office of Program Accountability and Risk
Management, called PARM, to oversee all major acquisitions.
PARM is also responsible for guiding managers and major
investments through key acquisition decision points.
Today, I will focus on two recent audits that highlight two
persistent challenges DHS faces in acquisition management,
establishing an effective, high-level governing structure that
can identify mission needs, coordinate assets, and guide
investment decisions, and gathering reliable data to develop
acquisition strategies and plans.
To review acquisitions, the Department has designed a
process with a governance structure, but this process is not
always followed. In our audit of the H-60 helicopter program,
we found that DHS did not ensure CBP addressed concerns about
its acquisition plans or comply with acquisition guidance.
Specifically, CBP continued with its acquisition without
addressing the concerns of the office of the chief procurement
officer on the areas of noncompliance that PARM had identified
in a draft acquisition decision memo. Had PARM issued a final
acquisition decision memo, CBP might have been required to
address those areas of noncompliance.
Further, we found that CBP disregarded direction from the
Department to coordinate its helicopter program with the Coast
Guard. We estimated that CBP might have saved as much as $126
million and would finish the modernization of its helicopters 7
years soon if it coordinated with the Coast Guard to complete
the project.
We also recently audited management of radio communication
programs at four DHS components: CBP, ICE, the Secret Service,
and the Coast Guard. We determined that DHS cannot make sound
investment and management decisions on radios and support
infrastructure because it doesn't have reliable, Department-
wide inventory data or an effective governance structure to
guide decisions.
This is due in part to the difficulty of coordinating the
legacy radio systems brought into the Department when it was
created. DHS does not have Department-wide policies to identify
common data elements to standardize definitions and radio
inventory management requirements, which would allow them
compare radio equipment across component lines.
Components use different systems to record and manage
inventory, and they do not consistently record radio inventory,
which results in inaccurate and incomplete data.
Unreliable radio inventory data makes it difficult to plan,
budget, schedule, and acquire upgrades and replacements, as
well as identify resources that could be shared to save costs
or address critical shortages. For example, we found that two
components purchased radio equipment that was never used, while
a third component needed that very same equipment.
Reliable Department-wide data would help DHS prioritize its
needs, plan cost-efficient investments, and assist in planning
for future acquisitions. This is a critical issue right now, as
the Department works to modernize its radio communication
equipment through a contract that could cost as much as $3
billion.
Effective acquisition management requires that the
Department develop specific, well-defined strategies to
identify mission needs, gather reliable data on its current
assets, and coordinate assets where possible to find cost
efficiencies. DHS must also oversee and review component
acquisitions to make certain that they are thoroughly planned
and comply with established processes.
A strong, centralized governing structure is essential to
accomplishing these tasks. These are difficult challenges, but
they are not insurmountable, and DHS has already begun taking
the steps to implement the recommendations from these two
audits. We are continuing our efforts to help the Department
identify ways to improve its acquisition management.
Mr. Chairman, this concludes my prepared statement. I
welcome any questions you or the Members of the subcommittee
may have.
[The prepared statement of Ms. Richards follows:]
Prepared Statement of Anne L. Richards
September 19, 2013
Good afternoon Chairman Duncan, Ranking Member Barber, and Members
of the subcommittee. Thank you for inviting me here today to discuss
the Department of Homeland Security's (DHS) acquisition practices.
Acquisition management is a complex, but critical, process made
more challenging by the magnitude and diversity of the Department's
procurements. Effective acquisition management requires careful
planning and oversight of processes, solid internal controls, and
compliance with laws and regulations. DHS is making progress in
creating a comprehensive acquisition framework of policies, procedures,
and entities to streamline its acquisition practices and ensure that
procured goods and services meet mission needs cost-efficiently.
Nevertheless, the Department continues to be challenged in implementing
sound acquisition practices.
In my testimony today, I will provide some background information
on DHS' acquisition management and then focus on two recent audits that
illustrate challenges facing DHS' acquisition management, that is, the
Department's ability to establish an effective, high-level governing
structure to coordinate Department-wide assets and guide investment
decisions, gather reliable inventory data, develop acquisition
strategies and plans, and oversee the acquisition process to ensure
compliance with established policies. Such a governing structure would
assist DHS in identifying efficiencies, preventing waste, and
allocating resources across the Department.
dhs' acquisition management policies and entities
Acquisition management is a complex process that goes beyond simply
awarding a contract. It begins with the identification of a mission
need and continues with the development of a strategy to fulfill that
need while balancing cost, schedule, and performance. Acquisition
management also entails managing operational and life-cycle
requirements--from formulating concepts of operations, developing sound
business strategies, and exercising prudent financial management to
assessing trade-offs and managing program risks.
DHS has issued policies and procedures and established various
entities to oversee its components' acquisitions. Specifically,
Acquisition Management Directive 102-01 (MD 102-01) provides overall
policy and structure for acquisition management in the Department.
In fiscal year 2011, the Department created the Office of Program
Accountability and Risk Management (PARM), which is responsible for
overseeing all of DHS' major acquisitions. PARM reports directly to the
Under Secretary for Management, manages and implements MD 102-01,
serves as the Executive Secretariat to the Acquisition Review Board
(ARB) and the Component Acquisition Executive Council, and guides
managers of major investments through the acquisition governance
process. PARM also provides independent assessments of major investment
programs and works with DHS partners to enhance business intelligence
to inform ARB decisions. It monitors programs between formal reviews to
identify emerging issues that DHS needs to address. DHS has established
a Joint Requirements Council to review high-dollar acquisitions, that
is, Level 1 acquisitions that exceed $1 billion and Level 2
acquisitions of $300 million to $1 billion, and to make recommendations
to the ARB on cross-cutting savings opportunities. DHS also created
Centers of Excellence to assist in improving performance.
The Department has also developed the Decision Support Tool to aid
in monitoring and oversight. This web-enabled tool provides DHS
leaders, governance boards, and program managers with a central
dashboard to assess and track the health of major acquisition projects,
programs, and portfolios. The Department's goal is to improve program
accountability and to strengthen the ability to make sound strategic
decisions throughout the life cycle of major acquisitions. On October
1, 2011, the Decision Support Tool became the official source of
Acquisition Decision Event (ADE) information and data; it is used to
provide ARBs with standardized information.
On February 13, 2012, DHS issued a memorandum to all components and
programs to ensure that, on a monthly basis, all acquisition program
information reported in the Department's existing data systems is
complete, accurate, and valid.
DHS envisions becoming more data-driven, with emphasis on the
criticality of maintaining quality data in its source systems. The
Department created the Comprehensive Acquisition Status Report (CASR),
which provides the status of DHS major acquisitions listed in the
Department of Homeland Security Major Acquisition Oversight List. The
new CASR format increases the quality of information and can be
produced more quickly. As the Department's business intelligence
capability and data fidelity efforts continue to mature, the condensed
time line will leverage Decision Support Tool automation data to feed
the CASR in real time.
acquisition life cycle framework
The Department classifies acquisitions into three levels to define
the extent and scope of required project and program management and the
specific official who serves as the Acquisition Decision Authority. The
Department oversees level 1 and level 2 acquisition programs. For level
1 acquisitions, those that equal or exceed $1 billion, the Acquisition
Decision Authority is the Deputy Secretary. For level 2 acquisitions of
$300 million to $1 billion, the Acquisition Decision Authority is the
Chief Acquisition Officer. Components are responsible for the oversight
and controls for acquisition programs below the $300 million threshold.
DHS adopted the acquisition life-cycle framework (ALF) to assure
consistent and efficient acquisition management, support, review, and
approval throughout the Department. The framework is designed to ensure
that acquisitions are stable and well-managed; that the program manager
has the tools, resources, and flexibility to execute the acquisition;
that the product meets user requirements; and that the acquisition
complies with applicable statutes, regulations, and policies.
The DHS ALF is a four-phase process that DHS uses to determine
whether to proceed with an acquisition:
(1) Need.--Identify the need that the acquisition will address;
(2) Analyze/Select.--Analyze the alternatives to satisfy the need
and select the best option;
(3) Obtain.--Develop, test, and evaluate the selected option and
determine whether to approve production; and
(4) Product/Deploy/Support.--Produce and deploy the selected option
and support it throughout the operational life cycle.
Each phase leads to an ADE, a predetermined point within an
acquisition phase at which the acquisition will undergo a review prior
to commencing the next phase. The review is designed to ensure that
needs are aligned with DHS' strategic direction, and that upcoming
phases are adequately planned.
Prior to every ADE, components are required to submit acquisition
documents to the ARB for review, including:
Mission Needs Statement.--Synopsizes specific functional
capabilities required to accomplish the Department's mission
and objectives, along with deficiencies and gaps in these
capabilities.
Capability Development Plan.--Defines how critical knowledge
to inform decisions will be obtained, defines the objectives,
activities, schedule, and resources for the next phase.
Acquisition Plan.--Provides a top-level strategy for future
sustainment and support and a recommendation for the
acquisition approach and types of acquisition.
Each phase ends with a presentation to the ARB, the cross-component
board in the Department composed of senior-level decision makers. The
ARB determines whether a proposed acquisition meets the requirements of
key phases in the ALF and is able to proceed to the next phase and
eventual full production and deployment.
The Acquisition Review Process is followed to prepare for an ARB
and to ensure appropriate implementation of the ARB's decisions.
dhs' management of its aviation assets and cbp's h-60 acquisition
In our May 2013 report, DHS' H-60 Helicopter Programs (OIG-13-89,
Revised), we noted that the United States Coast Guard (USCG) properly
managed its H-60 helicopter program, but the Department and U.S.
Customs and Border Protection (CBP) did not effectively oversee or
manage the acquisition, conversion, and modification of CBP's H-60
helicopters.
DHS established processes and procedures to govern its aviation
assets and provide acquisition oversight. However, these efforts did
not fully coordinate the acquisition, conversion, and modification of
DHS aviation assets, and did not control acquisition costs, schedules,
or performance. Department governance of aviation assets has been
sporadic, and acquisition oversight in some components has been
ineffective. As a result, DHS has not implemented a comprehensive
aviation strategy and did not properly oversee CBP's acquisition of the
H-60s.
dhs governance of aviation assets
DHS has no formal structure to govern the Department's aviation
assets and no specific senior official to provide expert independent
guidance on aviation issues to DHS senior management. Over the past 9
years, DHS issued policies and established various entities to oversee
its aviation assets and operations, but it did not sustain these
efforts.
Since 2003, senior managers realized the need for a high-level
structure to integrate the Department's components and help link cross-
component aviation missions and capabilities. Over time, this oversight
structure included Department-level management, with an Aviation
Management Council started in 2005. Oversight was inconsistent, and the
Aviation Management Council stopped meeting in 2007.
In 2009, Department-level oversight of DHS' aviation assets
resumed. DHS' Office of Program Analysis and Evaluation (PA&E) ensures
that components' operational plans align with the Department's needs
and resources. A PA&E-led Aviation Issue Team reviewed potentially
collocating component aviation facilities, finding commonality in
component aviation assets, and combining component aviation-related
information technology systems. The Under Secretary for Management
recommended re-establishing the Aviation Management Council to lead
DHS' efforts to strategically align aviation assets across the
Department's components to improve effectiveness, efficiency, and
interoperability.
In 2011, the Deputy Secretary established an Aviation Working
Group, but the group did not have a charter, defined roles and
responsibilities, or an independent aviation expert. It collected data
on CBP and USCG missions, aircraft inventories, flight hours, and
aviation resources; reviewed components' funding plans and
opportunities for joint acquisitions beginning in fiscal year 2019; and
considered an organizational structure for a Department-wide aviation
office. However, according to senior PA&E officials, without a
dedicated, independent aviation expert to lead an authoritative,
decision-making entity, the Department was relying on unverified,
component-provided information to make aviation-related decisions.
dhs oversight of cbp's h-60 acquisition program
DHS did not properly oversee CBP's acquisition of its H-60s. CBP
did not take into account guidance from DHS' Office of the Chief
Procurement Officer (OCPO) on its H-60 acquisition plan. In addition,
PARM did not conduct a complete review of CBP's H-60 program because
the Department did not ensure that CBP followed Departmental
acquisition guidance and properly participated in the ARB process or
coordinated with the ARB.
In 2007, CBP's Office of Air and Marine submitted its
Congressionally-mandated acquisition plan, the CBP Air and Marine
National Strategic Plan 2007-2012, which outlined how its aviation
assets and acquisitions would support its mission. CBP approved its
plan for acquiring 38 new and converted medium-lift helicopters on
February 7, 2008, and submitted the plan to the OCPO.
In a March 3, 2008, memorandum to CBP, the OCPO noted that the
acquisition plan included substantive issues that needed to be
addressed. According to the OCPO, CBP should have had two separate H-60
plans, and both plans should independently go through the acquisition
review process, which includes ARB review. The OCPO was also concerned
that CBP----
Had not clearly defined the period of performance for the
acquisition;
Did not have a complete life-cycle cost estimate;
Had not completed a cost-benefit analysis to compare
upgrading its existing fleet to purchasing new helicopters; and
Had not used various contracting best practices.
Although they were aware of these concerns, CBP officials continued
with the acquisition, signing an Interagency Agreement with the Army 3
days after receiving the OCPO memo.
According to a PARM official, CBP officials did not consider its
Strategic Air and Marine Plan (StAMP) to be subject to the acquisition
review process because the plan existed before the current acquisition
review process had been established. However, according to MD 102-01,
dated January 2010, the directive was to apply to all existing
acquisition programs ``to the maximum extent possible.''
In addition, in a September 2011 StAMP briefing, CBP acknowledged
that the conversion and modification of its 16 H-60 Alphas to Limas was
still in the acquisition phase. Therefore, CBP's StAMP acquisition
programs were subject to the acquisition review process, and CBP's H-60
acquisition, conversion, and modification programs should have
participated more transparently in the ARB process.
In a March 11, 2010, Acquisition Decision Memorandum (ADM), the ARB
concluded that CBP and the USCG were both pursuing H-60 conversions,
and that it was important to understand whether the USCG H-60
conversion programs were compatible with CBP's prospective conversions
and modifications. The ARB directed the USCG to collaborate with CBP
and report on possible helicopter program synergies and present a joint
review within 75 days.
The USCG hosted CBP officials at its Aviation Logistics Center, but
both USCG and CBP officials said that a senior CBP executive canceled
any reciprocal visits by USCG officials to CBP sites and instructed CBP
H-60 program personnel not to have any further contact with USCG H-60
officials. Without CBP's cooperation, the USCG was unable to complete
the joint review. PARM did not provide any further official direction
to the components on the incomplete review, and the ARB did not
determine why the joint review was not presented within the 75 days.
In a June 17, 2011, ADM, the ARB directed CBP to prepare for a
program review. The ARB intended for CBP to document its acquisition
program baselines, as well as present program acquisition
documentation, to comply with MD 102-01. CBP provided its response to
the June 17, 2011, ADM on September 23, 2011, and the official ARB
review was cancelled.
As a result, PARM sent a draft ADM to CBP that ``found the StAMP
program to be non-compliant'' for the following reasons:
CBP's ``inability to submit an acquisition program baseline
for approval'';
CBP's ``failure to submit other acquisition documentation in
accordance with MD 102-01 for review and adjudication''; and,
CBP's ``inability to provide authoritative life cycle costs
with supporting documentation for review and adjudication.''
PARM did not issue a final signed ADM and acknowledged the limited
effectiveness of providing a draft ADM to CBP. If PARM had issued a
signed ADM documenting CBP's noncompliance, CBP would have been
required to respond with an action plan addressing the identified
issues.
In July 2012, a PARM official confirmed the need to divide CBP's
StAMP into separate programs so the Department would have greater
visibility into the numerous acquisition programs and projects included
in the plan.
conclusion and recommendations
The Department could better govern its aviation assets under a
formal entity led by a senior-level DHS employee with appropriate
authority. In addition, CBP's H-60 programs remain subject to review
and should participate in the ARB process. Therefore, we recommended
that the Deputy Secretary direct CBP to apply all the requirements of
the Acquisition Life Cycle Framework in MD 102-01 to each individual
program or project within StAMP. DHS concurred with this
recommendation, and CBP was directed to submit StAMP to PARM, which
will oversee the plan in accordance with MD 102-01. Certain existing
projects and new acquisition programs or projects that are currently
part of StAMP will be required to progress through the acquisition life
cycle. The ARB will make an acquisition decision as the programs and
projects progress through the acquisition life cycle.
dhs' management of its radio communication program
In our August 2013 report, DHS Needs to Manage Its Radio
Communication Program Better (OIG-13-113), we noted that DHS is unable
to make sound investment decisions for radio equipment and supporting
infrastructure because it is not effectively managing its radio
communication program. DHS does not have reliable Department-wide
inventory data or an effective governance structure to guide investment
decision-making. As a result, DHS risks wasting taxpayer funds on
equipment purchases and radio system investments that are not needed,
sustainable, supportable, or affordable. Two DHS components we visited
stored more than 8,000 radio equipment items valued at $28 million for
a year or longer at their maintenance and warehouse facilities, while
some programs faced critical equipment shortages.
DHS components use different systems to record and manage personal
property inventory data, including radio equipment. Components'
inventory data indicates they do not record radio equipment
consistently into their respective personal property systems. Our
analysis and on-site testing of CBP, U.S. Immigration and Customs
Enforcement (ICE), the United States Secret Service (USSS), and the
USCG radio equipment inventories at technical maintenance facilities
and warehouses indicated the inventories were inaccurate or incomplete.
USSS and CBP also did not record new radio equipment in their inventory
systems.
The four DHS components we reviewed did not report infrastructure
real property inventory data consistently in the Real Property
Inventory System (RPIS), and they also reported incomplete and
inaccurate infrastructure real property data. The data the system
captures is not sufficient to manage the radio communication program.
Although it contains basic data fields for capturing elements needed to
manage real property, RPIS does not capture the comprehensive data
needed to manage radio programs. Managing radio programs and
infrastructure is not limited to real property information, but also
includes knowing the network, the backhaul (how the signal is
transmitted), operating frequencies, and the type of equipment
installed at each radio site. The DHS Office of Emergency
Communications' System Lifecycle Planning Guide, dated August 2011,
points out the importance of capturing this type of information in
managing a radio system.
DHS does not have an effective governance structure over its radio
communication program. Specifically, DHS has not implemented a
governance structure with authority to establish policy, budget and
allocate resources, and hold components accountable for managing radio
programs and related inventory. During a prior audit of oversight of
radio communication interoperability, DHS said that it established a
structure with authority to ensure components achieve radio
communications interoperability. However, that authority is limited to
the acquisition and management of future communication networks.
Components are independently managing their current radio programs with
no formal coordination with the Department. As a result, management and
investment decisions for the current DHS radio communication program
are made using inconsistent, incomplete, and inaccurate real and
personal property data.
Unreliable Department-wide radio inventory data has made it
difficult for DHS officials to identify radio infrastructure and other
resources that components could share to achieve cost savings or
address critical shortages. DHS also risks wasting taxpayer dollars
because of its ineffective management of radio equipment. For example,
CBP and ICE stored 8,046 radio equipment items valued at $28 million at
maintenance facility warehouses for a year or longer, while some CBP
program offices faced critical equipment shortages. In addition, two
components purchased radio equipment that was never used in operations,
while a third component needed the same equipment.
DHS is managing radio equipment and systems separately as personal
property and real property rather than as a portfolio. A portfolio
management approach is key to achieving a balanced mix of executable
programs and ensuring a good return on investments when determining
needs and allocating fiscal resources. Portfolio management is also
central to making informed decisions about the best way to allocate
available equipment to ensure the right equipment is at the right
locations and in the quantities needed to conduct mission operations.
conclusion and recommendations
DHS needs a reliable Department-wide inventory to help it plan,
budget, schedule, and acquire upgrades and replacements of its radio
systems and equipment. A Department-wide inventory will help DHS
prioritize its needs and plan its investments to make the most
efficient use of available resources. It will also assist with planning
for the acquisition and management of future communication networks.
DHS also needs a strong governance structure over its radio
communication program with adequate authority and resources to
establish policy, make resource allocation and investment decisions,
and hold components accountable for managing radio programs and related
inventories. A portfolio management approach to the DHS radio
communication program would help ensure DHS receives a good return on
investment when determining needs and allocating fiscal resources.
DHS estimated that it would need $3.2 billion to modernize its
radio systems to meet its needs, and awarded a $3 billion Department-
wide strategic sourcing contract in March 2012 for this purpose.
However, the cost efficiencies that DHS seeks to achieve from a
strategic sourcing contract for radio equipment may potentially be
negatively affected by poor procurement or inventory management
practices.
DHS concurred with both of our recommendations and began taking
corrective actions to develop and implement Department-level portfolio
management of tactical communications. The Joint Wireless Program
Management Office has also made significant progress in collecting the
data necessary to develop a single profile of DHS assets,
infrastructure, and services across components. DHS also said it will
complete a review of existing policies and procedures and will revise,
as necessary, its personal property manual to align with the findings.
Mr. Chairman, this concludes my prepared statement. I welcome any
questions you or other Members of the subcommittee may have.
Mr. Duncan. Thank you so much, witnesses.
Let me just remind the Members that votes are expected,
according to the Whip update, sometime around 3:05, so we will
work through it and maybe go past 3:05 a little bit and see how
far we get and make a decision about finishing the hearing
after votes at that point in time.
So the Chairman will now recognize myself for 5 minutes of
questioning. First off, let me just say that I think Americans
really are beginning to expect more and more for Government
agencies to start treating the money that you are given under
your charge as you would treat your own money, or if you were
running a business, how you would spend that money within your
own company.
The DHS acquisition decision memorandum of May 9, 2013,
where Under Secretary Borras directs the component acquisition
executives to waive the acquisition documentation requirements
for the 42 Level 1 and 2 acquisition programs that were in the
sustainment phase prior to 2008, when that acquisition decision
102-01 was issued. The 42 programs listed in this memorandum
have been allowed to proceed without assurance that they have
had the appropriate levels of knowledge to be successful.
So, Mr. Borras, I am going to ask, this memo also stated
that you planned to monitor the program, and the document
requirements will be reinstated if the program initiates a
major modernization or new acquisition. What sort of message do
you think this memo sends to program and project managers about
DHS's willingness to ignore accountability and transparency?
Mr. Borras. Well, Mr. Chairman, I certainly don't view the
direction that we provided the components as providing for
license to ignore any of our acquisition policies or
procedures. Quite frankly, it was made on an assessment, which
I would be happy to share with the committee.
We looked at, in this case, those 42 programs--these are 42
legacy programs, programs that predate when the Department had
established acquisition policies. Quite simply, most of the
documentation required to adequately develop acquisition
program baselines and many of the other official documentation
that we require programs since 2010 simply do not exist.
We would be making it up if we tried to recreate--take for
example a program like ACE, Automated Commercial Environment
program. That program is probably nearly 20 years old, and it
has changed so many times, we made a calculated judgment that
it would be much better to put the effort into rebaselining
programs as they exist today, rather than have our limited
resources--and, you know, this committee very well knows we
don't have a lot of resources--to go back and try to recreate
documentation where simply the data does not exist.
Mr. Duncan. Okay. So what unintended consequences do you
think this memo would have for the remaining 88 major
acquisition programs that DHS is currently managing?
Mr. Borras. Well, clearly, I don't believe it has any
impact. As I have said, we continue to--we have had well over
100 acquisition review board meetings with 250 acquisition
decision memorandums. Let me just share very, very briefly with
the committee what these decision memorandums document.
So this is where a program will come up for a review. If we
find deficiencies that have--they have either not complied with
our governance policies or practices or their cost estimates
are no longer valid or determined as not valid, that
acquisition decision memorandum provides specific direction to
a component program that says, in order to proceed, you must do
the following.
We will say, you must submit a validated cost estimate, for
example, within the next 30 days or 60 days, depending on the
complexity of the program, in order to proceed. So we put gates
on the programs now----
Mr. Duncan. Then that is reviewed by a committee or----
Mr. Borras. That is reviewed. It is an integrated process,
so the CFO, the CIO, the chief procurement officer, all of
those officers participate in the review. Then when I am
notified and it has been certified to be that, that program has
met the requirements of the acquisition decision memorandum,
the ADM, we allow them to proceed. That is taking place every
day.
Mr. Duncan. Well, that is encouraging. That is how it
should happen, but----
Mr. Borras. We have provided copies of these acquisition
decision memorandums to the staff when asked.
Mr. Duncan. Okay, well, thank you so much. We had a joint
hearing recently, and it comes to mind about TSA, and just
because they had the policies in place, they weren't actually
following the policy--that was a disciplinary issue, but it--if
you have the policies in place, you need to follow the
policies. From what I am hearing from you, you are trying to do
that, and so I applaud you for that.
Mr. Borras. We have canceled programs. We have suspended
programs. We have directed--I do mean directed--leadership of
programs to be changed, program managers and their staff.
Mr. Duncan. Let me just shift gears a minute, because
something that is interesting to me--when I was out in Arizona,
understanding from CBP guys out there--that sometimes officers
were having to trade radios at a shift change. They were
actually handing radios from one truck to another from the
truck window.
So I shared that with Ms. Richards when she was in the
office, and she lit up, because she was really chasing a whole
different rabbit, but along the same lines about radio
communication and the fact that there were a lot of--as we
heard today, there were a lot of radios in a warehouse, other
components in a warehouse that were gathering dust.
So DHS really didn't have a good idea of what was in the
inventory, how they were dispersed across the agency, and, you
know, if you are in private sector, you just don't do those
sort of things or you can't really be effective in your
business if you do those sort of things.
So I might ask that we talk a little bit more about that.
Has DHS taken any steps to hold the program accountable and
improve its stewardship of taxpayer dollars with regard to
radios, Ms. Richards? Where are you--where do you stand on that
investigation?
Ms. Richards. We published the audit report in August, and
we are waiting for the 90-day reply letter to get their full
corrective action plan. We did agree to our recommendations and
planning on taking action to address it.
It is a fundamental issue that happens--I have seen it in
DoD, and I see it in DHS--where the folks on the line don't
always feel that the paperwork is as important. It is a
cultural shift that needs to happen to get the data accurate so
that these decisions can be made so that information can be
shared so that CBP in Arizona can know that CBP in Maryland has
those radios, and I am using fictitious locations, had those
radios in an inventory.
So it is the fundamentals that they need to take a step
back and get right, setting up the records so that like radios
can be identified across components and between components.
Mr. Duncan. Let me ask you this: Did anybody in the field--
let's say in Arizona and that Tucson sector, who were having
trouble with radios and having the right kind of equipment--
they may even be radios today and some other components
tomorrow--but did anybody in the field call back up the chain
and say, you know what, we need some radios here, we need more
equipment in order to effectively do our job? Then did you
discover anybody in the middle or higher level saying, wait a
minute, we just did an acquisition, we are supposed to have
plenty of radios to meet all of our officers' needs, and start
the investigation of where those radios may have been, to
discover that they were sitting in a warehouse somewhere? Did
you discover any of that in your investigation?
Ms. Richards. We did see communications from the field back
to headquarters requesting radios. We didn't see communication
between the acquisition groups and the people in the field to
discuss whether radios were in the warehouse or not. We also
very specifically did not see information or even requests
going across component lines, for example, to see CBP ask
Secret Service, hey, we really need this kind of repeater. Do
you have one we can use? That is something that has not been
built into DHS yet. It is something that the Department-level
is really working to address.
Mr. Duncan. Okay, well, my time is expired, so I am going
to recognize the Ranking Member for 5 minutes. We may revisit
this issue in just a minute. I recognize Mr. Barber for 5
minutes.
Mr. Barber. Well, thank you, Mr. Chairman. I want to ask,
first, a series of questions, Mr. Borras, and see where we go
with the improvements that apparently have been made and some
still need to be made. I guess I am going to ask, first of all,
what specific steps is the Department currently taking to
ensure that its procurement process within each of its
components is effective and efficient and that it complies with
Department regulations?
We have heard testimony today and we have had reports, of
course, that suggest that the components basically do their own
thing. What is being done to bring some control to that kind
of--what I would call renegade kind of activity or rogue
activity at the component level?
Mr. Borras. Mr. Ranking Member, thank you for the question,
and I appreciate it. I am glad to answer that question, because
I think it is very important to note that the oversight of
acquisition can't be done solely by headquarters, not just a
corporate responsibility. Every single component has to share
in that responsibility. We simply don't have the people or the
personnel in the headquarters environment to provide oversight
for every single transaction in the Department. We have over
90,000 transactions on average in a year.
So what have I done to address that? We have created the
position of what we call component acquisition executive. These
are individuals that now sit in the components, that are
assigned by me, or, I should say, by the under secretary for
management, whoever that person may be, and they sit there, and
that is now our eyes and ears. They are responsible now. They
have the responsibilities in delegations to perform component-
level acquisition oversight. It is in their performance plans
that they are responsible for doing that.
Let me say something very quickly, because I know time is
precious and you have votes, about the cooperation of the
components. I am going to give you two very, very quick
examples. Recently, we have had a number of acquisition review
meetings with TSA. At every one of those acquisition review
board meetings, the deputy administrator, John Halinski, has
personally attended and sat there and made sure that his folks
were being responsive. If he didn't feel that the Department
was getting the right answer, he would chastise his own folks.
When former deputy commissioner of CPB David Aguilar was in
place, he attended every single acquisition review board
meeting, once again, to reinforce the notion that there is one
acquisition framework in the Department, and the components
will follow that. I am very, very encouraged by the senior
leadership commitment to support the acquisition review
process.
Mr. Barber. Well, I appreciate that. I think more of that
is necessary. I think we have to--when we set policies, we have
to hold people accountable for them.
But I want to turn to the topic that has been discussed
here this afternoon a couple of times. As we know, the purchase
of the helicopters, the H-60 helicopters, the Department's OIG
found that the DHS Acquisition Review Board did not approve the
CPB plan, the CPB proceeded with its procurement despite the
fact that it had a different directive.
The report further found that DHS Office of Program
Accountability and Risk Management did not conduct a full
review of the program as required by the acquisition management
directive. So what happened here? What was the accountability
for this kind of, I would say, blatant disregard for the policy
of the Department?
Mr. Borras. I would agree. We have had our challenges with
the Office of Air and Marine and Customs and Border Protection.
Part of the issue that we have had to deal with is that that
program, their Air and Marine program, procurement program, had
never been organized into a comprehensive procurement program
like, for example, in the Coast Guard, which has a complete,
organized acquisition program for the identification, for the
development of requirements for their ships and their aviation.
So we are dealing again here with a legacy issue. Also, the
Air and Marine organization has a hybrid program where they
acquire certain assets and then they acquire hand-me-downs, if
you will, from the Department of Defense. So it is a very
fractured, unorganized program.
So what I have done is I have directed the Office of Air
and Marine to appear before the Acquisition Review Board to--
before the acquisition review process and structure its program
to meet our requirements. So you are absolutely right. They
have not in the past done that. That is a fact. I acknowledge
that. That is why we have now required them to come before and
not proceed with any additional acquisitions at all until that
is done.
We have put together now an aviation management council in
the Department, so now there is one council that overlooks, for
example, at all aviation-required assets acquirement, whether
it be Coast Guard or Customs and Border Protection.
Mr. Barber. Were there any consequences taken or actions
taken against the personnel who basically blew off the
requirements?
Mr. Borras. There have been leadership changes in the
Office of Air and Marine in the past year. I can't tell you
specifically if personnel actions were taken specifically for
that, but there is a new leadership team at the Office of Air
and Marine.
Mr. Barber. Let me move quickly, because I know I am
actually over time, but I just want to ask this one question,
Mr. Chairman, if I could, of Ms. Mackin. As the GAO has found
components do not always comply--we have been talking about
this--with the acquisition management directives or the
recommendations made by the Program Accountability and Risk
Management, in your view, does the under secretary for
management possess the appropriate authority to ensure
compliance with acquisition decisions made at headquarters
level?
So what do you--what is your take on this?
Ms. Mackin. I don't think it is a matter of the authority
not being in the right place. As he mentioned, the component
acquisition executives at the components are in place, and that
is an area we have seen some improvement. It really does get to
the underlying data in the base lines and other documents, for
example, life-cycle cost estimates, and that gets down to the
individual program offices who need to have the capability to
construct a valid cost estimate and revisit it as needed.
Even PARM recently reported that about 75 percent of the
life-cycle cost estimates that reviewed weren't adequate. So if
I had to hone in on one thing that the Department still faces a
big challenge with, it is that fundamental cost-estimating
capability.
Mr. Barber. Thank you, Ms. Mackin.
Mr. Chairman, I yield back.
Mr. Duncan. Thank you for that.
The Chairman now recognizes the gentleman from
Pennsylvania, Mr. Barletta, for 5 minutes.
Mr. Barletta. Thank you, Mr. Chairman.
Mr. Borras, the 9/11 Commission identified our lack of a
biometric exit system as a major National security threat. Over
40 percent of illegal immigrants are people who came here
legally and overstayed their visas. Why is DHS not moving
faster to implement this system?
Mr. Borras. I am not in a position to specifically answer
that question regarding that particular program. That is an
operational question. I would be happy to provide you a
detailed answer to that.
Mr. Barletta. Is it true that they are actually waiting on
a cost estimate of such a system? Would that come through the
acquisition process? I know they maintain that they have their
planning efforts underway and they are going to report to
Congress in 2016 on the cost of a system like this. My question
is: Congress passed the law back in 1996 requiring us to do
that. Why would it take us 20 years to get that information,
the cost benefits, to Congress so that we could purchase a
system that is so critical to our National security?
Mr. Borras. Again, I don't know the specific answer to that
issue dating back to 1996. I can tell you that the Office of
Biometric Identity Management, which is now the new name of
that office, is doing the work right now. I am not an expert in
that field, but clearly the technology since 1996 has changed
significantly.
I am not expert enough to tell you whether or not we have
identified, and perhaps our folks in the science and technology
area can address that, whether or not we have identified, quite
frankly, the right technology that will give us the level of
assurance that when somebody says they are who they are, that
they, in fact, are, and that we can have the proper tools to do
that.
That program ultimately will come before our review, when
it is fully organized into a set of requirements that requires
approval to move forward through the acquisition process, but
it is not to us yet.
Mr. Barletta. Well, technology moves so quickly, in 20
years, I don't know, you know, how are you--if it is taking
that long just to come up with a cost-benefit, technology is
kind of constantly changing, so I don't know if you will ever
be able to report to Congress, because I think it is critical.
If the hold-up is just getting the cost-benefit ratio and we
want to move this to acquisition, how do we ever get ahead of
that? If it is taking 20 years to come up with a plan and
technology, obviously, is moving much quicker.
Mr. Borras. Well, again, it is a very complex issue. I
don't know the specifics about biometric tools or technology.
At such point that it comes before the Department for review
for a specific acquisition, we will thoroughly review that,
including its cost estimate, and determine whether or not it is
valid.
Mr. Barletta. All right. Thank you, Mr. Chairman.
Mr. Duncan. Thank you. The Chairman will now recognize the
gentleman from Texas, Mr. O'Rourke, for 5 minutes.
Mr. O'Rourke. Thank you, Mr. Chairman, and thank you for
calling this hearing today. In anticipation of potential major
acquisition related to immigration reform, as you know, the
Senate bill calls for something like $46 billion in additional
acquisitions and personnel growth, mainly among the Border
Patrol.
I want to revisit a decision that preceded your tenure. In
2006, the SBInet program, also known as the virtual fence,
which was billions of dollars' worth of surveillance and
communications equipment, that was ultimately canceled in 2011,
because it was costly, it was proven to be ineffective, and it
essentially allowed the private contractor to oversee basic
homeland security functions.
I would add to that, after meeting with Border Patrol
agents in the El Paso sector this last weekend, I don't think
those agents were consulted in the development of this plan. It
was a contract that was let on an indefinite delivery and
indefinite quantity basis, which in my opinion basically left
it up to the contractor, which was Boeing in this case, to
really decide the scope and oversee its implementation.
The inspector general and the GAO both looked at this, and
so I would wonder if each of you could perhaps take a minute to
talk about lessons learned from SBInet and how you will apply
them to the next major round of purchasing when it comes to
border security.
Mr. Borras, why don't we begin with you?
Mr. Borras. Thank you for the question, Congressman. I will
be as quick as I can. Certainly, the major lesson that we have
taken from SBInet and others, Deepwater and others from that
era, is the absence of an acquisition framework, policies and
procedures, and directives in the Department allow initiatives
to go from what I call from concept to procurement without a
thorough, robust requirements development and cost development.
It is--I am not going to say it is impossible for it to
happen today. It would be very, very difficult for something
like that to happen today, because it would have to pass
through our acquisition gates to get approval before it
happened. There was no such approval mechanism in place using
SBInet as a specific example.
Mr. O'Rourke. Ms. Mackin, do you agree with that
assessment, that following that boondoggle, the appropriate
controls are in place that it would not happen again?
Ms. Mackin. I think the acquisition policy is more robust
now, but it was in pretty good shape in the early days of the
Department, as well. As I mentioned, it did reflect the
knowledge-based approach, but I think this really gets to
requirements and having well-defined requirements up front. As
I mentioned, that is a key practice that commercial firms
follow. That was a big, enormous program, as was Deepwater,
kind of a system-of-systems approach, with the contractor
really driving a lot of the decision-making.
I think the other thing I would mention is the importance
of a robust test and evaluation plan, which is also required by
the Department, before a system is fielded, to make sure that
the users' requirements will be met, and the user requirements
really do drive the ultimate decision.
Mr. O'Rourke. Great. Ms. Richards, I know the Office of the
Inspector General had a scathing report that I think was useful
in putting a halt to this waste of money. Do you have anything
to add to what is already been said?
Ms. Richards. I don't really have anything to add. I think
that the issues were correctly identified. It was a failure to
correctly identify the user requirements and then test what was
going to be purchased to make sure it would work, meet the user
requirements and work in that environment. It was a combination
of those two failures that led to the total issue with the
SBInet.
The framework that is in place in the Department has
specific gates in the acquisition review process to insist on
valid requirements determination and testing. If those gates
are enforced, this shouldn't happen again.
Mr. O'Rourke. When we talk about users, are you talking
about Border Patrol agents?
Ms. Richards. Yes.
Mr. O'Rourke. Okay. It seems as though--and what I hear
from them is they were not consulted prior to SBInet or these
virtual fence strategies.
Ms. Richards. I think the GAO did the majority of that
work, and Ms. Mackin might be better able to address that
accurately.
Ms. Mackin. I think that was part of the concern. I think
another issue was just the big rush to field this system before
the testing was done. There was a lot of money invested. There
was a lot at stake. I am not sure the contract type, per se,
being an IDIQ, was necessarily the problem, but that could have
contributed, because the contractor, I believe, really was
driving some of the decisions, as opposed to the Government
making some of those calls.
Mr. O'Rourke. Thank you. I appreciate your answers.
Thank you, Mr. Chairman.
Mr. Duncan. Thank you.
The Chairman will now recognize the gentleman from North
Carolina, who I know is not going to pull for the Wolfpack
against my Tigers tonight, but Mr. Hudson for 5 minutes.
Mr. Hudson. No, sir. My UNC Charlotte 49ers playing their
fourth game this weekend. We are not a challenger threat yet,
but maybe one day.
Thank you for holding this hearing today on this topic.
This is really important. It is a topic that has become very
important to me personally. As the Chairman of the full
committee mentioned, this past July, I introduced H.R. 2719,
which is the Transportation Security Acquisition Reform Act.
This bill requires TSA to implement best practices and improve
transparency with regard to security-based technology
acquisition programs.
Ms. Macklin, can you describe which GAO acquisition best
practices DHS has implemented? Maybe as a second part, are
there any best practices that you have recommended that have
not been implemented? I think that maybe helps frame this
debate a little. If so, which ones are the ones that you are
most concerned about that are not being implemented?
Ms. Mackin. I think, as I mentioned, the policy reflects
the best practices, from validating the user needs to
establishing the requirements, validating the cost and
schedule, demonstrating that technologies are mature before
they are fielded. That is very important. Ensuring that the
funding is there for the programs and that the program offices
are in a position with system engineers, cost estimators, and
so forth, to carry out the acquisition.
So to the extent that that some of these items would be
codified in statute, it probably wouldn't be a bad idea, but
they are already reflected in policy. So, again, the key is the
program managers themselves, understanding what is needed,
being structured properly to carry out the existing policy.
Mr. Hudson. Great. I appreciate that. My bill also requires
TSA to develop a multi-year technology acquisition investment
plan in consolidation with the under secretary for management,
the chief information officer, and the under secretary for
science and technology.
I would just open up to any of you. Do you believe this is
necessary to develop such a plan for the whole Department?
Please elaborate. I would open up to all the witnesses.
Mr. Borras. I would be happy to respond to that and perhaps
make a slightly larger point, but germane, I would hope, to
your question. The issue of looking at us, the DHS, in
comparison to other agencies, for example, like DoD, I think it
is important to note one very significant difference that I
would like to put on the record.
DoD by and large, not exclusively--and my friends here can
correct me if I am wrong--by and large have unified procurement
accounts. So when they spend money on procurement, they reside
in procurement accounts, and they are the same pretty much
across the board. We don't have that in DHS. We don't have a
unified procurement structure.
So I would say it would be of great value to us, because
some of our procurements reside in salaried expense accounts.
Some of them reside in O&M accounts. We don't have a unified
account structure in the Department. I know we have asked for
that from Congress in the past.
I know that there is no central repository for DHS funds
for procurement. In the absence of good financial management
systems, which I think my friends would agree, it is very, very
difficult, unlike my friends in the private sector where I come
from, where we had the ability to pull asset information,
financial information, have unified information. We don't have
that.
So I would suggest we look at going even further than that
in terms of just, you know, can we harmonize the procurement
accounts which would allow us and Congress, quite frankly, to
have a better look at where we are spending our procurement
dollars?
Ms. Mackin. I think those are valid points. At the Defense
Department, as was mentioned, there is a procurement account,
there is an O&M account, there is a personnel account. It is
easier to track the spending that way across the entire
Department, so I think those are valid concerns.
Mr. Hudson. Well, thank you for that. That is some good
feedback.
I would ask, also, has DHS developed an agency-wide
acquisition plan? Is it possible to do that under this current
structure? Are you saying we need to sort of restructure the
way those accounts are set up?
Mr. Borras. Well, it would certainly be, if not ideal, it
would be extremely helpful to have that in place, because,
again, the transparency issue is a little difficult, because
money is appropriated in so many different accounts. Plus, as
you well know, we don't have flexibility--think about it. TSA
has a different account structure and a different
appropriations structure than, for example, CBP. So TSA gets
largely multi-year money. Other components at DHS get 1-year
money. Again, it is very difficult to harmonize all of that to
create one consistent, solid acquisition plan.
I would love nothing more than to be able to have that. It
would help industry tremendously to know what we had and what
we were trying to buy and when.
Mr. Hudson. Thank you, Mr. Chairman. My time is expired.
Mr. Duncan. All right. The Chairman will now recognize the
big sky Congressman, gentleman from Montana, Mr. Daines, for 5
minutes.
Mr. Daines. Thank you, Mr. Chairman.
Prior to coming to Congress--I just was elected last fall--
I spent 28 years in the private sector, so I appreciate, the
most, private-sector instincts, perhaps, we can bring to make
our Government run more efficiently. For many of us who stood
outside the Federal Government and watching the way the Federal
Government behaved in procurement processes--and I say that as
having worked for a Fortune 20 company, having worked for a
family construction company, having worked for a start-up
company we took public and grew to 1,100 employees, so I got to
work in small, medium, and large businesses, the word was
always the best time to buy from the Federal Government--
everybody knows it--is when? We are now prime time.
In Montana, the elk go into their rut about this time of
year. So if you are elk-hunting in Montana, it is a special
time. If you are selling to the Federal Government, it is a
very special time, because it is--you either spend your budget
or you lose it.
I am curious to see--and Mr. Borras, you mentioned you
spent time in the private sector--what are we doing to break
that culture, incentives so that managers in DHS are
incentivized to find ways to underspend their budget and reward
for that versus spend it or lose it?
Mr. Borras. Wonderful question. I don't know if I have
enough time today, let alone over the next week, to answer that
question. That is a fascinating topic. I, too, came back to the
public sector because I was confounded and mystified by some of
these same issues, the way the Government buys--a couple of
things.
We have no incentives, truly incentives, to save money. It
is talked about often in Government that people spend their
money because they want to obligate everything that was
appropriated, because if they don't, it will get rescinded and
taken away. I think that is sort of a negative incentive.
We should be incentivizing programs and agencies to find
ways to save money and, as we would do in the private sector,
you could incentivize them, so if you save X percent of the
money, you can keep, you know, 1 percent of that savings to
invest in your people, for example, ways to incentivize people
to spend less money.
I want to say this in the most appropriate way. It has been
very difficult, though, since I have been back in the Federal
Government--we have operated under 11 continuing resolutions,
and we are about to enter in another one. I am not here to make
political statements other than to say it is very, very
difficult to manage 3 months at a time, because every
continuing resolution is, in effect, a fiscal year, with
constraints that says no new starts and other requirements.
What it has done, for example, this year, it pushes so much
of the spending into the back end of the year. We don't like
it, meaning we in Government. Nobody likes to do that. We
spend, I think at DHS, maybe 40 percent of our dollars in the
last, you know, couple of months of the year. That is a----
Mr. Daines. What about the last week?
Mr. Borras. Well, hopefully not the last week. Hopefully
the last week we are down--I think we are--we have gotten
pretty good about getting our work done.
Mr. Daines. Yes. We just saw some amazing things standing
on the outside of what was spent the very last week of the
Federal fiscal year. I think if the taxpayers really saw what
is going on here, they would be astounded by that. I was struck
by the comment that--and I appreciate, you know, your fighting
that battle, and we have got plenty of problems here in
Congress. We can't pass a budget. We are operating on C.R.s.
But the statement that there aren't any incentives to
incentivize staff to find ways to spend under the budget is
troubling. If businesses, if families ran their budgets that
way, we wouldn't be in business, and we wouldn't be able to
keep our family households solvent, and herein lies why we
probably stand here staring at $17 trillion of debt. It is not
the only problem. It is just one of many here that we have to
address, I think, in terms of performance and incentives.
I am curious. Any other comments from our other witnesses
in that topic?
Ms. Mackin. I would just add, we do Federal contracting
reviews across many Government agencies. The fourth quarter
spending is certainly not unique to DHS. Every agency is kind-
of faced with those same issues, in part due to C.R.s, in part
due to other reasons.
We have reported on this before in several reports, so----
Mr. Daines. Is there any hope, as a taxpayer--and we are
all taxpayers--that somehow there would be incentives put in
place that would reward our public servants for underspending
their budgets?
Ms. Mackin. I am not aware of anything coming down the pike
in that regard.
Mr. Daines. Then last, on pay and performance, when people
are not performing up to standards--I am not talking about
terminations for cause, but for performance--does that happen
in DHS?
Mr. Borras. Let me make sure I understand your question
correctly, because I certainly want to answer you as accurately
as possible. Are you asking if we have pay-for-performance
requirements in the Department?
Mr. Daines. So I jumped to one of the topics. Really, back
to performance management--we will separate the pay side for a
moment. Never mind that.
Mr. Borras. Okay.
Mr. Daines. But our--do employees in DHS--are there ever
employees terminated in DHS other than for cause? You
understand what cause means?
Mr. Borras. Uh-huh.
Mr. Daines. Okay, for performance?
Mr. Borras. Well, that would be cause.
Mr. Daines. Well, no, cause is, in terms of fundamentally
where there is usually theft, there is something in terms of
fundamental policy broken here. Cause means that there has been
some activity here outside of a standard--performance relates
to delivering results. So has there ever been--do you know of
DHS employees that have been terminated because they have not
performed to standards? Not talking about, again, cause.
Mr. Borras. Well, I couldn't give you a specific number,
but we certainly have a sizable number of terminations that
include performance. There have been recent accounts in the
newspaper at TSA, for example, where TSOs have been dismissed
for performance-related issues.
Mr. Daines. Yes, and just--and I know I am out of time
here--but the difference is, if they are somehow--if there is
theft somewhere, that is a cause issue versus performance, but
I am over my time, Mr. Chairman.
Mr. Duncan. I thank the gentleman. I would love to have
another round of questionings here, but in the essence of time,
with the votes being called this afternoon shortly, we are
going to go ahead and dismiss the first panel.
I thank you guys for being here. I know the challenge that
you have. Twenty-two agencies and a huge budget and trying to
do acquisitions and bring it all under one roof, and I would
just ask that, you know, you consider that, you know, they are
taxpayer dollars. Good stewardship of that money is important.
That is why we are having this hearing, just to make sure that
those dollars are spent wisely and that we stay on top of
things.
You know, I am encouraged by what I hear, but I look
forward to furthering this conversation. I think both sides of
the aisle want to see that we spend those tax dollars wisely,
efficiently, effectively, with ultimate mission of securing the
Nation, and so we understand that that is the overarching goal,
is to keep our homeland secured.
So with that, I will dismiss the panel, and we will call
Panel No. 2 up to the podium.
Okay, the Chairman is going to go ahead and call the second
panel to order. We are pleased to have additional witnesses
before us today on this important topic.
Let me just remind the witnesses that your entire written
statement will appear in the record. What I would like to do
is, I am going to introduce you and I am going to go ahead and
allow the first two panelists to do their opening statements.
We are not going to have time to go through all three. They
have just called votes.
So what we will do is we will recess after the first two
pending call of the Chairman. About 10 minutes after our votes
are finished up, come back in, take the opening statement from
our third panelist, and then get into questions, if you all
will bear with us on that.
So the first witness today, Mr. William Greenwalt, is a
visiting fellow with the Marilyn Ware Center for Security
Studies and American Enterprise Institute, where he analyzes
defense and aerospace acquisition issues and industrial-based
policy. Previously, Mr. Greenwalt served in the Pentagon as
deputy under secretary for defense for industrial policy and
advised the under secretary for defense for acquisition
technology and logistics on all matters relating to the defense
industrial base.
Mr. Greenwalt has also served Members of Congress of both
the House and the Senate. He has worked for Lockheed Martin as
director of Federal acquisition policy. Prior to joining AEI,
Mr. Greenwalt was vice president of acquisition policy at the
Aerospace Industries Association.
Our second panelist is Mr. Stan Soloway. He is president
and CEO of Professional Services Council, principal National
trade association of the Government professional and technical
services industry. Prior to joining PSC, Mr. Soloway served in
the Defense Department as deputy under secretary for defense
for acquisition reform and concurrently as director of
Secretary of Defense William Cohen's defense reform initiative.
Before his appointment to DoD, Mr. Soloway was a public policy
and public affairs consultant for more than 20 years on
acquisition privatization and outsourcing issues.
Our third panelist, Mr. David Berteau, is a senior vice
president and director of the Center for Strategic
International Studies international security programs, also
director of CSIS defense industrial initiatives group covering
defense management, programs, contracting acquisition, and the
defense industry.
Prior to joining CSIS, Mr. Berteau was the faculty director
of Syracuse University's National Security Studies Program and
has 15 years of senior corporate experience. He has also held
senior positions in the Defense Department under four defense
secretaries. Clemson will play Syracuse this year, now that
they are in the ACC. So I recognize that.
So we are going to go ahead and recognize the first two
panelists, as I said. So, Mr. Greenwalt, we will recognize you
for 5 minutes for your opening statement.
STATEMENT OF WILLIAM C. GREENWALT, VISITING FELLOW, MARILYN
WARE CENTER FOR SECURITY STUDIES, AMERICAN ENTERPRISE INSTITUTE
Mr. Greenwalt. Thank you, Mr. Chairman, and thank you for
all the Members. I appreciate the opportunity to address the
acquisition reforms lessons learned from the Department of
Defense and the private sector and how they may apply to the
acquisition practices of the Department of Homeland Security.
The committee's interest in acquisition reform is timely,
as I believe that a greater focus on these issues not only has
the potential to enhance National security, but also save
billions of taxpayer dollars. The last set of meaningful
comprehensive acquisition reforms coincided with the onset of
budget austerity at the end of the Cold War. These bipartisan
reforms result in the incorporation of commercial advances in
information technology and the adoption of some of the best
commercial business practices of the time, many of them
identified by the GAO and the work done by their organization.
Ironically, the budget increases of the last decade have
not been kind to that reform effort. The rapid inflow of
dollars to agencies often led to acquisition practices that
were not as frugal or commercially-oriented as they should have
been.
At the risk of making lemonade out of lemons, sequestration
and the Budget Control Act offer the opportunity to refocus the
Government and oversight agencies on the bottom line and to
implement the acquisition reform goals in the mid-1990s.
There are many lessons learned that can be gathered from
studying DoD's acquisition practices since the end of World War
II. Some of these are good; some of these are bad. I have
developed--I have tried to develop for the committee's
consideration what I think are the most significant guiding
principles and recommendations which I hopefully--you will find
useful as you look into these acquisition issues.
The first principle--and one I think is extremely
important--is Government-unique is expensive. Exquisite
solutions oftentimes have exquisite price tags. The more you
have a dedicated industrial base that just serves the
Government, the more expensive it will be. Any rule or
requirement that only impacts the Government market and not the
commercial market will add cost. The lesson here, leverage the
commercial marketplace wherever you can and those business
practices wherever you can.
Principle No. 2, be wary of one-size-fits-all solutions.
Whenever a problem is found with acquisition--normally in a
scandal of some sort--there is a tendency to find a one-size-
fits-all solution. You need to determine whether the problem is
systemic or localized.
As far as where I would look in issues with acquisition, I
will put them in a number of different buckets. I would look at
the acquisition workforce. I would look at requirements. I
would look at systems acquisition. We spent a lot of time in
the first panel talking about systems acquisition. I would look
at research and development, IT and services, and look at
different best practices in all of these areas.
The first area that I would spend on would be the
acquisition workforce, and I think Mr. Soloway is going to have
a lot to say on that, but there are some lessons learned from
DoD that you can look at, and one potential lesson learned is
the establishment of what is called the defense acquisition
workforce development fund, which allows actually some of those
incentives to save some money that the Congressman from Montana
was discussing.
Second area I would say is don't replicate solutions that
already exist. One of the most wasteful things the Government
can do is use its limited research and development dollars in
things that already exist. The requirements process here has to
be reformed and to accept an 80 percent solution. To accept a
commercial solution, to accept a solution that has already been
developed by the rest of the Government and bring that in.
There is always the chance, there is always an incentive to
try to get more. When you do get more, you end up asking for
those exquisite solutions, which drive costs.
The third area in the systems acquisition is to try to
limit the number of large programs, to make it very difficult
to get through a new program. I think the criteria that GAO
lays out is the correct one, but those have to be disciplined.
The requirements have to be disciplined. The budget has to be
disciplined, and so on.
Fourth area and a lesson learned that I think DHS can look
at is to learn from the rapid acquisition process in the
Department of Defense. That process has taken the users out in
the field and driven rapid solutions in a 6-month to 24-month
time frame to get equipment out in the field. Most of those are
commercially-oriented or very rapid type of things. They are
smaller, but they are definitely something that the committee
should possibly take a look at.
The fifth and final area I would look at is commercial
services and information technology. GAO has identified a
number of best practices in that area. The big bottom line is,
there is a big commercial marketplace out there. I would buy
commercial wherever you can.
So in conclusion, these are about a few ideas for the
committee to consider as it looks to reform the acquisition
practices of the Department of Homeland Security. I think there
are many more best practices out there. I commend the committee
as it first looks for lessons learned to help guide its
oversight efforts in the area. Thank you.
[The prepared statement of Mr. Greenwalt follows:]
Prepared Statement of William C. Greenwalt
September 19, 2013
Thank you for the opportunity to address acquisition reform lessons
learned from the Department of Defense and the private sector and how
they may apply to the acquisition practices of the Department of
Homeland Security. The committee's interest in acquisition reform is
timely, as I believe that a greater focus on these issues not only has
the potential to enhance National security, but also save billions of
taxpayer dollars.
The last set of meaningful, comprehensive acquisition reforms
coincided with the onset of budget austerity at the end of the Cold
War. These bipartisan reforms were led by the Department of Defense and
the House and Senate Defense Authorization Committees and resulted in
the incorporation of commercial advances in information technology and
the adoption of some of the best commercial business practices of the
time. Ironically, the budgetary increases of the last decade have not
been kind to that reform effort. The rapid inflow of dollars to
agencies often led to acquisition practices that were not as frugal or
commercially oriented as they should have been.
In the last 5 years, the Department of Defense and the rest of the
Federal Government have been on an accelerated path to a return to the
acquisition practices of the 1980s, which were a morass of unique
Government regulations and rules. This approach, which was later the
subject of the 1990s acquisition reforms, was not attractive to the
most creative and innovative companies at the time and did not return
value to the taxpayer.
During the 1980s, information technology bought by the Government
was generations behind what was available in the commercial
marketplace. Government-unique contractors bid on rigid Government
requirements and specifications that were drawn up by Federal
acquisition officials whose main preoccupation seemed to be to avoid a
bid protest. The result was an adversarial system where low-price
shoot-outs for mythical programs that could not be executed were the
norm. Meanwhile, a parallel commercial market existed that refused to
do business with the Government but could solve many of these ``gold-
plated'' requirements at a fraction of the cost.
The 1990s acquisition reform initiatives and legislation focused on
best value and commercial item contracting and tried to change this
situation. This approach was enshrined in a memo from then Secretary of
Defense William Perry in 1994, as well as the 1994 Federal Acquisition
Streamlining Act and the Clinger-Cohen Act of 1996, which all made
significant progress in the immediate decade after implementation.
However, the Federal Government's recent shift to LPTA (Low Price
Technically Acceptable) contracting and the return of a rules-based
compliance culture that continues to add costs is rolling back the
advances made in the past 20 years of acquisition reforms.
Sequestration and the Budget Control Act offer the opportunity to
refocus the Government and oversight agencies on the bottom line and to
implement the acquisition reform goals of the mid-1990s tailored to any
new circumstances from the last 2 decades. Nothing focuses minds faster
than having to live within a constrained budget--be it your
household's, company's, or agency's. These kinds of acquisition reforms
are absolutely necessary at DoD and DHS, as without them and a
corresponding change in business practices, budget reductions could
result in a significant decrement to National security. The old adage
to do more with less has to become a reality and the only way to do
that is to take advantage of advances in technology and change
underlying ways of doing business at the National security agencies.
There are many lessons learned that can be gathered from studying
DoD's acquisition practices since the end of World War II. The key is
to identify which best practices could be replicated at DHS and which
so-called ``best practices'' are really dead-ends that have added costs
but no value to the taxpayer or to our National security. Based on this
history, I have developed for the committee's consideration what I are
think are the most significant two guiding principles and five
recommendations.
But before I delve into those, one lesson learned from past
successful acquisition reform efforts is that they need significant
Congressional involvement from Members and staff steeped in common
business sense to gain any traction. Without some kind of Congressional
interest and sanction, Executive branch bureaucracies will tend to
ossify the acquisition system into a one-size-fits-all, cookie-cutter,
rules-based approach that is not nimble enough to execute deals that
are in the best interest of the taxpayer.
Acquisition policy is not rocket science but it is complicated. As
you delve into this issue, if something doesn't meet the common-sense
test it is probably an area that needs reform or at a minimum a clear
justification of its existence.
With that being said, I believe there are two guiding principles
Congress should use when addressing acquisition reform proposals.
Principle No. 1.--Government-unique is expensive. Exquisite
solutions oftentimes have exquisite price tags. The more you have a
dedicated industrial base that just serves the Government--the more
expensive it will be. Any rule or requirement that only impacts the
Government market and not the commercial market will add cost.
Requirements for information in formats not used in the commercial
marketplace or for data that is not normally collected by companies all
have a cost and the taxpayer pays for it--whether it is an increase in
the costs of goods and services provided or from the reduction in
competition and innovative ideas from those firms who chose not to
comply with unique Government or agency requirements and exit the
business.
Let me be clear, some level of unique Government procurement rules
and oversight are necessary, but they have to be carefully assessed to
ensure that they do not drive perverse incentives in the industrial
base and in the agency. Congress needs to ensure that the current
acquisition laws, regulations, policies, and rules are adding value and
not destroying it and meet a clear cost-benefit test.
Principle No. 2.--Be wary of one-size-fits-all solutions. Whenever
a problem is found with acquisition, it first has to be determined if
it is a systemic problem or a localized one. The acquisition system is
currently plagued with a lot of legislation, regulations, rules, and
policies enacted to address a singular scandal or perceived problem
that are not appropriate to all types of acquisitions. Many solutions
will likely have to be tailored to specific types of acquisitions--but
always keep in mind Principle No. 1.
There are three types of acquisition I would focus on: Large
Governmental systems similar to DoD weapon systems, services, and
information technology. Within each of these types there are several
categories of potential acquisitions depending on the application, the
industrial base, and whether or not there is a compelling need for
speed or innovation.
For example, shipbuilding is different than buying ground vehicles.
Buying desktop computers will be different than a data analysis system
that incorporates information from multiple sensors and sources.
Construction services are different than medical services. Buying a
vehicle for immediate deployment to protect troops from daily attacks
from roadside bombs is different than upgrading a truck used on
domestic military bases. Each category potentially has its own best
practice that might require a tailored legislative or regulatory policy
approach. Legislating to address a problem with systems acquisition
brought on by a shipbuilding issue in the Coast Guard with a sole-
source Government-unique contractor may be counterproductive if applied
to information technology and services acquisition with plenty of
competition and commercial alternatives.
One also has to be deliberate about what you want the acquisition
system to do. Right now the acquisition system is asked to be
efficient, effective, transparent, competitive, fair, innovative, and
accountable--all noble principles but unfortunately all meaning
different things to different people. Disagreements in what these
principles mean and how they should apply can lead to oftentimes-
disastrous consequences for the Government. The laws, regulations, and
processes involved in many of these principles can lead to a trade-off
between these principles, as they are not necessarily complementary.
For example, an across-the-board initiative to improve
accountability triggered by an agency contracting scandal (which might
seem like a positive thing to do) could see a drop in efficiency,
effectiveness, and innovativeness in the acquisition system due to new
administrative burdens placed on the system. Too many of these burdens
might lead commercial contractors to leave the marketplace or establish
costly separate Government-unique entities within their firms to comply
with these new accountability measures. The first question to ask in
any procurement scandal is whether existing law is working. If law
enforcement has the tools to deter, identify, and prosecute cases of
procurement fraud as it did in the recent Army Corp of Engineers
kickback case, there is probably no reason to act.
I would propose the following five recommendations to improve
acquisition at DHS:
(1) Professionalize the acquisition workforce.--Without a
professional workforce that can exercise sound business judgment,
successfully executed programs in the Government will be a rarity.
DoD's acquisition workforce will face significant challenges ahead;
particularly as older, more experienced acquisition professionals
retire. Still, from most observers I have talked to about DHS, it
appears that DHS' acquisition workforce is far behind the
professionalism and experience level of the DoD acquisition corps.
So as a first step the committee may want to consider adopting
DAWIA (Defense Acquisition Workforce Improvement Act) standards for
DHS. It also may want to consider a funding mechanism such as found in
the DAWDF (Defense Acquisition Workforce Development Fund) to pay for
training and workforce development. Still, questions have been raised
about the quality and implementation of the DAWIA-required education
and training provided by the National Defense University. The committee
may want to look at other outside-the-agency training options for DHS,
be they from public universities or the private sector.
As this workforce development will be a long-term project, the
committee may want to consider in the short-term centralizing the best
acquisition talent in the Department to specialize in certain types of
procurements and buy for the entire enterprise. Centralization,
however, runs the risk of the creation of bureaucratic barriers that
make it more difficult to award contracts--so only the most difficult
acquisitions or categories of acquisitions should be considered for
this option.
DHS could also consider contracting out for acquisition assistance
from non-conflicted firms in areas of systemic workforce weakness. The
National Reconnaissance Office (NRO) since the 1960s has done something
similar to access non-conflicted (Organizational Conflict of Interest
or OCI-free) systems integration experience that it lacked to help it
deal more effectively with its contractors.
If, after a few years, the committee is still not satisfied with
the progress in developing an adequate DHS acquisition workforce it
should follow the progress of a potential British experiment. In the
United Kingdom, the British Ministry of Defense (MOD) is proposing to
contract out the entire acquisition function to a private non-
conflicted firm. The British MOD, if it actually does this, would be
embarking on a grand experiment in government acquisition and if it
were successful would have significant lessons learned for the U.S.
Government.
(2) Don't replicate R&D for solutions that already exist.--One of
the most wasteful things the Government can do is use its limited
research and development (R&D) funds on things that already exist. Yet,
there is a tendency to do exactly that in the Government where a ``not-
invented-here'' syndrome tends to prevail. Replicating has two costs--
duplication but also in opportunity costs from lost R&D that cannot be
applied to other solutions.
DHS' contract spend of $12.4 billion in 2012 is unlikely to drive
many commercial markets. If DoD, which contracted for over $361 billion
in goods and services in 2012 (or another agency), has already
developed something that works, DHS should buy it off the shelf. The
same applies to the commercial marketplace. That this doesn't happen
(even at DoD) is a problem with the requirements portion of the
acquisition system. It is a difficult sell within DoD to only accept
80-90 percent of what they think they might need. Instead DoD tends to
embark on 15-year development programs and invest billions of dollars
that never quite meet those requirements when they could have had
something deployed immediately that meets most of the users needs for a
fraction of the eventual cost of the ``required'' system.
As a tool to guard against this, an agency needs to have conducted
significant pre-program market research before it embarks on a
procurement to really know what is already out there in the commercial
market or has been uniquely developed and successfully deployed in the
other Government agencies. The agency will likely need some kind of
robust requirements review process charged with disciplining unique
requirements both prior to and after program initiation. Even when an
agency does buy ``off the shelf'' there is a real danger that
subsequent needs for ``minor modifications'' will equate to large
dollars in development costs. The requirements system needs to be
effectively disciplined to prevent this from happening. DoD's
experience with configuration steering boards, while still in its
infancy, may be one way of trying to enforce this kind of discipline.
I will digress for a moment to discuss why leveraging other
people's money is so important. At one time the Federal Government and
DoD dominated R&D spending. For example, according to figures compiled
by the National Science Foundation, the Federal Government provided 67%
of R&D funding in 1964 and served as the driver of innovation in the
economy. Today, the private sector now provides over 60% of R&D funding
and accounts for over 70% of its performance and is where innovation is
concentrated.
But that is only here in the United States. Global R&D now stands
at almost $1.5 trillion a year. There has been a significant trend in
the globalization of R&D in the last several decades so that now U.S.
R&D is only 28% of global R&D and the U.S. Government's share is now at
around 11%. And unlike in the past there are now many more avenues for
solutions out there than just U.S. Government-unique research and
development. DHS with its limited R&D funds could try to go it alone,
but a more prudent use of funds would be to only spend its R&D on
something that no-one else is doing and leverage off of everyone else,
first by looking at the portion in the U.S. Government's portfolio,
then U.S. commercial, followed by the R&D conducted by allied
governments and finally in the global commercial market.
(3) Make it really hard to start a new ``too big to fail'' program
and then enact a strong Nunn-McCurdy like system to cancel programs if
they do not meet goals.--By first buying systems as much as possible
off the shelf, it would be hoped that there would be very little that
DHS would be doing that is DHS-unique in systems acquisition. It would
be expected after comparing contract spending at DoD and DHS, that DHS
would only have a handful of programs that are equivalent to DoD's
MDAPs or Major Defense Acquisition Programs. However, the committee may
want to focus its oversight on programs with a smaller dollar threshold
than the legislated DoD MDAP threshold.
Major systems acquisition is one area where there are significant
lessons to be learned from DoD. DoD has a history of great
technological innovation and periods of technological evolution that
involve incremental improvements to existing systems. We are currently
in one of the latter periods with innovation being primarily driven by
the commercial market and rapid acquisition programs outside of the
traditional DoD acquisition process.
Throughout both types of periods there has been one constant--cost
overruns, schedule slippages, and performance issues. Ron Fox from the
Harvard Business School in his aptly titled book ``Defense Acquisition
Reforms 1960-2009: An Elusive Goal'' sets the stage on the history of
acquisition reform with regards to large systems development:
``Defense acquisition reform initiatives have been Department of
Defense perennials over the past fifty years . . . Many notable studies
of defense acquisition with recommendations for changes have been
published, and each has reached the same general findings with similar
recommendations. However, despite the defense community's intent to
reform the acquisition process, the difficulty of the problem and the
associated politics, combined with organizational dynamics that are
resistant to change, have led to only minor improvements. The problems
of schedule slippages, cost growth, and shortfalls in technical
performance on defense acquisition programs have remained much the same
throughout this period.''
Fox begins his history by referencing the first large-scale
acquisition reform study of the 1960's--The Weapons Acquisition
Process: An Economic Analysis, by Merton J. Peck and Frederic M.
Scherer published in 1962. This study reviewed the results of weapons
acquisitions of the 1950s and identified six major problems with these
acquisitions: ``(1) Schedule slippage; (2) cost growth; (3) lack of
qualified government personnel; (4) high frequency of personnel
turnover; (5) inadequate methods of cost estimation; and (6)
insufficient training in the measurement and control of contractor
performance.'' Fox comments on Peck and Scherer's conclusions: ``Fifty
years later, acquisition reforms continue to seek remedies to the same
problems.''
GAO and others have tended to coalesce around the following
solutions to cost, schedule, and performance problems at DoD: The need
for stable requirements; stable budgets; proven and mature
technologies; and stable personnel. Many of these ideas were
incorporated for DoD into law in the last couple of years to ensure
that early on in a program these objectives are met in what is called a
Milestone B certification (Section 2366b, Title 10 U.S. Code), which is
at the end of DoD's technology development phase of acquisition. This
should be a difficult hoop to get through and large programs should not
be initiated and significant funding brought to bear until there is
equivalent type of certification at DHS. The committee may also want to
consider only approving programs at Milestone B that will be completed
and deployed in less than 3 to 5 years. There is no reason that DHS
should emulate DoD's overly lengthy 15-20 systems acquisition time
cycle.
If a program at the equivalent of Milestone B meets these criteria,
there should be a better chance of the program to successfully meet its
cost, schedule, and performance goals. Once this certification by the
senior acquisition official in the Department is made, you may want to
consider adopting some type of Nunn-McCurdy reporting and oversight
requirements for DHS. Because costs estimates for the program should be
more realistic at Milestone B, this is when I would recommend beginning
the Nunn-McCurdy baseline. Past practice often had DoD setting this
baseline earlier without meeting the objectives in what is now
contained in the Milestone B criteria. These premature baselines
resulted in unrealistic expectations for the program and subsequent
Nunn-McCurdy cost breaches. With a more realistic cost estimate
established at Milestone B, if programs do exceed the ``critical'' cost
overrun thresholds set in Nunn-McCurdy, the program should be cancelled
in all but exceptional circumstances.
(4) Establish an Innovation Fund that allows for the rapid
deployment of operational prototypes and the maturation of technology
to support systems acquisition.--To get to the level of technological
maturity necessary for large programs to meet their Milestone B
certifications and to continue pushing the technological envelope in
areas necessary to meet changing National security requirements, the
committee should look at DoD's informal rapid acquisition system that
developed to meet wartime needs over the last decade. These programs
should be relatively small and focused on deploying operational
capability in parts of the agency in a 6-month to 2-year time frame.
Because of the inflexibilities usually inherent in agency budget
systems, I would recommend establishing some type of flexible R&D fund
that can quickly fund rapid prototyping initiatives similar to the
rapid equipping initiatives in the military services. These rapid
operational prototypes could be initiated by a similar requirements
process developed in DoD known as the JUONS (Joint Urgent Operational
Needs Statements) process.
These types of initiatives serve several purposes. The first is to
get technology out into the field faster and meet user requirements in
a compelling need situation. The second is to prove technology at a
smaller unit level that could be potentially scalable and transferred
into a major systems program. A third outcome is that short time frame
to deployment forces the agency to incorporate off-the-shelf
technologies quickly into new types of capabilities. To get some
commercial companies who might not otherwise participate in DHS
acquisitions, these rapid prototypes may require the use of DHS' other
transaction authority.
(5) Services and IT acquisition: Identify and adopt commercial best
buying practices.--DoD is a large buyer of services, on which it spends
more than half of its contract dollars. It also is a large buyer of
information technology (IT). Needless to say these are different kinds
of procurements than weapon systems. It would be expected that most of
DHS' future contract dollars will be spent in these two areas as well.
Back in the 1990s and early 2000s, Congress asked GAO to go out and
determine the best commercial practices for these types of
acquisitions. This was different work for an agency more used to
compliance auditing, but GAO rose to occasion and created an
exceptional body of work. Much of it was then incorporated into the
information management provisions of the Clinger Cohen Act of 1996 and
the services acquisition management provisions in various National
Defense Authorization Acts of the early 2000s. These reforms and GAO
reports currently serve as the basis for ``best practices'' for buying
IT and services in the Government.
Since that time, there has not been a lot of ``best practices''
oversight to be found in the Government. Since this work is now 10-20
years old it is probably time to task GAO (or another entity if GAO no
longer has the right expertise to perform such an evaluation) to re-
look at some of these best practices. It could be assumed that the
private sector, some U.S. Government agencies and other governments
(either State or foreign) have developed new ways to better manage the
purchases of IT and services. These new best practices could be used to
update the Clinger-Cohen Act, Title 10, and any Government-wide
services acquisition legislation and regulations.
In conclusion, these are but a few ideas for the committee to
consider as it looks to reform the acquisition practices of the
Department of Homeland Security. I think there are many more ``best
practices'' out there and I commend the committee as it first looks for
lessons learned (both good and bad) to help guide its oversight efforts
in this area. I look forward to any questions the committee might have.
Thank you.
Mr. Duncan. Thank you so much.
Mr. Soloway, you are recognized for 5 minutes.
STATEMENT OF STAN SOLOWAY, PRESIDENT AND CEO, PROFESSIONAL
SERVICES COUNCIL
Mr. Soloway. Thank you, Mr. Chairman, Mr. Barber, Members
of the committee, appreciate the opportunity to be here today.
Before I get started, if you would permit me, I would like
to associate myself also with the words of condolences that a
number of you uttered with regard to the great tragedy at the
Navy Yard that took the lives of civil servants, law
enforcement, military, and Government contractor personnel.
This is a shared loss for all of us in the greater community. I
was pleased to hear that Mr. McCaul mentioned that there was a
possibility to be looking into some of the security clearance
issues and so forth, and we would certainly very much like to
be a part of that conversation, since the clearance
requirements for contractors are exactly the same and conducted
by the same entities as they are for Government employees and
others. We have a shared responsibility to make sure we have it
right, and we look forward to having that conversation with
you.
With regard to today's hearing, I will just quickly
summarize the written testimony that we submitted. My testimony
is largely founded in the report that Mr. McCaul mentioned in
his comments that we issued on September 9 called ``From Crisis
to Opportunity.'' This was a commission that we convened of 19
executives to look at some of the systemic barriers to
innovation, efficiency, and effectiveness across Government,
particularly in the acquisition, integration, and utilization
of professional and technology services, but even more broadly
than that.
Although it is designed as a Government-wide review, I
believe the findings and recommendations we reached are very
relevant at DHS. In fact, we have already briefed some of the
DHS officials, and Mr. Borras will be meeting with us shortly
to go in more deeply into the recommendations that we had.
Second, as an opening thought, I just want to share the--
while this hearing has in its title ``lessons learned from
DoD,'' as an individual who sat in that chair at DoD in the
late 1990s during the last movement towards acquisition reform.
There are clearly some lessons, but I think they are very
limited. I think that DoD has a long way to go, and I would
argue that many of the recommendations of our commission apply
just as equally to DoD, as they do to DHS and other agencies.
In fact, DoD has spent $2 billion--with a B--in workforce
development in just the last 5 years. According to the
acquisition leadership within DoD, within the services and the
components, the improvement has been minimal at best.
Our report is founded in a set of overarching tenets and
findings that we came to through 6 months of work. Let me just
summarize them very quickly. The Government is in the midst of
an all-too-often ignored or underappreciated series of
interconnected crises. It faces stunning demographic
imbalances, particularly in the technology workforce, a risk-
averse culture in which real innovation is present, but is
widely the exception, poor collaboration and communication, not
just between the Government and industry, but within Government
functions themselves, an outdated and ineffective approach to
workforce development and training, particularly in
acquisition, and, of course, hovering above all, the fiscal
crisis.
At the same time, we see these crises as a great
opportunity. We have made a series of recommendations designed
to address them--to move towards that opportunity in the areas
of human capital, innovation, achieving excellence, and the
role of industry.
The recommendations are contained in the full commission
report. With your permission, I would like to ask that it be
included in the record of the hearing.*
---------------------------------------------------------------------------
* The Professional Services Council's 2013 Leadership Commission
final report, ``From Crisis to Opportunity: Creating a New Era of
Government Efficiency, Innovation and Performance'' has been retained
in committee files, and is also available at http://www.pscouncil.org/
c/p/2013_Commission_Report/2013_Commission_Report.aspx.
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They are as follows, in general: First, we need to
fundamentally rethink the way in which the Government develops
and trains its workforce, particularly in acquisition and
information technology. The first panel had some very
interesting and important insights into process and policy
compliance, but ultimately none of that will matter if we don't
have the right workforce with the right preparation and the
right skills at the right place at the right time. We are
concerned, as are our colleagues in Government, that that is
not today the case.
For the acquisition community, the opportunity exists today
to make massive change because of the generational change
taking place and to therefore focus like never before on
critical thinking, business acumen, technology acquisition and
integration, and other core skills, which, according to our
2012 survey of Government acquisition officials are in woefully
short supply. For the technology workforce, the challenge is
slightly different, and this was one of the more stunning
revelations that came to us.
The information technology workforce in Government has
perhaps the worst demographics of any key workforce. It almost
nine times as many people over 50 as under 30, less than 5
percent of the workforce is under 30, the over-60 cohort is the
highest it has been in 10 years, and the under 30 cohort is the
lowest it has been in 10 years. That, I would argue, is a
symbol of the Government's difficulty attracting and retaining
key technology talent and is a powerful argument for an
entirely different way of approaching strategic human capital
planning across the Government.
When it comes to innovation and collaboration or
performance, we have made a series of recommendations to
require such things as all program offices entering into an
open and collaborative dialogue with their private-sector
partners to jointly identify sustainable efficiencies, rather
than just simply chopping or cutting margins. This in the long
run will achieve--help us achieve success in not only
sustaining efficiency, but also building partnership.
We have also developed a new taxonomy designed to help
guide smart acquisition strategy, particularly for the
acquisition of complex services, which is lacking today and
throughout the Government, despite the details of the Federal
acquisition regulation. We also have an acquisition environment
overly dominated by a default to low-priced technically-
acceptable awards, which in the end result in a less innovative
and agile supplier base, higher cost to the taxpayer, and
offering lower quality. So many of our recommendations around
workforce development, the creation of business acumen, a
culture of innovation, collaboration, reward, and incentives is
designed to overcome that kind of a tendency.
Finally, we have made a set of commitments from an industry
perspective where we are going to continue as an organization
to invest our resources to develop templates that would help
the Government better distinguish the value of key proposal
discriminators, so they can comfortably avoid the trap of low
bids. We are also going to work with the Government on a series
of training modules designed to help provide the workforce with
the key tenets of some of the new models of technology
acquisition, particularly around things like infrastructure as
a service, like cloud computing, and so forth, which entirely
change the old models.
As one CIO put it to us, when we were doing the commission,
one Federal CIO, he said the world is revolving around apps. We
don't have an acquisition process for apps. You have the idea,
and you field in 6 weeks? We are lucky if we can get the first
requirements done in 6 months.
So that is the kind of thing that we want to work with the
agencies on improving, but overall, I think from a homeland
security perspective, these are opportunities to build on what
they have already started. The Homeland Security Acquisition
Institute is an excellent idea, but it needs to be limited in
its focus so they can open the aperture to a very wide array of
otherwise available and widely-used best practices training
across the commercial space.
DHS leadership has been in the vanguard of pushing greater
collaboration, greater communication. It is not happening at
the front line, but we need to continue to push that. They have
also started a rotation program for acquisition employees which
needs to be expanded to functional, as well as organizational
rotation, so people, as you do in the best of the private
sector, get experience in different parts of the company, in
different functions to best understand their specialties.
There are a wide range of opportunities here. The details
are all contained in our report. We face a very real set of
challenges and crises, and we look forward to working with the
committee and the Department on trying to turn those crises
into a real opportunity, and I thank you very much for the
opportunity----
[The prepared statement of Mr. Soloway follows:]
Prepared Statement of Stan Soloway
September 19, 2013
Mr. Chairman, Congressman Barber, Members of the subcommittee.
Thank you for the invitation to testify before you this afternoon on
behalf of the Professional Services Council's 370 member companies and
their hundreds of thousands of employees across the Nation.\1\ As DHS
enters its second decade of existence, the time is right to assess what
more can be done to improve overall mission outcomes at the Department.
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\1\ For 40 years, PSC has been the leading National trade
association of the Government professional and technical services
industry. PSC's more than 370 member companies represent small, medium,
and large businesses that provide Federal agencies with services of all
kinds, including information technology, engineering, logistics,
facilities management, operations and maintenance, consulting,
international development, scientific, social, environmental services,
and more. Together, the association's members employ hundreds of
thousands of Americans in all 50 States.
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the psc commission and dhs
In fact, such a review is not just suitable for DHS, but for the
Government as a whole. It was with that intent that PSC launched, in
January of this year, its Leadership Commission. The PSC Leadership
Commission, comprised of 19 members of the PSC Board of Directors, was
spurred to action in large part as a result of the findings of PSC's
fifth biennial Acquisition Policy Survey, which suggested that after
more than a decade of trying to address well-documented shortcomings in
Federal acquisition, including human capital planning and workforce
training, and despite the investment of unprecedented financial
resources, little has changed.\2\ The commission was also spurred by a
series of conversations with Congressional staff who were also
searching for new ideas to help address seemingly intractable
challenges.
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\2\ See: ``The Unabated Crisis: The 2012 PSC Acquisition Policy
Survey'' December 2012. Available at http://www.pscouncil.org/i/p/
Procurement_Policy_Survey/c/p/ProcurementPolicy- Survey/
Procurement_Policy_S.aspx?hkey=835b11ac-0fe7-4d23-a0e0-b98529210f7e.
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Through 6 months of deliberations and dialogue with Federal
acquisition, information technology, and human capital professionals,
the commission reached a set of findings and recommendations that will
significantly inform my testimony today. Indeed, for DHS in particular,
where nearly 30 percent of the agency's budget goes to acquisition, and
information technology is key to all of its operational needs, the
commission's work holds substantial relevance. That relevance is
heightened by the fact that DHS's acquisition leadership has already
demonstrated an understanding of these challenges and an openness to
new strategies for improving the Department's performance.
Let me therefore start with a brief summary of the commission's
findings. With your permission, I would like to submit the entire
commission report for the record.
an underappreciated set of crises
Overall, the commission's findings can be summarized as follows:
The Government is in the midst of a human capital crisis
that is largely being ignored or underestimated. The crisis is
marked by astounding demographic imbalances, especially in the
technology workforce, a stark struggle in attracting key
talent, a quickly escalating pace of retirements, and,
according to our Government colleagues, significant gaps in
core acquisition competencies;
Federal acquisition and technology workforce training and
development continues to rely on internal mechanisms that do
not provide the critical thinking in business and risk acumen
so essential in today's marketplace;
Innovation, while present, remains the exception rather than
the rule;
Collaboration, both within Government and between Government
and its private-sector partners, is at low ebb, despite a range
of leadership initiatives, including at DHS, to reverse this
disturbing trend. In fact, one of the most significant findings
was that, according to our Government colleagues, collaboration
between acquisition and technology functionals is ineffective
and often non-existent, thus contributing to the difficulty in
aligning mission needs with that which is ultimately procured;
While the Federal Acquisition Regulation provides
substantial guidance for the establishment of acquisition
strategies, the Government lacks a foundational taxonomy that
helps inform and drive smart acquisition strategies; and
Industry must play a role in reforms, including finding ways
to address key Government concerns, such as the prominence of
award protests, and the difficulty assessing the objective
benefits of solutions being proposed.
Hovering over all of this, of course, is the crisis budgeting
environment in which every agency is now operating. That environment
inevitably results in sub-optimization of operations, a wide range of
procurement impacts, including lengthy delays, and much more.
I discussed this topic in testimony before the Senate Homeland
Security and Governmental Affairs Committee in June.\3\ It is a crisis
and challenge that is simply not adequately appreciated or understood
by many in the Congress or the general public.
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\3\ PSC's testimony from ``The Costs and Impacts of Crisis
Budgeting'' before the Senate Homeland Security and Government Affairs
Committee is available at: www.pscouncil.org/PolicyIssues/Legislation/
Appropriations/Testimony_to_HSGAC_on_The_Costs_and_Im-
pacts_of_Crisis_Budgeting.aspx.
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Among the other impacts of this troubling crisis are buying
strategies and behaviors that sub-optimize results and encourage penny-
wise and pound-foolish decisions. Examples include the over-use of
lowest price technically acceptable contract awards, the potential
over-reaching of the Government's otherwise well-intentioned strategic
sourcing initiative, and acquisition strategies that simply do not
reflect commercial best practices and that will likely result in simply
adequate, or worse, outcomes in lieu of excellence.
imbalanced perspectives on the industrial base
Further, what might be deemed to be a compliance rather than
performance and outcomes-focused acquisition process leads to
strategies that are ultimately destructive to both the Government and
industry. One good example is the current trend, now evident in many
agencies, including DHS, to use specific market segments as tools to
achieving small business contracting goals. We offer this observation
carefully, since a large percentage of our members are small firms and
we do not want to, in any way, indicate any lack of support for the
Government's small business programs. However, what we are seeing today
is inconsistent with the objectives of those programs and threatens to
significantly distort what should otherwise be a balanced industrial
base available to DHS and other Federal agencies.
This trend is manifest by acquisition decisions to set aside all or
most of entire categories of work for small businesses largely because
other categories do not lend themselves to, or have failed to achieve,
adequate small business participation. Further, at DHS and elsewhere,
we have seen very sizeable procurements set aside for small business
even though the sheer size of the procurements--sometimes as much as
$100 million or more--might well be inappropriate for performance by
small companies.
The effects of this type of imbalance is to both constrain
competition--since significant numbers of providers will be ineligible
to bid--and exacerbate a market balkanization that is already
threatening the viability of mid-tier firms and the long-term ability
of small businesses to grow and thrive beyond the restrictive small
business size standards. We are aware of cases where customers have
specifically asked their acquisition counterparts to not set work aside
because they wanted the fullest and most competitive field possible,
and have been denied because of other pressures generally unrelated to
the acquisition involved. And we are well aware of small businesses,
with ambitions to grow, that are managing their companies to remain
below the small business thresholds, thus defeating one of the
fundamental purposes of the small business programs.
Each of these effects are present throughout the components of DHS.
In fact, DHS has been considering a variety of ways to address this
imbalance. Three years ago, at the request of the Department, PSC
conducted an analysis of the Department's small business programs
where, among other things, we identified areas for improvement as well
as the need for a balanced industrial base.
limited lessons from the defense department
Given the title of this hearing, it would be a mistake to too
heavily rely on or look to DoD for solutions to the challenges facing
DHS. For one thing, the agencies are so vastly different in size and
need. For another, with the exception of DoD's ability to protect in
large part the funding needed to train its acquisition workforce, DoD
is struggling with many of the same challenges facing DHS and also has
a long way to go. Indeed, DoD has spent nearly $2 billion over the last
5 years on acquisition workforce development but, according to the
majority of its own acquisition leaders, has made little progress,
particularly when it comes to the acquisition of services. In fact, the
spending trend for DoD has been migrating towards the acquisition of
services--as opposed to hardware and major systems--for some 15 years,
yet DoD still does not have within the Defense Acquisition University a
curriculum to adequately prepare its workforce to effectively acquire
and integrate professional and technology services.
With those general findings in mind, I offer a set of
recommendations, based on the commission's report, which we believe are
highly relevant to DHS and could be of real benefit to its operations.
Moreover, we are convinced that the acquisition leadership within DHS
both understands many of the challenges we have identified and is
prepared, with the right leadership and Congressional support, to
pursue a number of these recommendations.
a new perspective on workforce development
First, with regard to the workforce, particularly but not solely in
the acquisition field, we believe it is time to fundamentally rethink
how this vital resource is trained and developed. It needs to start
with a more strategic review of the Government's human capital
realities. No longer can the Government assume, as too many would like
to, that the Government can simply decide what skills it wants to hire
and then do so. Instead, due to both its resource limitations and the
Government's abject difficulty attracting core skills, the Government
must carefully parcel its precious human capital resources in a
hierarchical manner that prioritizes the most critical functions,
rather than attempting to spread those resources on the basis of
traditional perspectives.
Acquisition is clearly a critical function in Government and to DHS
and is absolutely core to its missions. So, too, is information
technology. But where there are signs that the Government is able to
attract the requisite young acquisition talent to replace the rapidly
retiring more senior workforce, the same is not true in technology.
Thus, in acquisition, the biggest challenges are more in how that
increasingly youthful workforce is developed and trained, whereas in
technology the Government needs to address more broadly and
holistically how and where to deploy its scarce personnel resources. In
fact, the Federal information technology workforce today arguably has
the worst demographic imbalance of any Government workforce segment--
fully 8 to 9 times as many workers over 50 as under 30; the largest
over 60 cohort in a decade; the smallest peak career cohort of 40-50-
year-olds in a decade; and the smallest under-30 cohort in years. In
other words, the trends are going in precisely the wrong direction.
That strongly suggests the need for new thinking and action.
Specifically, the commission's recommendations include
substantially broadening the aperture of training for the acquisition
workforce, rather than relying solely on internal, and often overly
traditional, mechanisms. If the perceptions of Federal acquisition
leaders are true that the acquisition workforce lacks key skills in the
acquisition of complex information technology or in negotiations--the
essence of any business relationship--then something is fundamentally
wrong with how that workforce has been trained and developed to date,
no matter the amount of money or time committed to that training.
For DHS, this recommendation would build on efforts already under
way. While, on some levels, the creation of the Homeland Security
Acquisition Institute is a positive development and reflective of the
commitment of DHS leadership to workforce improvement, it could also
exacerbate their challenges. The key is to focus the Institute on
Government-unique processes while opening the door broadly to a wide
range of sources for much needed business and related training and
development. This has been a key mistake made by DoD, which continues
to pour money into and expand its own bricks-and-mortar training
infrastructure and rely on the same mechanisms for training delivery it
has for decades. DHS has a great opportunity to do something very
different.
Additionally, DHS labors under the same burdens that other civilian
agencies do--the lack of a clearly-defined, aspirational career field
for program managers. Across the civilian agency spectrum, there is
wide variance in the availability of qualified program managers--who
are absolutely essential to the effective execution of complex
programs. Thus, our commission has recommended changes to the Office of
Federal Procurement Policy Act that would both expand OFPP's workforce
responsibilities and enable the creation of such a technology career
path, replete with the requisite training, development, and
certifications.
Similarly, our commission made recommendations for cross-functional
rotations of personnel as well as cross-functional training, private-
sector exchanges, and the like. DHS already has in place an Acquisition
Professional Career Program, in which acquisition personnel do a series
of rotations in different DHS components. The program is an excellent
idea but could be substantially enhanced if the workforce were also
provided functional rotations. As is widely done in the best of
private-sector companies, such functional rotations build internal
knowledge, understanding, and long-term collaboration.
Another area where DHS is to be commended is with regard to its
recent initiatives to leverage the private sector to assist with its
training. Though small in scale, the effort recognizes that DHS can
learn from the experience of the private sector and that will help DHS
acquisition personnel understand how industry assesses risk and makes
key business decisions.
building an environment of collaboration & innovation
When it comes to collaboration, the DHS acquisition and technology
leadership have been among the most consistent advocates and
practitioners of enhanced internal and external collaboration and
communication. Unfortunately, the consensus among virtually all of our
member firms that support DHS is that the leadership exhortations are
not being heeded at the operational level. Given that close
communication between customer and supplier is widely seen as a key to
successful partnerships, this trend must be addressed aggressively.
While it will take time, there are a lot of additional steps that can
and should be taken.
Foremost, the current fiscal crisis offers a unique and powerful
opportunity to build a new culture of collaboration. Our commission has
recommended that all significant program offices be given, by their
individual component leadership, a reasonable but real target for
efficiency and savings, and then be directed to work directly with
their private-sector partners to collectively identify ways in which
real, sustainable program savings can be achieved. Both sides know they
are in this together; this kind of exercise could not only enable the
achievement of meaningful cost savings, but in the process also enhance
the internal and external collaborative relationships.
Additionally, the commission recommended a number of post-award
steps that can also enhance communications and understanding. For
example, the commission recommends two key enhancements to the post-
award debriefing process. First, that all debriefings be required to
include any and all levels of information that would otherwise be
attainable through a formal discovery process during a protest. This
will serve to help unsuccessful offerors submit more effective and
responsive proposals on future procurements and almost certainly reduce
the likelihood of protests. Second, each major acquisition should be
followed by a 360-degree debriefing, through which all offerors, and
internal agency stakeholders--including the operational entity for
which the acquisition was conducted--be given an opportunity to
evaluate the quality of the acquisition process itself. These
evaluations could be conducted on-line and anonymously and provide the
Government with valuable insights into how it can improve its processes
and thus its outcomes.
Connected to the issue of collaboration is that of incentivizing
innovation. A number of Government officials, including DHS officials,
have expressed concern that industry proposals are becoming
increasingly vanilla. Clearly, this is an issue industry needs to
address. At the same time, companies must continually evaluate the
degree to which a customer is seriously seeking innovation or simply
asking for the same service at a lower price. To a great extent, this
can all be traced to the quality of the statement of work or
requirements accompanying an RFP. Beyond addressing that core issue,
which DHS and other agencies openly acknowledge being a problem area,
we believe it would also be helpful to pursue two additional steps.
First, include in the evaluation criteria-specific points for
innovation. Second, PSC has committed to creating a template that
companies (and agencies) can use as an addendum to an RFP in which they
can specifically identify not only the innovations they are proposing,
but also objectively quantify the monetary value of the innovation.
This should enable much greater clarity in the evaluation of proposals
and provide the Government with a valuable tool that helps overcome the
challenges of evaluating widely-divergent proposed solutions--which is
particularly important in an era of frequent protests and an
increasingly inexperienced acquisition workforce.
industry must step up as well
As I noted at the outset, we also recognize that industry has
significant responsibilities. While we cannot dictate behavior to the
length and breadth of the private sector, there are a number of
additional steps PSC is committed to taking to help facilitate
improvements. We have committed to convening a panel that will seek to
develop recommendations to address the issue of protests. Few issues
are more contentious in Federal procurement and we recognize the
importance of addressing it. In addition, with the agreement of key
Government agencies, PSC will be developing an on-line course covering
the basic tenets of acquiring infrastructure as a service. As you know,
the emergence of the ``as a service'' concept, including cloud
computing, brings with it new and sometimes complex challenges of
business structure, pricing, and contracting. As such, we will provide
to the Government, without charge, an on-line course to help orient
both Government and industry to the key overarching principles and how
they differ from more traditional approaches to acquisition.
conclusion
Mr. Chairman, Members of the committee, we face a very real set of
challenges and crises. I hope that the work of our commission and this
testimony contributes to the identification and pursuit of meaningful
solutions. With every crisis comes opportunity; and we have rarely had
the kind of opportunity we have today to make genuine and powerful
progress. We look forward to working with you and with the Department
toward that shared goal.
Thank you for the opportunity to appear here today. I look forward
to answering any questions you might have.
Mr. Duncan. I appreciate that. Excuse me. Unfortunately, we
are going to have to go vote, so without objection, the
committee--subcommittee will be in recess, subject to call of
the Chairman. We will reconvene 10 minutes after the conclusion
of the last vote. I am going to ask the staff to put the vote
on the monitor, if you all would like to watch that vote, so
you just kind-of know where we are.
With that, we will stand adjourned in recess.
[Recess.]
Mr. Duncan. Okay, I will call the subcommittee back to
order and recognize Mr. David Berteau for his 5-minute opening
testimony. Sir, you are recognized for 5 minutes.
STATEMENT OF DAVID J. BERTEAU, SENIOR VICE PRESIDENT AND
DIRECTOR OF INTERNATIONAL SECURITY PROGRAM, CENTER FOR
STRATEGIC AND INTERNATIONAL STUDIES
Mr. Berteau. Thank you, Mr. Chairman and Mr. Barber.
I should note, sir, that I grew up in the South, when South
Carolina was actually still a member of the Atlantic Coast
Conference, as well. My alma mater, Tulane University, was a
member of the Southeastern Conference. I teach today at both
Georgetown and the University of Texas, so I have mixed
emotions, but I really go back to--you always go back to where
you grew up.
Mr. Duncan. Well, tonight I hope you say, ``Go Tigers.''
Mr. Berteau. I think Clemson is going to do fine in
football season. It will be a little bit different story when
it comes to basketball, so, thank you, though, Mr. Chairman. I
am looking forward to that. Thank you and all of you for
inviting me here today.
Even though I work for the Center for Strategic
International Studies, I need to state that both my oral and
written views are my own. The center itself does--being a
nonpartisan center does not take institutional positions on
matters of policy. You have my background, you have my
statement, so let me go from there.
Our statement--my statement is pulled together, really,
from two different things. One is, we do a substantial amount
of analysis each year on how Federal agencies in the National
security arena spend their contract dollars. We put out a
report for the Department of Homeland Security. It was last
done for 2011. We haven't done 2012. We plan to wait until
sequestration numbers are available for 2013 and then update
and see where we are.
I am not going to go through the material in my written
testimony. There is a lot of detailed data in there. I would be
happy to provide additional material either to Members of the
committee or your staff as you all see fit.
Let me, though, make a few overall highlights worth noting.
One is that overall spending on contracts by the Department of
Homeland Security is down 14 percent in 2012--that is the last
year we have data for--compared to 2011. We expect that trend
to continue coming down when we have 2013 data. More than half
of that reduction, though, is in the Coast Guard, and it is
largely tied to fewer ships. As a result, you see spending in
products is down 34 percent, but spending in services was only
down 6 percent, which is less than half the overall rate.
I would note, also, that we look at how DoD uses the
system. Fifty-five--our numbers are 55 percent of DHS contract
dollars were obligated after competition with more than one
bidder, in other words, two bidders or more. You saw that, in
the opening statement, they have got--DHS's own data shows 72
percent, I believe, was Mr. Borras' number, but that is a
different way of measuring than the way we measure. We count
the competition only if there are two or more bidders. But that
was actually up 48 percent from 48 percent the year before.
Fixed-price contracting does remain the norm for DoD. It
was 63 percent of contract obligations in 2012 were under
fixed-price contract. That is actually down a little bit more.
It was 66 percent in 2011. DHS has done a good job of awarding
more contract dollars to small businesses and to medium-sized
businesses, in fact, one of the best in the Federal Government
in many ways. It was over 30 percent in small businesses in
2012, and for medium-sized businesses. We define medium-sized
as bigger than small but less than $3 billion in total annual
revenue, which is a wide range, if you will from just over
small to $3 billion. But medium-sized businesses, in terms of
total contracts, was up 20--from 23 percent in 2011 to 26
percent. We also count only prime contract dollars, so
companies themselves reflect different numbers.
Let me turn then to steps that you can take to improve. We
basically--I have spent most of my career working on improving
acquisition in DoD and across the Federal Government. My
colleagues would say, obviously, I haven't done a very good
job, because there is still plenty of improvement left to go.
But there really is a lot that DHS could take from DoD's
history and experience.
I note a number of caveats in my testimony, but here are
the five that I think are worth paying attention to. One is a
strong DHS-wide acquisition management focus. It took DoD 39
years to get to the point to create a single under secretary
for acquisition. But DHS shouldn't take that long to have that
single focus, if you will.
The second is standardized authorities, including
certification and training for program managers and
standardized mechanisms to validate and integrate requirements
and programs and resources. There are some parts of DHS that
have this today, but it is certainly not standardized across
the Department.
The third is a long-term multi-year plan, similar to the
Defense Department's Future Year Defense Program, which was
talked about, but has not yet been manifested. DHS promised it,
but they are still working on making it better.
The fourth--and I think this is critical for this
committee--is standardized and better transparency of reporting
on their systems to the Congress and the public. There is a lot
of data that DHS provides to the Congress, but it is a
committee at a time and it is a piece at a time, and it really
ought to be standardized, more universal, and more transparent.
The fifth is that--as DoD has learned a lot of lessons from
rapid acquisition as a result of the wars. Stan has commented
about apps take 6 weeks to develop and promulgate, and our
acquisition process takes months or years. But the Defense
Department is still wrestling with how it learns from those
rapid acquisition projects, if you will, and standardize and
institutionalize that, so we may have to wait a little bit to
see what they do in order before we know what to do with
respect to DHS.
Finally, I think there is one big lesson from the private
sector, and that is taking advantage of innovation that is
developed globally. This is similar to the apps issue, only
writ much larger. The cycle time for commercial global
technology is so fast and our procurement system is so slow
that we have barriers there, but there are other barriers, as
well.
Intellectual property ownership disputes, questions of
export controls, questions of forcing companies to comply with
Government cost accounting standards, even though it is not in
their commercial interests to do so. Not that we need to change
these things by getting rid of them, but we need to change them
by learning how to incorporate them better into Government
acquisition.
With that, Mr. Chairman, I will stop and yield to
questions.
[The prepared statement of Mr. Berteau follows:]
Prepared Statement of David J. Berteau
September 19, 2013
Mr. Chairman, Congressman Barber, and Members of the subcommittee,
I thank you for the opportunity to appear before you this afternoon as
part of this distinguished panel to offer my views on the acquisition
practices of the Department of Homeland Security (DHS) and on some of
the lessons and best practices from the Defense Department (DoD) and
the private sector that DHS could benefit from. My statement draws on a
number of recent studies of the Center for Strategic and International
Studies (CSIS), but both my written and oral statements are my own.
They do not necessarily represent the views of CSIS.
I have been at CSIS for 12 years, the past 6 as a full-time program
director, but I have been engaged in Federal Government acquisition and
program management for a third of a century. I have worked on and
studied the topic of today's hearing from inside the Government, as a
Government contractor and consultant, as a professor in graduate
courses, and with fact-based research at CSIS since before DHS was
created.
why lessons learned matter
The Department of Homeland Security has been in existence just over
10 years. I have followed with interest this subcommittee's series of
hearings that look back at the Department's first 10 years and look
forward to the future. Earlier this afternoon, this subcommittee heard
from the DHS Under Secretary for Management and the representative of
the Government Accountability Office (GAO) on the potential for
improvement in DHS acquisition. The panel on which I am honored to sit
will expand on their views by drawing from both our research and our
own experience. As a new department, and DHS is still the newest
Federal Cabinet agency we have, it is crucial that the leadership of
the Department learn the lessons of the successes (and the mistakes) of
other Federal agencies. It is equally crucial, though, that DHS not
assume that what worked elsewhere will work the same way for DHS. This
hearing is designed to help DHS move forward on both of those fronts:
Adopt and adapt good ideas from within the Federal Government and from
the private sector, but don't blindly assume that what worked somewhere
else will work the same at DHS.
dhs acquisition performance
In conducting any review of lessons learned that should be applied
to DHS, it is important to start with the current performance of the
system. I would like to summarize the results of our research at CSIS.
Our most recent published report on DHS procurement is the ``U.S.
Department of Homeland Security Contract Spending and the Supporting
Industrial Base, 2004-2011''. For this hearing, we updated our data and
analysis to include 2012.\1\ As is typical in our reports, this
presentation will use constant dollars, in this case 2012 dollars. When
2013 data meet our reliability standards, likely early next year, we
will update and issue a new report that will cover 2004 to 2013.
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\1\ CSIS uses for contract data the public information available in
the Federal Procurement Data System, supplemented by direct examination
of specific contract documents.
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Here are some of the highlights. First, as you can see from Figure
1, in 2012 total DHS spending was up slightly compared to 2011, but
contract spending was down significantly. After 7 years in which DHS
contract obligations were at least $14 billion, spending dropped from
$14.5 billion in 2011 to $12.4 billion in 2012, a 1-year decline of
14%.
Contract spending in 2012 for DHS was only slightly more than 25%
of total spending, the smallest share of total spending since 2006 (a
year in which total spending was driven up by Hurricanes Katrina and
Rita).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Overall spending in Figure 1 does reflect the first tranche of
spending reductions from the Budget Control Act of 2011, but this
figure does not show the impact of sequestration this past March. The
biggest cause of changes in DHS overall spending is natural disasters,
and this figure also does not reflect spending on Hurricane Sandy last
October.
Figure 2 presents DHS contract obligations in terms of what is
being obtained by the contracts. It shows contract spending in dollars
(constant fiscal year 2012 billions) for the three categories of
Products, Research & Development, and Services. The figure shows that
from 2011 to 2012 spending on products is down 34%, on R&D is down 29%,
and on services is down 6%.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The two figures show contract spending for all of DHS combined. The
next figure breaks down contract spending by the five major DHS
components of the Coast Guard, the Federal Emergency Management Agency
(FEMA), Immigration and Customs Enforcement (ICE), the Transportation
Security Administration (TSA), and Customs and Border Patrol (CBP),
with the remainder of DHS combined under the domain of ``Other''.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Contract obligations declined from 2011 to 2012 in every DHS
component. The largest decline in both dollar and percentage terms was
in the Coast Guard, where contract spending fell from $3.8 billion to
$2.7 billion, or 28%. One reason for the large decline in Coast Guard
contract spending was that the National Security Cutter was funded in
2011. As the figure shows, in 2012 the Coast Guard returned to their
recent historical level. The ``Other'' category is almost entirely
services contracts, and is primarily composed of IT services,
professional services, and facilities-related services at DHS-wide
level or in smaller DHS components.
CSIS research analyzes and displays contract spending in many
additional ways, including six separate categories of services
contracts, as seen in our 2012 report referenced earlier. We are happy
to provide this committee with any and all of our additional displays,
should you find it useful.
DHS has focused considerable attention on increasing competition
for contracts, but the results have been mixed. CSIS examines the
number of bidders as well as whether the contract solicited competitive
offers. Figure 4 below shows that DHS increased competitive contract
obligations by 11% in competitions with five or more offers, from $2.7
billion in 2011 to $3.0 billion in 2012. These contracts now make up
nearly one-fourth of all DHS contract obligations in 2012, and the
amount has increased every year for the past 6 years. Competitions with
three or four bidders represent another 20% of total DHS contract
obligations, and CSIS found that 55% of total 2012 DHS contract
obligations were awarded after competition with two or more offers, up
from 48% in 2011.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
CSIS also tracks contracts by a category that we call
``Unlabeled''. The unlabeled category includes those entries where data
fields are left blank, as well as those with obvious errors (such as a
competitively-awarded contract listed as receiving zero offers).
Notably, DHS had made dramatic improvements in correcting the data
entered into the Federal Procurement Data System (FPDS). Accuracy and
completeness in data entry are essential to transparency and
accountability. Although most agencies have reduced their totals of
what CSIS calls ``Unlabeled'' contracts, DHS has made noteworthy
progress in this regard, reducing problem entries by more than 80%
since 2009.
CSIS also analyzes what we refer to as ``Funding Mechanism'' for
contracts. In general, this characteristic tracks whether a contract is
fixed price or cost reimbursable. Figure 5 below shows that DHS has
obligated 63% of contract dollars in 2012 to fixed price contracts,
down from 66% in 2011.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Figure 5 also shows that cost reimbursable contracts have gone from
35% of total obligations in 2009 to 36% in 2012. The reduction of
contract spending entered as ``unlabeled'' or ``combination''
represents an increase in accuracy and accountability.
Finally, CSIS analyzes contract obligations in terms of the types
of companies that win the contracts. Figure 6 shows that DHS is relying
less on large firms in 2012 than in 2011. Small businesses were awarded
31% of contract spending in 2012, up from 28% in 2011. Mid-sized firms,
with less than $3 billion in total annual revenue, accounted for
another 26% of 2012 contracts, up from 23% in 2011. Large firms, those
with more than $3 billion in total annual revenue, fell to 48% in 2012
from 43% in 2011.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Overall, DHS contract data, for 2012 compared to 2011, show in
constant 2012 dollars the following key trends:
Overall spending on contracts is down 14%, with more than
half of that reduction in the Coast Guard, tied to fewer ships;
The decline is seen most heavily in contract obligations for
products, down 34%, while services contract obligations fell at
just 6%, less than half the rate of the overall DHS decline;
55% of DHS contract obligations are awarded after
competition with two or more bids, up from 48% in 2011;
Fixed price contracting remains the norm for DHS, accounting
for 63% of contract obligations in 2012, down from 66% in 2011;
Increasing shares of DHS contract obligations are awarded to
small and medium-sized firms.
My team and I would be happy to provide additional information on
any and all of this material to this committee or any of the Members
and staff.
improving dhs acquisition outcomes
The previous section of my statement describes the current
performance of the DHS acquisition system and the recent trends across
a variety of measures for that performance. Let me turn now to the
broader concern of this hearing, which is to consider steps that DHS
can take to help improve its acquisition process and outcomes. This
section takes a higher-level view of challenges faced by DHS
acquisition and possible improvements that could help address those
challenges. As requested by the committee, I focus this section on
lessons that DHS might learn from DoD and from the private sector.
Before listing some of those lessons, however, it is useful to step
back to the creation of the Department of Homeland Security. At the
very first hearing before the House Select Committee on Homeland
Security on July 11, 2002, the administration witnesses stated
unequivocally that joining 22 agencies and departments into the new
Department of Homeland Security would engender such overhead
efficiencies that total headquarters staffing and budgets could be
reduced from the existing structures. Based on this belief, and without
any publicly-available detailed assessment of requirements, DHS from
its inception did not create a central mechanism for acquisition
oversight. While some DHS leaders have provided senior focus on
acquisition oversight, it has not up to now been institutionalized in
DHS.
This is similar to the Defense Department in the decades prior to
the Packard Commission's recommendations in 1986 and their subsequent
enactment into law that same year. Congress created a statutory Under
Secretary of Defense for Acquisition (now Acquisition, Technology, and
Logistics) with primacy over all others in DoD save the Secretary and
Deputy Secretary of Defense. While no similar position exists for DHS,
it is important to note that DoD outspends DHS in total contract
obligations by a factor of more than 30 to 1. Still, the DHS roles of
Chief Procurement Officer and Head of Contracting Activity warrant
institutional support within the DHS organization structure.
Some DHS components have taken significant steps to correct past
problems. As part of a study under an acquisition research grant from
DoD's Naval Postgraduate School, CSIS is examining the governance
structures for complex systems of systems. One of the systems we are
investigating is the Coast Guard's Deepwater program, with a view to
how changes over the past few years in response to Deepwater's
challenges have made the overall acquisition process better. Based on
our research to date, the Coast Guard seems to have made important
strides toward integrating requirements, resources, and program
milestone decisions in a way that will likely lead to better program
outcomes. However, more time is needed to verify whether those outcomes
meet expected needs.
potential lessons from the department of defense
There are three areas that, in my view, merit consideration as DHS
looks to DoD for possible areas of acquisition improvement. I look at
each of these areas in turn.
The first area is organization and regulation. At the time of the
creation of DHS, there was a common theme that this was the largest
reorganization in the Federal Government since the creation of the
Defense Department in 1947. From a numbers point of view (both
personnel and agencies), that statement is largely true. But it's
important to remember how long it took DoD to evolve into a mature,
functioning, relatively integrated Cabinet agency. It took 2 years
before the National Military Establishment set up under the 1947 Act
even became a single department.
It was 11 years before President Eisenhower's reforms, pushed
through Congress over objections by the military, created what we now
know as the Combatant Commands and began to take the Military
Departments out of the chain of command for deployed forces. It took 14
years before the Planning, Programming, and Budgeting System was
created to provide for an integrated DoD budget and long-range
projection of the defense program. It was not until 1970, 23 years
after the original Act, that Deputy Secretary of Defense David Packard
penned the first DoD directive on the acquisition system that still
exists, DoD Directive 5000.1; it was 4 pages long. And it was not until
the Goldwater-Nichols Act of 1986, 37 years after the original Act,
that the Chairman of the Joint Chiefs of Staff became the single
principal military advisor to the Secretary of Defense and the
President. Prior to that, requirements for consensus sometimes stymied
the need for timely advice and decisions.
I note this history because we need to recognize that it takes a
long time to create a new, unified, more efficient organization. It
took 51 years for the Executive branch and Congress to evolve today's
process for the Federal budget, from the initial creation of the Bureau
of the Budget to the passage of the Budget Reform Act of 1974. Big
changes take time.
Even so, it's not appropriate to say that what works for DoD will
work for DHS. The organizations are not parallel or even similar. There
is not, and likely never will be, the equivalent of DoD's Military
Departments in DHS, focused on joint and common missions at home and
around the globe. There is not, and likely never will be, the
opportunity for single agencies to serve the entirety of DHS in the way
that the Defense Logistics Agency or the Defense Contract Audit Agency
does for DoD. In fact, that audit function supports agencies across the
Federal Government, in a way that is unlikely for DHS in support
missions.
Part of the reason for this difference is that DHS does not have
the entire homeland security mission, either for the Federal Government
or for the Nation. As Figure 7 below depicts, only 54% of Federal
spending for homeland security missions is in the DHS budget. The rest
resides in DoD, the Departments of State, Justice, Energy, and Health
and Human Services, and numerous other Federal agencies.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
(Note: The figure above lists spending through 2012, the latest
year for which CSIS has contract spending data. We plan to update this
chart when we update our report this coming winter.)
The role of the Federal Government in homeland security is also
dramatically different than it is for defense. In addition to non-DHS
Federal spending, significant responsibilities rest with State and
local governments and in the private sector. There is no equivalent for
DoD to this wide-spread distribution of responsibilities, which makes
it more difficult to take DoD solutions and apply them to DHS.
As one example of that difficulty, look at DoD's acquisition
regulations, which dwarf those of civilian agencies, including DHS. In
addition to the Government-wide Federal Acquisition Regulation (the
FAR), there is a DoD-wide supplement to the FAR (the DFARS), and each
DoD major component has its own supplement to the supplement (Army,
Navy, Air Force, and the Defense Logistics Agency, among others). The
4-page DoD directive from David Packard has grown to hundreds of pages,
much of which is the result of statutory and regulatory fixes to
specific problems that have never been internally rationalized or
reconciled. These layers of regulation often serve potentially useful
purposes from the point of view of the covered component or the
Congress, but they add unnecessary complexity to procurements and
confusion to firms that need compliance systems that can accommodate
all forms of acquisition regulation.
In addition, with each passing year, the magnitude of these layers
of acquisition grows larger. Congress needs to act to integrate and
rationalize the overall set of acquisition statutory requirements for
DoD before anyone tries to apply them to other agencies like DHS, and
DHS should carefully consider whether DoD rules make sense for it. For
example, in my view, the last thing DHS needs is to force the Coast
Guard to consider and apply the 29,000 pages of Naval Vessel Rules
promulgated for ship construction and maintenance by the Naval Sea
Systems Command.
The second area for consideration is the structure of incentives
and disincentives that DoD has in place to reward proper contract
management and oversight. Ultimately, DoD is its own customer for the
programs it designs, procures, and operates and maintains. Thus, the
feedback for successful program execution and acquisition performance
is reflected in mission accomplishment by the troops in the field.
While this is often the case for DHS, it is equally likely that the
ultimate user of a DHS-procured system or program is in another Federal
agency or tied to first responders at the State or local level or even
in the private sector. Mission success is harder to measure for the DHS
acquisition community.
One of the most significant attempts to create better incentives
for DoD acquisition system performance was the passage of the Nunn-
McCurdy Act in 1982 as part of the fiscal year 1983 National Defense
Authorization Act. This statute was designed to force DoD to report on
major cost and schedule overruns and performance underruns, and its
namesake authors expected the requirements to lead to better
acquisition performance in DoD. While CSIS has not explicitly assessed
the efficacy of the Nunn-McCurdy Act, our work on cost and schedule
overruns in major defense acquisition programs indicates that few
programs have been cancelled as a direct result of major Nunn-McCurdy
breaches. Instead, for 30 years, defense secretaries have rebaselined
breach programs and certified those new baselines, in some cases only
to see new breaches arise within just a few years. While some of these
programs are eventually cancelled, it's not usually because of a Nunn-
McCurdy breach report.
Still, there has been value in the Selected Acquisition Reports
that DoD issues each year in compliance with Nunn-McCurdy requirements.
These reports provide a standardized method of reporting to Congress
and the interested public on the performance of major acquisition
programs, with consistency over time and across the various DoD
Military Departments and components. DHS would do well to consider, and
Congress should consider requiring, a more standardized and universal
mechanism for DHS to report to Congress on the cost and schedule
baselines and performance for major acquisition programs, including IT
programs. DHS provides Congress much information and material today,
but it is not standardized, it is not reported equally to the
interested committees, and it is often not available to the public.
Congress and DHS should work together to find a useful way to
standardize and publicize reporting.
The third area is the recruitment, training, and retention of the
acquisition workforce. DoD used furloughs in fiscal year 2013 to meet
sequestration targets for cutting costs. The furlough process and its
accompanying practice of forcing contracting officers and the
acquisition workforce to ``work to the rules'' have produced anecdotes
of reduced output, delayed contracts, and undermined morale in the
workforce. It is difficult to analyze how widespread these anecdotes
are, but it is clear from the monthly Treasury Department data that DoD
spending is down in the fourth quarter to an extent greater than just
that driven by sequestration. The long-term effects of furloughs on the
DoD workforce will need to be watched closely.
The lesson for the acquisition workforce of the last budget
drawdown in DoD is that it is far easier to get rid of parts of the
workforce than it is to rebuild it. DoD has been rebuilding the
acquisition and technical workforce for 12 years now, with a renewed
focus under Section 852 authority over the last 5 years, but DoD is
still not back to the sustainable demographic and experience level that
was present at the end of the Cold War in 1989. DHS needs to pay
attention to DoD's experience as it works to train and retain its own
acquisition workforce.
potential lessons from the private sector
There has been a long history of attempts to translate and apply
commercial best practices to Government operations. Many of these
efforts have failed to produce measureable results, for reasons that
range from the different legal structures in the Government (such as
requirements for using cost and pricing data instead of defining
contract outcomes to obtain the best value) to the lack of equivalent
management tools (such as no balance sheet, capital budget, or time
value of money for investments). But one area where the Federal
Government in general and DHS in particular can learn from the private
sector is in taking better advantage of technology developed in the
global commercial sector.
The DHS Science and Technology office has evolved to focus its
spending more on the development and application of technology rather
than investing in basic research. In this way, DHS may have the
opportunity to match or exceed current DoD efforts to identify
commercial technology with value for incorporating into Government
acquisition programs. This is not only true for information systems and
technology but for a broad array of technologies that range from
sensors to adaptive manufacturing (also called 3D printing). But DHS
must find ways to reduce barriers to successful incorporation of
commercially-developed technology, including the perception that the
Government does not adequately value or protect proprietary data and
intellectual property, information that for commercial companies is
their competitive advantage in a global marketplace.
conclusion
Mr. Chairman, Congressman Barber, Members of the subcommittee,
there is much more to discuss and address on all of these issues. The
information presented above provides the highlights of our work at CSIS
over the past 2 years on these issues. We are happy to provide you with
additional material on these and other related issues, should you
desire. Thank you for the opportunity to appear today before the
subcommittee, particularly along with the other panel members with me
today. I welcome your comments and questions.
Mr. Duncan. Thank you so much. The three of you are clearly
leaders in the acquisition management area. So the first
question I have for you is a yes-or-no question. Has anyone
from DHS ever reached out to you and asked for any assistance
in their acquisition processes?
Mr. Greenwalt. No.
Mr. Soloway. Absolutely.
Mr. Duncan. No.
Mr. Berteau. Yes, sir, and we work with them pretty closely
when we do our analysis.
Mr. Soloway. I would just--if I could just put a little
add-on to that, not only have they reached out to us, one of
the things DHS has instituted over the last year-and-a-half is
a series of roundtables with their front-line workforce and
industry folks, not talking about programs, but talking about
best practices. So they are making those efforts.
The problem is, it is a huge workforce, and there is a long
way to go. But, yes, they have been reaching out.
Mr. Duncan. Okay, well, that is great. That is the answer I
wanted to hear that they have.
Let me pause just a minute to wish one of the members of
the OME staff, committee staff, Debbie Jordan a happy birthday
today. Happy birthday, Debbie.
I am a big advocate for what was known as the Byrd
Committee. From 1941 to 1972, the Byrd Committee, named for
Harry Byrd, was an anti-appropriations committee. It was a
committee of the House of Representatives that actually was
charged with looking at every line item, every dollar, every
period, every comma in the budget looking for programs that
were wasteful or duplicative or redundant that could be cut.
It was how we funded World War II in the very beginning,
before we floated the first bond, we decided to shrink the size
of Government and use those savings to fund the ramp-up to the
war effort. It lasted until 1972, and I am an advocate for
going back to that, but learning about the Nunn-McCurdy
amendment in 1983 defense authorization act, which was an
oversight tool for Congress to hold the Defense Department
accountable for cost growth on major defense acquisition
programs, when certain thresholds for unit costs are exceeded,
the DoD is required to notify Congress of the breach.
Or in order to prevent an acquisition program in violation
of Nunn-McCurdy from being terminated, the Secretary of Defense
must restructure the program to address the root causes of cost
growth, rescind the most recent milestone or key decision point
approval, and withdraw associated certifications, require a new
milestone and a key decision point approval before certain
contracting actions are taken, and report on all funding
changes resulting from the growth in cost and finally conduct
regular reviews of the program. That is just smart management.
I don't want to micromanage every dollar spent by the
Department of Homeland Security, nor should Congress have to
have that level of micromanagement oversight. But would you
agree and would applying a Nunn-McCurdy-type mechanism to DHS
acquisitions process act as positive stimulus to encourage DHS
officials to best address cost overruns to effectively save
American taxpayers?
Mr. Greenwalt. I would say yes, and I think the key there--
there are some lessons learned from that experience. In the
beginning, there was a tendency for the Department of Defense
to have requirements creep in those systems, and they would re-
baseline. So after about 20 years, Congress came back and said,
no, no, no, you can't re-baseline.
But the problem is, is that they have established baselines
that are too--that are premature, and so there is a key thing
to get here when you do Nunn-McCurdy is to figure out, when is
the best time to establish a Nunn-McCurdy baseline to hold them
accountable? It is very hard to hold them accountable for
something that they set 20 years ago.
So if you can get them to the point--and I think the--where
GAO was talking about, meeting all of those best-practice
requirements and setting your base right there, that is when
you start a program, that is when you fund it, and then you
establish the baseline from there, then hold them accountable,
and then do what Congress did for the Department of Defense,
which is basically say, if you are over that critical breach,
the presumption is on termination.
Mr. Duncan. Yes. Mr. Soloway, you act like you want to add
in.
Mr. Soloway. I just would suggest a little bit of caution
on copying the Nunn-McCurdy model. First of all, Nunn-McCurdy
was really designed for major weapons systems that have a very,
very long life cycle, as Bill said, 20 years. Sometimes we are
in lots 30 and 40 years or 60 years later, and they are still
out there. But that is a long life cycle. The bulk of what DHS
buys, it doesn't have that kind of life cycle in the
procurement----
Mr. Duncan. Kind of a short--short----
Mr. Soloway. Much shorter, so it is not clear that a Nunn-
McCurdy would be workable in that kind of an environment.
One of the things we have recommended in our commission
report, though, is the creation of an acquisition dashboard,
which to David's point around transparency would give you as
the Congress and the public much better insight into progress
that programs are making against baselines without putting the
formal overlay of a Nunn-McCurdy-like system, because the
programs tend to be shorter in length and they are more
services than they are hardware, anyway.
Mr. Duncan. Without expanding further, I am going to ask
Mr. Berteau, you know, the Weapons System Acquisition Reform
Act of 2009 also sought to improve the organization procedures
of DoD for the acquisition of major weapons systems. I am sure
you were there during that time, so do you believe that there
are aspects of that law maybe taken in context with Nunn-
McCurdy that DHS could use or we could create to improve its
accountability and transparency? Any other comments you would
like to make along those lines are fine.
Mr. Berteau. Thank you, Mr. Chairman. I was actually a
career civil servant and worked in the Office of the Secretary
of Defense when Nunn-McCurdy was passed, was very involved in
the debate. Of course, the Defense Department at the time
thought it was a horrible idea and that Congress shouldn't
interpose such oversight. But nonetheless, it did pass by, I
think, unanimous consent--both in the committee and on the
floor.
Nunn-McCurdy has not achieved its actual goal, which was to
force the Secretary to cancel programs that were over cost or
behind schedule, if you will. But it did achieve a tremendous
goal in terms of both focusing the attention of the Department,
making it harder for them to ignore problems, and providing
Congress with regular reports, so that Congress could track it
itself.
I think that is kind of what Stan is talking about, in
terms of an alternative mechanism, not necessarily so much
focused on the breach question, as the reporting of data
question.
The Weapons System Acquisition Reform Act, I think its two
single-most significant contributions for DoD, and it is coming
up on its fifth anniversary next spring. We are going to issue
a report card and analysis of that on its 5-year anniversary.
No. 1 was better emphasis on cost analysis and cost
assessment up front, so that you have got a truer picture of
what it is likely to actually cost. Now, this is always a
matter of dispute. The program always wants the cost to be as
low as possible, so that you can put into the budget as
possible. The cost analysts want it to be as accurate as
possible, so they want it to reflect reality.
I think the early lessons of DoD, and particularly the
report since the law took effect and really got implemented, is
that better costing does lead to better program management. So
I think that is a very positive outcome that DHS could adopt
here.
The second is, in fact, a separate office that is chartered
to look at the root causes of big problems when they come up.
This, while each entity inside DHS has varying degrees of
success in that regard, there is really no entity in DHS that
is chartered to do that root cause analysis on the most
significant problems, not on everything. Just pick the three or
four biggest ones that you have got right now, and that would
be, in my view, worth looking at for DHS, as well.
But the broader picture--I think you need to narrow it down
to the few things that are useful.
Mr. Duncan. So you say the Weapons System Acquisition
Reform Act is going to have a report due this spring?
Mr. Berteau. It has an annual report from the program
analysis and root cause assessment office, but there is no
official DoD. My group at the Center for Strategic and
International Studies is going to be issuing a report card on
the Weapons System Acquisition Reform Act on its fifth
anniversary next May.
Mr. Duncan. Okay, so we will watch closely for that.
Mr. Berteau. Thank you, sir.
Mr. Duncan. My time is expired. So I recognize the Ranking
Member, Mr. Barber, for 5 minutes.
Mr. Barber. Thank you, Mr. Chairman. Thank you all for your
very thoughtful testimony. You know, I think we are all
interested in how we can improve DHS--certainly I am, and I
know the Chairman is--on many levels. We have discussed them in
other hearings. But acquisition is really high on my list,
having been involved with DHS for many years before I came to
Congress. I see a great need for improvement and transparency
and accountability.
So let me ask the first question, Mr. Greenwalt, to you. In
your testimony, you stated that the Department would benefit by
adopting Defense Acquisition Workforce Improvement Act
standards, and you recommended considering a funding mechanism
similar to the Defense Acquisition Workforce Development Fund
to pay for training and workforce development.
I think we all know that, along with other departments, DHS
has been hit with budget cuts over the last 2 or 3 years,
requiring, I think, in many cases, for the Department to do the
same amount of work with less funding.
How do you recommend or would you recommend that the
Department implement the measures that you have suggested in
light of these fiscal challenges?
Mr. Greenwalt. Yes. The Department of Defense DADF fund, or
the Defense Acquisition Workforce Development Fund, is kind of
a unique fund, in that it originates out of expired
appropriations. So in the sense, you have O&M funds, R&D funds,
procurement funds expiring, and those are scooped up and paid
for, for training.
What is interesting about that mechanism, it has been
authorized. The appropriators have approved it. It is designed
to address these acquisition workforce deficiencies.
Now, there is a big question on implementation how well
that money has actually been spent, and I think we could have a
debate on how that money should be spent and what kind of
training and so on, but the fact that there is a fund like
that, it has been in place for several years, and it would go
around, and it also serves as an incentive to not spend money,
because if you are an acquisition professional and you want to
hold back money that isn't appropriated, because that could
actually come back into your workforce and training.
Mr. Barber. That is very helpful. Thank you. Mr. Soloway,
you indicated in your written testimony that, given the title
of this hearing, it would be a mistake, I think you said, to
too-heavily rely on or look to DoD for solutions to the
challenges facing DHS. Could you elaborate on that and say what
practices that DoD uses do you think could be most useful to
replicate in DHS?
Mr. Soloway. Certainly. I think it ties directly to Bill's
comments a moment ago on the defense acquisition workforce
funds and DAWIA. I did not mean to suggest that DoD does
nothing right. My suggestion would be that all of our findings
and our commission applied as equally to them as others,
despite the resources they have that other agencies have not
had.
I think Bill's last point around how the developed
workforce money is spent is the core issue. DoD has an
excellent school in certain areas, but it is lacking in others,
and so forth, so that is one, I think, big difference.
I think that the preservation of funds and the commitment
to funding for training is probably the No. 1 thing I would
say. DoD, the one thing you could say without question, the
years I was there, since, before, has had a very constitute,
robust funding mechanism for acquisition training. Again,
whether the training is right or--that is a different issue.
There has been a commitment.
The second thing DoD has had to varying degrees, but
relatively steadily, is very senior leadership attention to
acquisition. The under secretary for acquisition technology and
logistics is essentially the first among equals of the under
secretaries, but the deputy secretary typically is very
engaged. Even the various secretaries have taken a personal
interest.
When I was there, it was one of the great advantages. We
had a secretary, a deputy secretary, an under secretary, for
who all of them these were really critical issues. So having
that kind of senior leadership involvement, which we don't,
frankly, have not seen at DHS and other civilian agencies, is a
big difference. I think it is worth looking at that model.
The last thing I will say, because I know you want to get
to other questions, as we talk about the Defense Acquisition
Workforce Improvement Act, DAWIA, and certifications and so
forth, we have to be very careful about distinctions between
the civilian agencies and DoD. It strikes to one of the major
recommendations in our report.
In the civilian agencies, when you talk to people about
acquisition, you are basically talking about contracting. At
DoD, when you talk about acquisition, what we refer to as the
big A, you are talking about contracting, you are talking about
pricing, you are talking about logistics, you are talking about
program management systems, engineering, a whole set of skills
that go into a complex program.
In the civilian agencies, there is no such thing as an
aspirational, defined, a certified career path for program
managers, yet the civilian agencies operate largely on
programs. I think one of the things that we recommended, which
would be Government-wide, but would certainly apply to DHS, is
that the Office of Federal Procurement Policy Act be expanded
so that they actually have cognizance over a program management
workforce, and can create within the civilian agencies that
skill set.
We did work independent of my role at PSC for the former
Council on Excellence in Government at OMB several years ago,
and in the survey work of the agencies, we found the vast
majority of people in civilian agencies who were, ``program
managers'' had the title merely because of the documents they
signed, not because of the training they had.
That is not a criticism of the people. It is a suggestion
that we don't even have the right career structure to execute
the programs we are asking them to execute.
Mr. Barber. Thank you for that. I just have a couple of
questions, I think, that tie together for Mr. Berteau. By many
accounts, the Department is further along with its acquisition
policies and improvements than it has ever been before, and
some have indicated that in order to succeed, DHS simply needs
to follow its own procedures. Would you agree with that
assessment, Mr. Berteau? If not, what more do you think the
Department can do to improve its outcomes?
The second question has to do with the under secretary for
management. Does that person, does that position have adequate
safeguards in place to ensure that DHS components can acquire
goods and services in a responsible way, in a way that avoids
waste?
Mr. Berteau. Thank you, Mr. Barber. You're correct to raise
as the first question of: Is the Department even doing that
which it lays out itself to do? So before you lay on additional
improvements, make sure you have actually implemented and
executed the ones that are in place already.
I note in my written statement the historical fact that DHS
has really only been there now for just over 10 years. If you
look at the history of how long it took the Defense Department
to evolve to the point it is today, with a centralized
acquisition authority that Stan recommended, with a focus on
training and career development for the workforce, these are
things that took DoD 20 and 30 and 40 years before they got
into place. That was with a structure that by and large already
existed. You already had a war department. You already had a
Navy department. You were just merging the two together and
creating an Air Force.
DHS is much more complex with a lot more moving parts and I
think substantially less recognition at the component level of
the authority, direction, and control of the Secretary. In
fact, if you look at Title 10, which is the U.S. code that
controls DoD, it is unambiguous in its delineation that the
Secretary of Defense has the authority, the direction, and
control of the Department. There are no other major Cabinet
agencies that have a similar delineation of responsibility and
authority in the person of the Secretary. They have a lot of
more diffuse and separate authorities.
I think given that, the biggest challenge that DHS has is,
in addition to following its own processes and making sure they
are doing them, is looking at how those integrate across a
whole variety of authorities and circumstances. I know you saw
in your own time there, individual components in DHS don't
necessarily wake up in the morning and say, oh, did we get new
guidance from headquarters today, all right? So that is the
kind of thing that I think is often going to come into play.
That leads me to the role of the under secretary, which I
think is one of the critical places where that needs to start.
If there is ever going to be a strong focus on that acquisition
and procurement and overall program management from DHS, it
needs to be within, I think, the existing structure.
I think the last thing DHS needs today is another
reorganization, because, you know, that just ends up being
different tree, same people. That is not necessarily the
outcome you want.
Mr. Barber. Thank you so much.
Thank you, Mr. Chairman.
Mr. Duncan. Well, just want to follow up with something Mr.
Soloway was talking about. You know, the private sector,
acquisitions have a different meaning and different connotation
than they do in the public sector in some ways. Private
businesses think of acquisition as an expenditure of a large
amount, relatively speaking, of the size of the company of
capital for the purchase of equipment or maybe other capital
assets or contracting for certain services.
When they contract for certain services, those services are
monitored, that if it is an IT service, that the IT company is
actually providing the service that the company requires. If it
is not, then it is terminated, and they find another vendor,
because they are spending their own money. So they are a little
more adept at that.
I want to talk about the human capital of the public
sector. Professional Services Council leadership commission's
2013 report sought to address the challenges facing Federal
human capital with the acquisition process and technology, and
the report looked at the Federal Government in its entirety and
concluded that Government's current human capital strategies
are not delivering the desired results and a fundamental change
was needed.
So what can both the Government and private sector do to
improve performance, efficiency, and quality of Government
acquisition officials? You touched on that just a little bit a
minute ago, but that whole, I guess, fraternity of acquisition
officials. Can you just address that a little bit further?
Mr. Soloway. Yes, I think there are a number of elements to
it. We tried to touch on some of them in the report, and there
are undoubtedly others that we either missed or were just too
far down the path to get to.
Mr. Duncan. Let me ask you to touch on the fact that, how
do we attract the best and brightest human capital out there?
How do we retain those? I think that is really what I am trying
to get at.
Mr. Soloway. I think there are a couple of things. I think
one of the things that most of the surveys I have seen, the
partnership for public sector is a great example, because they
do so much in this area, show that the greatest dissatisfaction
in Government is--let's leave aside pay freezes and so forth--
but the greatest dissatisfaction right now is around questions
of reward for performance, I think was a question in the
earlier panel about performance rewards and so forth, and then
the private sector, that is sort of the standard, is how it
operates.
So I think looking at how we manage human capital, figuring
out a different kind of incentive structure--I don't want to
get into a whole personnel reform debate or discussion today--
but I think there are real issues there. I think, second, we
have to be very careful about how we target who and what skills
we are trying to hire. The Government is never going to be able
to hire all of the technology people it wants, so we need to
take precious dollars and really zero them on for training, for
development and so forth.
I mean, what we see, instead, as is often the case even in
the private sector, and unfortunately, is when times get tough,
training is the first thing to get cut. I had one agency
executive tell me about a month ago that their entire
acquisition workforce training is gone because of the budget.
Now, that to me is a very, that is bad management because
of the implications, but work--people in any professional field
want to know that they are going to have opportunities to
develop their skills, to do interesting work, and move forward,
but you can't do it is everything is a sort of peanut butter-
spread approach to workforce as opposed to very targeted and
very strategic.
I think the third thing is rethinking even workforce
structure. We make a recommendation in the report for the
creation of something called the technology management
workforce. If you look at companies that do a lot of technology
work, and I will use, my favorite example is Federal Express,
because they are essentially an IT company. Everybody who is
anybody at Federal Express is both a business expert and a
technology expert, because that is the two things that they do.
We don't have a lot of that, other than at the very senior
levels in Government. We don't develop our workforce as
integrated workforce as we develop them in silos, and that
inhibits their growth and development, and then they become
much more susceptible to opportunities to go outside and do
different things and have that more contemporary kind of work
experience.
So I think there is a whole level, a set of things that
don't require law, that actually DHS or other agencies could
do, could experiment with to really to drive a better work
experience, even against some intractable fiscal and other
issues that are going to prevent compensation, for instance,
from equaling what you could make elsewhere.
Mr. Duncan. Well, something that the gentleman from Texas,
Mr. O'Rourke, and I were talking about on the walk over to the
Capitol that was brought out in the first committee is the
systemic problem, and it is really systemic to Government as a
whole, Federal Government, State government, local government,
school districts, of spending your entire budget.
At the end of the fiscal year, if you haven't spent your
budget, you go out and you buy all those office supplies and
others, and you spend your budget, because that is how you
justify getting that budget next year an increase.
You know, is there a--I think it was brought out in the
last committee, last panel--there ought to be some sort of
incentive for spending every dollar, that creating some
savings, finding those savings, keeping those contracts under
budget and under cost.
I know as a business, for business leader, I would be more
apt to give someone a higher budget request in the next fiscal
year if they showed some fiscal restraint and common sense
budgeting and not spending their whole budget just they had to.
I would be more apt to reward them with maybe a different
acquisition or different capital purchase or a higher budget in
subsequent years if they showed that they actually cared about
being good stewards of those taxpayer dollars.
So I guess I would just throw this out there. What sort of
incentive-type programs can Government create for Government
acquisition officers and officials for doing that sort of
thing?
Mr. Soloway. I think--I would let my colleagues address
this, as well--we tried several different initiatives when I
was at the Defense Department and had some interesting
learnings. We did have at one point--looked at putting in place
a personal incentive program, where program offices really
achieved some great cost savings that the individuals would
actually be rewarded, like you might in a company, with a bonus
or something like that.
The problem is, people; men and women in uniform aren't
allowed to get bonuses, so you had an immediate disconnect
there because you had mixed workforces.
The Navy experimented for a number of years with--if you
came up with an improvement plan that could reduce maintenance
costs or reduce program costs or so forth, a percentage of
those savings would stay in the organization. The problem is,
when budgets get tight and the annual resource battles, what
organization is it staying? Is it staying at the base? Is it
staying with the command? Is it staying with that section of
the Navy? Ultimately that didn't work too well.
So the incentive question is a really, really tough one. I
think that one of the things we have to get at first is,
leadership showing real support--and I am talking the kind I
was mentioning earlier--real support for the workforce that is
doing this work. Frankly, they don't feel supported.
I am being very candid and blunt, and I will say it is
their leadership. There have been issues with Congress and IGs
and the GAO, not that any of them are doing something that is
not their job, but the workforce doesn't feel like they get any
credit when they do things right. The only thing that gets
noticed is when something goes wrong. Even then, the root
causes are often misunderstood and so forth.
So, again, I will go back to our report. One of the things
that we talked about, and we got this from a lot of Government
folks, including some young professionals we talked to who were
really interesting, was leadership, understanding what it means
to be a risk absorber, to really step up and stand up for your
folks when things go wrong. So that when they are innovative
and something goes bad, you are there to protect them. When
things go right, you are there to celebrate them.
I don't think folks who work in Government, my experience
in Government, expect lots and lots of financial incentives and
so forth. But being recognized and rewarded for great work,
that is actually not nearly as common as one would think.
Mr. Duncan. In a lot of instances, that is equal to a
financial reward in the eyes of their peers.
Mr. Soloway. Absolutely.
Mr. Duncan. So I don't have anything further. I will turn
it over for Mr. Barber for a second round of questions.
Mr. Barber. Well, thank you, Mr. Chairman. I wanted to pick
up on this theme of--my question has to do with how the
Department does or does not encourage creativity, the flow of
good ideas, both from outside, as well as from inside the
Department. I have talked to a lot of Border Patrol agents, the
men and women who are on the ground every single day. They
really know what is happening. Yet they feel, and I think it
goes to your last comment, Mr. Soloway, that no one is
listening or there is no way to be heard.
The same is true for a lot of really innovative companies,
small businesses typically, who say I really want to present
this idea, and I don't even know where the front door is, let
alone how to go through it.
It seems to me that DARPA, for example, is a--provides an
opportunity for creative thinkers, outside-of-the-box thinkers,
to come up with really important ideas that can result in
better National defense.
What can we do to change what I believe is the culture in
DHS, both in terms of accepting or being open to outside ideas,
as well as internal ideas?
I would agree with you, Mr. Soloway, that the employees at
DHS just feel that there is no recognition of what they do and
they work hard every single day to get it done. So just all of
your thoughts, really, on how we can change this culture,
because I think that, when it comes to border security, we need
to be as creative and as nimble and as smart as we possibly can
be, because, quite frankly, the cartels beat us to the punch
way too often. So your comments, please, gentlemen?
Mr. Soloway. I will start on that, because I think you
raise two distinct, but absolutely essential issues. On the
first one, relative to engaging the Border Patrol or other
users in the field, if you will, in the process and getting all
the best ideas together, there are all kinds of models in the
private sector for what they call change management, in which
companies really engage with their supplier base and very deep
levels as to where they are going, what they are thinking. That
doesn't happen very often in Government.
I think there are ways that that can be done by following
some of those models. Again, going back to the report, this
idea that I mentioned earlier of directed collaboration. We
want to save money on programs? Rather than just saying to a
program, ``Go cut 8 percent,'' why not tell our program
officers directly, from leadership, ``We want you and your
contractors and your university researchers and your customers
to go into a room together and figure this out, come up with
sustainable savings.''
Companies know they are going to give up revenue. The
Government may change their requirements. Somebody may say, I
don't need that report. There are tools that way.
The other piece is actually a challenge. I think you are
correct, there are a lot of small businesses that have this
struggle, but, frankly, a lot of larger businesses have the
same struggle, because the Government is unique in commerce in
that the customer is not the one who does the buying. I can go
talk to a Border Patrol office with a great solution, but then
they have to go three levels away and maybe thousands of miles
for somebody to actually execute the acquisition.
Bridging internal gaps--the internal collaboration, another
theme we strike in the report, is absolutely essential. We see
this disconnect in IT all the time, where the technology folks
have--and they know what they want, but by the time it filters
over to the acquisition side, it may or may not look anything
like what they were trying to get, and that is a disconnect
internally that can be done and dealt with organizationally.
Mr. Greenwalt. Yes, I think that is one of the reasons why
I wanted to recommend to the committee that you look at the
rapid acquisition equipping initiatives in DoD. One of the
reasons why is that the traditional acquisition system over
DoD, we just couldn't bridge the gap between the users out in
the field and the combatant commands to what they really
needed, so they essentially established an acquisition system,
actually many, that went around that system and went to the
users and found it exactly what they wanted and got industry to
deliver something quickly out in the field as quickly as
possible.
I think that is something that you might be looking for in
Border Patrol and other areas in DHS and to look at how that
process works. I think, Dave, you might have a couple comments
on it, as well.
Mr. Berteau. Mr. Barber, I think--two observations I would
make, both this and the line of questioning that the Chairman
was pursuing there. One is that the Defense Department is
always different than the rest of the Federal Government in the
following way. Then DHS is sort of caught in the middle, which
makes this committee's job kind of interesting.
Stan mentions that the customers don't buy. That is kind of
true. But in DoD, at least who they are buying for is
themselves. There is a cycle of the user is there eventually,
right? Much of the rest of the Federal Government, what they
spend their money is customers outside that agency. DHS is a
mix. There are components in DHS that are like DoD in that what
they build requirements for, what they build budgets for, what
they acquire is for them to use in executing their mission. In
that way, they are very much like DoD. That is kind of core to
much of the National security arena. There are other parts of
DHS for whom that is not true, but that is not really the
subject of much of today.
So I think it is useful to keep that in mind. Who is the
end-user here? How do they fit into that process?
The second--and, Mr. Chairman, you mentioned in your
question--private companies have a capital budget. In fact, in
your conversation with Mr. O'Rourke, so does every other
Government entity in America, except for the Federal
Government. Whenever we talk about can't we copy the States
from a balanced budget point of view or the cities, because
they all have to have a balanced budget, yes, but they also
have a capital budget, which is going to make sure that when
you are balancing that budget, you are thinking long-term as
well as today.
What I would suggest to you--and I have been after this for
some time--is look at the question of whether or not there is
an opportunity for a pilot of a capital budget process. Maybe
it is Customs and Border Protection. Maybe, in fact, the
incentive is, if you save a little money, you can put it into
your capital budget, which solves your program of who gets the
benefit, what level gets the benefit. It is the entity itself.
Don't let the comptroller steal it. Don't let the appropriator
steal it. Fold it into the capital budget, and you have got it
right there. That actually will allow an enhanced career path,
because now you can see the stuff you work on come to bear and
have benefits the following year.
Mr. Duncan. Well, thank you. We are out of time.
I will just respond to one thing. They do have carry-over
dollars that they keep in the drawer and they spend on things
like that, that not really on this year's balance sheet that
they are aware of.
Then the other thing is, I think if the Federal Government
did create capital account, Congress is notorious for raiding
accounts, such as the Social Security Trust Fund and Highway
Trust Fund, to spend those dollars in other ways. So although I
think that is a great idea and I am all for it, because State
government operates that way, county governments, I am afraid
the Federal Government would raid those funds and then we would
be back into a borrowing situation with capital expenditures.
But that is a question or a conversation for another day. I
want to thank you gentlemen for being here. The witnesses today
were great. Your testimony is very valuable. I apologize that
votes got in the way. I think more Members would have hung
around for this second panel and they would have benefited from
what I think is an excellent discussion here today.
But the Members of the committee may have additional
questions for the witnesses, and we will ask that you respond
to those questions in writing, if possible. So without
objection, the subcommittee will stand adjourned.
[Whereupon, at 4:46 p.m., the subcommittee was adjourned.]
A P P E N D I X
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Questions From Chairman Jeff Duncan for Rafael Borras
Question 1. How many of the 88 major acquisition programs have
clear Acquisition Program Baselines (APBs)? How many do not? What steps
is DHS taking to address those programs that lack APBs?
Answer. Response was not received at the time of publication.
Question 2. In 2012, GAO reported that DHS plans to spend more than
$105 billion on acquisition programs that do not have basic APBs. Is
that still accurate? If not, please elaborate.
Answer. Response was not received at the time of publication.
Question 3. What steps do you plan to take that will ensure that
DHS does not award any future contracts without DHS or component
approval for key planning documents needed to set up operational
requirements?
Answer. Response was not received at the time of publication.
Question 4. In July, GAO reported on several instances of poor DHS
acquisition management. First, GAO found 35 instances of overlap among
DHS research and development (R&D) contracts. Second, GAO found that
DHS has not implemented a biometric exit capability, has failed to show
the cost-benefit comparison between biometric data and biographic data,
and does not have accurate time frames because DHS is behind schedule.
Third, GAO found that the U.S. Coast Guard has not met its goal with
its C4ISR System and was managing this program without key acquisition
documents including an APB. What is DHS doing to fix these problems?
What actions are PARM and the OCPO taking to address these issues?
Answer. Response was not received at the time of publication.
Question 5. As outlined in the OIG May report on H-60 helicopters,
the OCPO and PARM did not conduct a complete review and did not hold
CBP and USCG accountable for their program management of the H-60
helicopters. PARM did not issue a final signed Acquisition Decision
Memorandum requiring CBP to follow DHS policy. What actions have you
taken to address these failures? Does DHS plan to force CBP to allow
the USCG to complete the conversions and modifications through the USCG
Aviation Logistics Center in order to save American taxpayers about
$126 million and shorten the completion schedule by about 7 years? If
not, please explain.
Answer. Response was not received at the time of publication.
Question 6. As outlined in the OIG August report on DHS radio
communications, DHS does not have reliable DHS-wide inventory data, and
DHS lacks an effective governance structure to guide investment
decision making. What actions do you plan to take to fix these gaping
problems in acquisition management? What actions to do you plan to take
to better involve DHS personnel in the field (i.e. CBP agents on the
border) in crafting acquisition requirements, assisting in the
acquisition process, and communicating with other components with
interests or potential inventory to ensure such duplication, overlap,
and wasteful spending as outlined in this OIG report do not occur
again?
Answer. Response was not received at the time of publication.
Question 7. As outlined in the OIG August report on DHS radio
communications, several DHS components were at fault for not reporting
radio equipment stored in their warehouses, new inventory, and
infrastructure real property inventory data valued in the millions of
dollars. What disciplinary actions have you taken to address this poor
management?
Answer. Response was not received at the time of publication.
Question 8. Regarding the May 09, 2013 ``Acquisition Decision
Memorandum,'' please discuss the risks involved with this waiver
particularly given that acquisition programs realize most of their
costs during the sustainment phase of a program's life cycle.
Answer. Response was not received at the time of publication.
Question 9. The May 09, 2013 memo stated that you plan to monitor
the program and that the document requirements will be reinstated if a
program initiates a major modernization or a new acquisition. What is
your plan for overseeing these sustainment activities? How many people
have you assigned for compliance activities with these 42 programs
listed in the memo?
Answer. Response was not received at the time of publication.
Question 10. The May 09, 2013 ``Acquisition Decision Memorandum''
includes several programs widely known to have serious problems with
operational effectiveness, cost overruns, or schedule delays including
CBP's Secure Freight Initiative, TSA's FAMS Mission Scheduling and
Notification System, TSA's HAZMAT Threat Assessment Program, TSA's
Information Technology Infrastructure Program, TSA's TWIC Program,
TSA's National Explosive Detection Canine Training Program, TSA's Air
Cargo program, and the USCG's Business Intelligence Program. How were
these programs chosen for inclusion? Can you guarantee that this
decision as outlined in the May 09, 2013 memo will not result in
greater cost overruns, schedule, delays, duplication, or wasteful
spending of American tax dollars? Please provide the analysis and
consultation you did at the Department level, with your components, and
with any independent groups to come to this decision.
Answer. Response was not received at the time of publication.
Question 11. What is the time line for DHS to achieve the goal of
full integration of the Integrated Investment Lifecycle Management
(IILCM)? What are the possibilities for DHS to leverage the IILCM
across all acquisition investments? How has DHS incorporated private
sector, other Federal agencies, and independent verification in
developing the IILCM?
Answer. Response was not received at the time of publication.
Question 12. DHS operates its own training center, has 7
acquisition certification programs, and has a 3-year Acquisition
Professional Career Program (APCP) with 320 acquisition classes. What
efforts has DHS taken to consolidate acquisition training with other
available courses and institutions within the Federal Government?
Answer. Response was not received at the time of publication.
Question 13. When was the APCP established? How many instructors
and students does it have? What is the ratio between instructor and
student? How many DHS employees have graduated from this program? How
did DHS develop its catalogue of 70 courses and over 300 classes?
Answer. Response was not received at the time of publication.
Question 14. How is DHS planning to address the challenge that the
increasing proportion of the DHS procurement workforce is retirement
eligible?
Answer. Response was not received at the time of publication.
Question 15. What is DHS doing to promote employee retention? What
specific actions have you taken that you have seen a measurable result?
How do you measure employee satisfaction?
Answer. Response was not received at the time of publication.
Question 16. Business intelligence tools can be useful to allow DHS
to have better management and visibility into DHS acquisition programs.
As it is often the responsibility of DHS components to update the data
that informs these tools, are you concerned about the quality of the
data entered into business intelligence tools? Is every contract
manager required to enter performance evaluations into the Contractor
Performance Assessment Reporting System? How long has this reporting
system existed and who manages it? How often does it get updated?
Answer. Response was not received at the time of publication.
Question 17. Since the Federal Law Enforcement Training Center
(FLETC) is the only legacy DHS component that does not require a
Component Acquisition Executive (CAE) position because of the nature of
its procurement portfolio, would you explain how FLETC's acquisition
and procurement policy works? How does DHS do strategic sourcing of its
ammunition purchases? What are the cost differences in purchasing
ammunition without strategic sourcing?
Answer. Response was not received at the time of publication.
Question 18. The Department's Chief Financial Officer has
identified a 30% funding gap across the Department's major acquisition
programs. Can you discuss what that means in terms of the DHS' mission,
operations, and long-term planning?
Answer. Response was not received at the time of publication.
Question 19. One comment made by DHS officials to GAO from the
Office of Program Accountability and Risk Management (PARM) and the
Office of Program Analysis and Evaluation (PA&E) was that cost
estimates provided by program management offices often understate
likely costs. PA&E officials reported to the GAO that many programs did
not include operations and maintenance in their cost estimates, which
can account for at least 60% of a program's total cost. Has DHS at the
Department level and component level acknowledged this flaw and
corrected it? Please elaborate.
Answer. Response was not received at the time of publication.
Question 20. What capabilities does the Department have in place to
analyze how much is spent on procurement at an item level? What
percentage of the workforce is focused on tracking compliance of each
procurement to negotiated contracts?
Answer. Response was not received at the time of publication.
Question 21. Does the Department have full transparency and
auditability into the purchasing of goods and services? How many laptop
computers were purchased by the Department in fiscal year 2013 and at
what price points?
Answer. Response was not received at the time of publication.
Question 22. A number of agencies within the Department are
currently considering utilizing shared-services as a way to reduce
their overhead costs for back-office functions such as HR and finance.
However, it is the committee's understanding that the agencies are
considering independently purchasing divergent systems from different
sources. Has Department leadership considered using a single shared-
services platform for the entire Department? Has the Department
considered partnering with the private sector to implement such a
platform?
Answer. Response was not received at the time of publication.
Question 23. Is the Department confident that another Federal
agency's system is scalable to support your unique requirements? If the
USCG goes with a Government Shared Service such as the Department of
Interior, who then will service components, such as TSA? Will TSA then
need to procure their next system?
Answer. Response was not received at the time of publication.
Question 24. This summer DHS awarded a contract for an enterprise
learning management system. The committee has heard that the chosen
solution is not a robust solution that is often used in the private
sector and that the chosen solution will require TSA to undo previous
work on their learning platform to be compatible with the newly chosen
solution. Please describe the logic in choosing the solution and
rationale behind the transition plan.
Answer. Response was not received at the time of publication.
Question 25. Describe DHS efforts to implement performance-based
budgeting and ways to incentivize programs to under-spend their budget.
What legislative authority does DHS believe it needs to
institutionalize such an approach?
Answer. Response was not received at the time of publication.
Question 26. What account structure does DHS recommend to clarify
what money is to be used for and provide greater transparency among
various funds?
Answer. Response was not received at the time of publication.
Questions From Chairman Jeff Duncan for Michelle Mackin
Question 1. What do you see as the greatest challenge DHS faces in
implementing changes that will improve acquisition outcomes?
Answer. Response was not received at the time of publication.
Question 2. What do you believe is the single greatest action that
DHS could take to improve its acquisition program management?
Answer. Response was not received at the time of publication.
Question 3. As GAO has released several DHS acquisition-related
reports in March, May, July, and August of this year, what has DHS'
response been to all of these findings and recommendations? Do they say
that they've already implemented the recommendations before you've
issued the report?
Answer. Response was not received at the time of publication.
Question 4. How many of GAO's five recommendations for executive
action from the September 2012 report has DHS complied with?
Answer. Response was not received at the time of publication.
Question 5. In GAO's March 2013 report, GAO found that almost 90%
of the current major defense acquisition programs have conducted
``should cost'' analysis and ``most of those programs noted that they
had realized or expected to realize some cost savings as a result.'' To
your knowledge, is DHS employing ``should cost'' analysis? Do you
recommend that DHS consider it?
Answer. Response was not received at the time of publication.
Questions From Chairman Jeff Duncan for Anne L. Richards
Question 1. Regarding the OIG May 2013 report on H-60 Helicopters,
what has DHS done to hold the helicopter programs accountable in
response to your report?
Answer. According to DHS, the Deputy Secretary has approved a
proposal from the Management Directorate's Office of the Chief
Readiness Support Officer (OCRSO) to establish an Aviation Governance
Board (AGB). The AGB will be chaired and staffed by the OCRSO and will
be responsible for providing coordinated oversight and management of
DHS aviation programs. The AGB's first task is to develop a formal
charter, estimated to be completed by December 31, 2013. As of October
22, 2013, the OCRSO had begun holding meetings and began to oversee the
cost-benefit analysis (CBA) of the CBP and USCG H-60 helicopter
programs. The analysis was originally expected to be completed and
delivered to DHS OIG on September 30, 2013, but it is still pending.
The DHS Chief Acquisition Officer also directed CBP to re-submit
its Strategic Air and Marine Plan (StAMP) for management and
acquisition to the DHS Office of Program Accountability and Risk
Management (PARM). To date, PARM's Acquisition Review Board has not
received complete documentation from CBP, nor has it held another
Acquisition Decision Event for CBP's StAMP. DHS OIG is closely
monitoring the progress and evolution of StAMP, and we plan to attend
in person when it occurs.
In its 90-day memo updating OIG, dated September 4, 2013, the
Department reported that it planned to have a senior-level DHS official
request an H-60 helicopter transfer of ownership from DoD, and thus,
would elevate this request to the CBP Office of Air and Marine
Assistant Commissioner. The target date for sending the request to DoD
was September 30, 2013. DHS OIG is still awaiting confirmation and
documentation supporting this action.
As noted above, DHS' OCRSO is facilitating completion of a CBA
between CBP and the USCG to determine whether there are cost
efficiencies to completing the remaining CBP H-60 conversions and
modifications at the USCG's Aviation Logistics Center, as we
recommended. CBA completion was planned for September 30, 2013. On
September 29, 2013, an OCRSO representative indicated in writing that
CBP and the USCG had completed their CBAs, but that OCRSO was still
reviewing the work and wanted more clarification from DHS OIG on the
methodology we used to compare the programs. DHS OIG continues to
coordinate with OCRSO to expedite receipt of the final H-60 helicopter
CBA so that we can review it as soon as possible.
Question 2. Regarding the OIG August 2013 report on radio
communications, what has DHS done to hold the radio communication
programs and the components in particular accountable in response to
your report?
Answer. OIG transmitted the final radio communications audit report
to the Department and components on September 3, 2013. DHS concurred
with both recommendations and has begun taking steps to implement them.
We recommended that the Department establish a single point of
accountability with the authority, resources, and information to ensure
it implements a portfolio approach for its radio communication program.
In response, DHS noted that it is working to develop and implement
Department-level portfolio management of tactical communications, but
that the estimated completion had not yet been determined. In response
to our recommendation to develop a single portfolio of radio equipment
and infrastructure, the Department reported that the Joint Wireless
Program Management Office has made significant progress in collecting
the data necessary to develop a single profile of DHS assets,
infrastructure, and services across components. DHS also noted that it
will complete a review of existing policies and procedures and will
revise its personal property manual as necessary to align with the
findings. The Department estimated these actions would be implemented
by June 2014. We consider both recommendations resolved, but open,
pending documentation of DHS' efforts. We expect to be updated on both
of these recommendations when we receive the Department's 90-day memo.
Question 3. What do you see as the greatest challenge DHS faces in
implementing changes that will improve acquisition outcomes?
Answer. As noted in my oral statement before the subcommittee, our
audits in this area continue to show that the Department's greatest
challenge is establishing an effective, high-level governing structure
that can identify mission needs, gather reliable data on and coordinate
assets, and guide investment decisions. This is especially challenging
considering the complexity and breadth of the acquisitions that DHS
needs to manage. In 2013, DHS' Major Acquisition Oversight List
contained more than 125 major acquisitions, each of which had an
estimated cost of more than $300 million. DHS is currently spending
more than $158 billion on these programs and projects.
In a September 2012 report, GAO noted that although DHS recognized
the need to implement its acquisition policies more consistently,
significant work remained. DHS has established processes and entities
to manage acquisitions, but without a strong, centralized authority it
is hindered in its ability to ensure compliance with its policies and
processes, as well as properly coordinate and provide effective
oversight of its planned and on-going acquisitions.
Question 4. What do you believe is the single greatest action that
DHS could take to improve its acquisition program management?
Answer. Going forward, the DHS Office of Program Accountability and
Risk Management (PARM) and the Acquisition Review Board should not
allow acquisitions to proceed without ensuring that program managers
have completed and clearly documented all acquisition life-cycle
processes, including fully developing program life-cycle cost
estimates. The Acquisition Review Board must provide a consistent,
Department-wide method, using a limited set of key acquisition
documents, to evaluate components' acquisition status and progress at
programs' key decision points. By fully implementing the Department's
processes and procedures under the appropriate authority level and
review, PARM will begin to provide more effective oversight by
identifying challenges, and controlling cost, schedule, and performance
within the Department's acquisition programs.
Questions From Chairman Jeff Duncan for William C. Greenwalt
Question 1. What do you believe is the biggest frustration or
challenge from the perspective of the private sector regarding DHS
acquisition policy and practice?
Answer. One of the biggest frustrations the private sector has with
Federal acquisition policy and practice (to include DHS and DoD) is the
impact that the Government's rules, regulations, and practices have on
the ability of the private sector to propose best-value solutions. The
portion of the private sector that bids on Government contracts is
becoming more Government-unique in its operations as opposed to how it
would operate in the commercial market. Federal contractors are
becoming better at complying with Federal rules and regulations and
meeting the letter of rigid requirements put in place in the contract
than delivering the best solution to meet the Government's need.
Contractors are being rewarded on how well they comply with these rules
and regulations and meeting rigid Government specifications for
solutions oftentimes already mapped out by the Government rather than
proposed by the private sector. This combination of rules and rigid
requirements precludes some of the best contracting talent from ever
bidding on Government contracts.
Current Federal procurement practice is targeted at reducing short-
term prices and profits at the expense of long-term value and
unfortunately in the next several years we are likely to see more
acquisition failures as was witnessed in the HealthCare.gov rollout as
this works its way through the system. One of the most egregious
examples of this trend is the increased use of LPTA (low-priced
technically acceptable) contracts which are suitable for the purchase
of commodities but should have no place in buying complex IT and
service solutions for the Government. Under an LPTA there are no
incentives for a contractor to propose the best solution but merely to
bid on whatever the Government thinks it needs (which the Government
rarely knows with complete certainty) and to try and cut corners
wherever it can to reduce its price. If the Government is not 100%
correct in its detailed specifications in the contract and goes with
the lowest bidder, that contractor may not be qualified to deal with
requirements changes when the Government realizes it's the mistakes and
questionable assumptions it had when it originally put out the bid. The
Government should instead be conducting more performance-based best
value contracts versus LPTAs but ``best value'' contracts require more
time, effort, resources, and discretion at the beginning of a program
that the Government is unwilling or at the present time incapable of
providing.
Question 2. In GAO's March 2013 report, GAO found that almost 90%
of the current major defense acquisition programs have conducted
``should cost'' analysis and ``most of these programs noted that they
had realized or expected to realize some cost savings as a result.'' To
your knowledge, is DHS employing should cost analysis? Do you recommend
that DHS consider it?
Answer. ``Should cost'' analysis can be a very effective tool for a
very narrow case of sole-source cost contracts where some limited
production has already occurred, large production is expected in the
future and cost per units have been rising. As outlined in the Federal
Acquisition Regulations (FAR), ``should cost'' analysis needs to be
analytically sound and rigorous as a collaborative effort between
Government and industry with benefits for both. It is only as good as
the soundness of the method. I am not aware of DHS using this FAR-based
method or of any of its programs meeting this FAR-based criteria, but
in the narrow cases where it would be appropriate and DHS had the skill
set to undertake such an analysis in production, it would be an
effective tool.
At DoD, I would be careful what one calls ``should cost'' analysis
and GAO should be more careful of the definitions it uses in its
criteria for evaluation. What is now passing for ``should cost''
analysis at the Department of Defense is more of an exercise in what
DoD ``wishes'' things would cost after it has signed a contract and is
not a product of the analytic process outlined in the FAR. ``Should
cost'' has now become an exercise in achieving after-the-fact
negotiation objectives and is an example of the Government using its
monopoly buying power to reduce industry profit margins based on
limited analytical work. While short-term ``savings'' may be achieved
the future impact on the industrial base remains to be seen from this
``wish cost'' approach. I would not recommend this as a DoD best
practice until the longer-term impacts are in. While it is a way to
help the Department's short-term cash flow problems it may not be a way
to adequately incentivize a dynamic, innovative industrial base in the
future.
Questions From Chairman Jeff Duncan for Stan Soloway
Question 1. What do you believe is the biggest frustration or
challenge from the perspective of the private sector regarding DHS
acquisition policy and practice?
Answer. I do not think you can point to one issue and say it trumps
all others. Instead, I would answer the question by saying the biggest
challenge in dealing with DHS acquisition policy and practice is the
combination of limited collaboration, over-interpretation or mis-
interpretation of guidance, and workforce gaps.
In terms of collaboration, across Government we have seen a marked
decrease in the kind of meaningful and substantive dialogue between the
Government and its industry partners as the Government seeks to
identify and capitalize on optimal solutions. Communications are
unnecessarily limited and, sometimes even discouraged or prohibited,
and, as a result, often prevents bidders from identifying and proposing
effective innovations. The same lack of communication plagues internal
collaboration within the Government. PSC's 2013 Leadership Commission
was surprised to find how deep and broad the disconnects are between
and within Government organizations and functions, particularly between
the acquisition and technology communities. If one thinks of the
technology community as the true ``customer'' and the acquisition team
as the ``enabler,'' then these disconnects present very serious
obstacles to DHS for obtaining the capability or solution the
``customer'' is seeking. And when one combines those disconnects with
the limited interactions between Government and industry, the problem
becomes even further exacerbated.
Second, there is an unfortunate tendency at DHS, and across
Government, to interpret general guidance as mandated direction, thus
unintentionally circumventing the flexibilities of the Federal
Acquisition Regulation that seek to establish an ecosystem where smart
acquisition and business judgments serve as the foundation. For
example, as the policy leadership began to put more emphasis on
increasing the use of fixed-price contracts, the reaction in the field
became that fixed-price contracts were, in effect, mandatory. This
tendency has been repeated on the heels of a Government-wide push
towards the use of lowest price technically acceptable acquisition
(LPTA) strategies. Under an LPTA award, the Government must, by
regulation, award a contract to the lowest bidder who is minimally
technically qualified. The misuse or over-use of LPTA is driven by many
factors, not the least of which is the continued questioning of--and,
in fact, prohibition against--allowing any circumstance in which the
Government opts to spend slightly more money for a superior outcome.
The risk aversion this trend represents is driven, in large part, by an
over-interpretation by the workforce of admonitions to not over-spend
(which is far different from spending wisely) and, as with the
communications challenges, presents an enormous obstacle to high
quality and innovative solutions.
Finally, there are enormous gaps in workforce capacity and
capabilities at DHS, in both acquisition and technology. The DHS
leadership is to be commended for its aggressive efforts to address
those gaps with better and more accessible training and development
opportunities. But much more needs to be done. The 2013 PSC Leadership
Commission Report contains a set of recommendations, including the
dramatic expansion of cross-functional training, organizational
rotations, a broader array of training opportunities, and much more. We
have also recommended the creation of a new workforce component--
technology management--which would combine technology and business
expertise in one functional field, much as is done throughout
significant parts of the commercial world. We have also recommended the
creation of a clearly-defined program management career field and path,
which does not today exist in the civilian agencies but which is
absolutely essential to the effective management of complex and multi-
faceted programs.
Question 2. In GAO's March 2013 report, GAO found that almost 90%
of the current major defense acquisition programs have conducted
``should cost'' analysis and ``most of those programs noted that they
had realized or expected to realize some cost savings as a result.'' To
your knowledge, is DHS employing ``should cost'' analysis? Do you
recommend that DHS consider it?
Answer. The extent DHS is utilizing ``should cost'' analyses for
its major programs is unclear. While the concept deserves
consideration, DHS should consider several factors in determining how
to apply it to their own needs, and its use should be limited to the
most complex, high-risk acquisitions only. Specifically, DHS must
consider:
(a) DoD's ``should cost'' process is not without its detractors and
many have questioned its effectiveness. Specifically,
substantial disagreements as to the baseline assumptions and
the causes of changes to the baselines are common and thus the
``results'' are sometimes questionable.
(b) DoD uses these analyses for major defense programs which exist
in a marketplace and environment that is in many ways unique.
Thus, normal market research and similar tools are not always
adequate and the scope and nature of ``competition'' is
somewhat limited. However, in DHS's case, the preponderance of
its needs involve commercial capabilities or analogs of
commercial capabilities, thereby suggesting strongly that a
substantially enhanced market research capability is likely to
provide more insight and value than a Government-created,
``should cost'' process.
(c) The vast preponderance of DHS's needs are procured
competitively from a broader marketplace of offerings. As such,
the competitive process itself is a highly reliable tool for
the determination of both cost and the ``art of the possible.''
To replace or supplant that with a Government-created, ``should
cost'' process brings with it the potential for the Government
assuming it has all or most of the technical answers, which is
increasingly not the case.
(d) ``Should cost'' analysis is labor-intensive and requires vast
acquisition and analytical skills. Given the acquisition
workforce challenges outlined in our Commission Report, it must
be recognized that significant workforce training would be
needed before ``should cost'' analysis could be reliable or
broadly utilized.
Questions From Chairman Jeff Duncan for David J. Berteau
Question 1. What do you believe is the biggest frustration or
challenge from the perspective of the private sector regarding DHS
acquisition policy and practice?
Answer. Response was not received at the time of publication.
Question 2. In GAO's March 2013 report, GAO found that almost 90%
of the current major defense acquisition programs have conducted
``should cost'' analysis and ``most of those programs noted that they
had realized or expected to realize some cost savings as a result.'' To
your knowledge, is DHS employing ``should cost'' analysis? Do you
recommend that DHS consider it?
Answer. Response was not received at the time of publication.
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