[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
HEARING ON BLACK BERET PROCUREMENT:
BUSINESS AS USUAL AT THE PENTAGON?
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HEARING
before the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC, MAY 2, 2001
__________
Serial No. 107-5
__________
Printed for the use of the Committee on Small Business
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73-064 WASHINGTON : 2001
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COMMITTEE ON SMALL BUSINESS
DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
ROSCOE G. BARTLETT, Maryland California
FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois
SUE W. KELLY, New York WILLIAM PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio DONNA M. CHRISTIAN-CHRISTENSEN,
PHIL ENGLISH, Pennsylvania Virgin Islands
PATRICK J. TOOMEY, Pennsylvania ROBERT A. BRADY, Pennsylvania
JIM DeMINT, South Carolina TOM UDALL, New Mexico
JOHN THUNE, South Dakota STEPHANIE TUBBS JONES, Ohio
MIKE PENCE, Indiana CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey DAVID D. PHELPS, Illinois
DARRELL E. ISSA, California GRACE F. NAPOLITANO, California
SAM GRAVES, Missouri BRIAN BAIRD, Washington
EDWARD L. SCHROCK, Virginia MARK UDALL, Colorado
FELIX J. GRUCCI, Jr., New York JAMES R. LANGEVIN, Rhode Island
TODD W. AKIN, Missouri MIKE ROSS, Arkansas
SHELLEY MOORE CAPITO, West Virginia BRAD CARSON, Oklahoma
ANIBAL ACEVEDO-VILA, Puerto Rico
Doug Thomas, Staff Director
Phil Eskeland, Deputy Staff Director
Michael Day, Minority Staff Director
C O N T E N T S
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Page
Hearing held on May 2, 2001...................................... 1
Witnesses
Shinseki, General Eric K., Chief of Staff, U.S. Army............. 4
Capps, Hon. Lois, Member of Congress, 22nd District of California 18
Jones, Hon. Walter B., Member of Congress, 3rd District of North
Carolina....................................................... 19
Glisson, Lt. Gen. Henry T., Director, Defense Logistics Agency... 23
Goodman, Michele, President, Atlas Headwear...................... 27
Cooper, David, Director, U.S. General Accounting Office.......... 30
Whitmore, John D., Acting Administrator, U.S. Small Business
Administration................................................. 32
Joffe, Evan, Springfield LLC..................................... 34
Schooner, Steven L., Associate Professor of Government Contracts
Law, George Washington University Law School................... 36
Oliver, Hon. David R., Acting Under Secretary of Defense,
Acquisition, Technology, and Logistics......................... 38
Appendix
Opening statements:
Manzullo, Hon. Donald........................................ 71
Velazquez, Hon. Nydia........................................ 74
Issa, Hon. Darrell........................................... 76
Prepared statements:
Shinseki, General Eric K..................................... 78
Capps, Hon. Lois............................................. 81
Jones, Hon. Walter B......................................... 84
Glisson, Lt. Gen. Henry T.................................... 87
Goodman, Michele............................................. 92
Cooper, David................................................ 103
Whitmore, John D............................................. 110
Joffe, Evan.................................................. 122
HEARING ON BLACK BERET PROCUREMENT: BUSINESS AS USUAL AT THE PENTAGON?
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WEDNESDAY, MAY 2, 2001
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:05 a.m. in Room
2360, Rayburn House Office Building, Hon. Donald Manzullo
[chairman of the Committee] presiding.
Chairman Manzullo. This hearing will come to order. Good
morning and welcome to this hearing of the Committee on Small
Business. A special welcome to those who have come some
distance to participate and to attend this hearing.
I would like to extend an especially warm welcome to
General Shinseki. He is a true patriot having served two tours
in Vietnam and was wounded twice in combat.
Let me make it clear that this hearing is not about the
policy decision to have all active U.S. Army personnel wear
berets. Nor is the hearing about what color beret a particular
unit within the U.S. Army is going to wear. This hearing is
merely focused on the decision to purchase berets from foreign
sources.
I readily acknowledge that the Committee on Small Business
has no jurisdiction over the policy issues of whether the U.S.
Army should wear berets and the color of those berets. These
two issues are settled and are not within the jurisdiction of
this Committee. The military leaders of this nation who have to
make the difficult decisions to place our young men and women
in harm's way deserve our total and absolute respect.
The only reason we are holding the hearing today is to
discuss the procurement issue. This Committee has both
legislative and oversight jurisdiction to ensure that small
businesses are not bypassed in the federal procurement process.
I would respectfully request that the Committee members limit
their questions to procurement issues.
General Shinseki has told me, and I am sure he will tell
the Committee, that if he had been informed the berets were
being manufactured overseas because of the short time period
needed to acquire the berets, he could have changed the date of
delivery and possibly other requirements.
Our purpose is to try to get the Department of Defense to
follow the existing rules of procurement and possibly to seek
legislative remedies.
You will hear in this hearing a gross disregard of the
procurement rules. The number of textile manufacturers and
apparel and shoe manufacturers in this country continues to
dwindle.
Congressman Walter Jones, Jr. was scheduled to testify at
the hearing originally scheduled for April 5. That same week
Congressman Jones received word that the district he represents
lost over 1,000 textile-related jobs.
As chairman of the Committee on Small Business, I have an
obligation to these small businesses that are being impacted by
the military's refusal to follow the procurement laws. The
report of the inspector general of the Department of Defense,
dated over two years ago, shows that nearly 60 percent of
procurements of military clothing made by the department
violate some procurement laws and regulations.
It is ironic. While our Army is ready to fight to keep us
free, the Defense Logistics Agency, a totally separate entity,
continues to frustrate our laws, which will result in the
destruction of our domestic small businesses.
The paramount issue in this hearing is why couldn't these
berets be manufactured in the United States.
This hearing is going to be about real people and how real
people are impacted by decisions that are made by the DLA in
violating our procurement laws.
You will hear the compelling testimony of Michele Goodman,
who has a small manufacturing facility in Phoenix. And you will
hear about the fact that she has made it a policy for years to
employ disabled and severely disabled people who have gone
through workshops and whose only type of occupation are the
types of positions that Ms. Goodman offers to these people.
These are the most defenseless of all Americans. These are
the ones who, in the past, have not been able to work. These
are the ones who are impacted whenever the United States
government goes offshore in order to purchase clothing and
shoes and everything.
That is what this hearing is about, the thousands of
Americans that are impacted, the small business that strive to
compete on a day-to-day basis.
As a rule of order, I fully intend to keep the questions
and answers to five minutes, no four minute and 30 second
questions expecting to have the same amount of time to answer
the question. We have several panelists and members here.
Ms. Velazquez, as the ranking member, and I, as the
chairman, may exercise our discretion to use more than five
minutes. I will strictly enforce the five-minute rule. I can
assure you of that.
Again, thank you. I now yield for the opening statement
from my good friend, the Ranking Member, Ms. Velazquez.
[Chairman Manzullo's statement may be found in appendix.]
Ms. Velazquez. Thank you, Mr. Chairman.
Today's hearing continues our effort to shine light on the
contracting practices of the Department of Defense which are
effectively deterring this nation's small businesses.
This is the sixth hearing we have held that looks at the
contracting practices of this agency. And every time we ask the
question, ``Why aren't small businesses being awarded prime
contracting opportunities,'' the answer of the Department of
Defense, ``Well, we make big stuff, and these are contracts
that small businesses just cannot handle.''
First of all, you and I both know that is wrong. Second of
all, when a contract opportunity is presented that small
businesses can handle, you yank the rug right out from under
them by providing unrealistic timelines based on arbitrary
deadlines. You then create product specifications that are so
restrictive as to defy the imagination, like a beret that is
made as one piece.
My concern today is that we are taking opportunities out of
the hands of our nation's economic foundation, our small
businesses, for what, on its face, is a subjective deadline.
Why do we have one U.S. manufacturer? I will tell you why,
because only one U.S. company has equipment. The machinery used
to manufacture the one-piece knitted beret no longer exists,
which begs a whole host of questions.
Why is this beret so exclusively made? Is the beret
indestructible? No. Is the beret bullet-proof? No. Is the beret
wearable in combat? No.
So when I ask the question, the answer I get, the
Department of Defense thinks the beret looksbetter with no
seam. Looks better? So now fashion consciousness is the new excuse the
Department of Defense uses when they sidestep federal regulations in
small business procurement?
I will tell you all that this is not the end of the issue.
I want the Army and the entire Department of Defense to know we
are going to be holding your feet--your collective feet to the
fire on this and other procurement issues.
We will not allow the DOD to carry on as they have
previously and use the same old tired excuses they have for the
past seven years. And I will tell you that there is no way that
this Committee will sit still while small business
participation is continuously blocked.
First is contract bundling. Now we are talking about unduly
restrictive specification and arbitrary timeliness. Frankly, I
wait with eager anticipation to see what DOD will come up with
next because these excuses just aren't going to work anymore.
So I suggest you either come up with something new or do
something to solve the problem. I believe that problems such as
the one we are examining in this hearing will continue until we
pass substantive legislation like the Small Business Contract
Equity Act. This legislation give small business necessary
protections in government contracting.
Mr. Chairman, I want to thank you for your tenacity in
pursuing this issue. I believe that you are right on the mark
in holding this contract-specific hearing because it seems that
these forums are the only way to get the Pentagon's attention.
It is my hope that today we can commit to holding regular
contract-specific hearing starting with the DLA contract that
has affected businesses throughout Ohio and the Midwest.
I want to close by saying that we are here today for one
purpose and one purpose only, to defend the interests of
America's small businesses from every quarter. And nowhere are
those interests more threatened than when it comes to issues
like this. And I believe that, as we defend those interests, we
are protecting the future of the American economy.
Thank you, Mr. Chairman. And, again, I look forward to more
investigative hearings like this where we get to the bottom of
these practices by the department that are detrimental to our
nation's small businesses.
Chairman Manzullo. Thank you very much.
The first panel is General Shinseki. General?
General Shinseki. Good morning, Mr. Chairman.
Chairman Manzullo. Good morning. Could you pull the mike
closer to you?
General Shinseki. I will. Can you hear me?
Chairman Manzullo. Yes, sir.
STATEMENT OF GENERAL ERIC K. SHINSEKI, CHIEF OF STAFF, UNITED
STATES ARMY
General Shinseki. Okay. Good morning, Mr. Chairman,
Congresswoman Velazquez, members of the Committee. I am here to
explain the Army's decision last October to authorize the wear
of black berets by our soldiers. And, Mr. Chairman, thank you
for the opening statement.
I would just add that, subsequent to that decision that the
Army announced last October, the Defense Logistics Agency let
contracts to meet the Army's requirements.
I'll provide the Army's rationale for its decision to
authorize the wear of black beret, and I believe the following
panels will address the contracting decisions that led to the
production of those berets.
For those members with whom I have spoken with in person,
to include yourself, Mr. Chairman, on this issue and other
members who may have attended a meeting last week of the House
Armed Services Committed, I regret and I apologize for the
repetition since some of my remarks will not be new.
But let me just begin by saying 22 months ago, we, the
Army, were encouraged to get on and begin the challenging
process of changing this magnificent Army, to keep it relevant
for the strategic environment of the 21st century, transform
the Army, do as much as you can accomplish on your watch but
don't break near-term war fighting readiness. That was pretty
much the charter, transform, don't break readiness, but do it
quickly.
The Army is a large institution, a million soldiers in
uniform, and change in large institutions is difficult. Even
more difficult is trying to effect a commitment for that kind
of change in a short period of time.
But thanks to bipartisan congressional support last year,
we were able to build remarkable momentum for beginning the
process of change without breaking readiness.
The decision to don the black beret is part of that
commitment to change, but it is not a new initiative. It had
been considered before.
And when I became the chief in June of '99, the black beret
initiative was revisited with me. I deferred any decision on
that black beret decision for a year until the summer of 2000
in order to get on with the challenging and more crucial need
to transform the Army-at-large.
After generating the requisite momentum for Transformation,
I said we would come back and consider the utility of the black
beret decision, and so I spent that first year walking the
Army, talking to our soldiers, explaining to them our need to
transform and educating them on how we intended to go about it.
The very first symbols of that commitment to transform are
occurring even today out at Fort Lewis, Washington, where we
are standing up our first two interim brigade combat teams.
As we began to achieve momentum, I also began to sense a
growing perception on the part of our soldiers that if one were
not stationed out at Fort Lewis, Washington, then somehow they
were not part of Army transformation, not on the cutting edge
of the Army.
And, remembering back to our experience with the 9th
Infantry Division High Tech Test Bed, another effort to
transform the Army about 20 years ago, we needed the Army to
understand that our requirement for change was much broader
than just those two interim brigades at Fort Lewis. It was
comprehensive. It was about more than just platforms, and
everyone needed to be a part of it.
And so, as we engaged the Army that first year, we also
rediscovered that this magnificent Army is composed of a number
of strong and proud communities, communities which have given
us the heritage we enjoy today, our active and our reserve
components, aviation and ground units, maneuver and our support
formations, and, within our maneuver community, heavy forces,
light forces, special operations forces.
All of them are wonderful and important in their own
rights. But, as happens with communities, each of those
communities tended to see themselves a little more clearly than
the larger Army.
We have gone to great lengths over the past 22 months to
bring these communities closer together because that is what
Transformation and change is going to require. There are still
some walls out there, and, while each community is important,
none of them alone wins the nation's wars. It takes the Army to
win a war.
So the black beret is about building cohesiveness amongst
those communities because we will need all of them to transform
just as we will need all of them to win a war. Everyone is part
of this commitment to change, and, for the vast majority of our
1 million soldiers, this black beret decision is not an issue.
Their Army is moving out. They want to be a part of it.
We chose the black beret to symbolize this change because
it is the one relevant color that cuts across all community
lines. Black is the only color that has been worn by both our
heavy and our light formations. And it is worn today not only
in the Ranger regiment, but also in our combat training centers
by the 11th Armored Cavalry Regiment, the 1st Battalion 509th
Infantry, and the 1st Battalion, 4th Infantry Mechanized.
The black beret, therefore, best reflects the Army of the
future, that Objective Force we are pursuing, which will
combine the lethality and survivability of today's heavy forces
with the deployability and agility of our light forces.
The capabilities of this future objective force will be
dominant. It will extend the decisive capabilities of today's
M1A2 Abrams tank, the M2A3 Bradley fighting vehicle, The
Crusader, and Knowledge Base C4 ISR to a future Objective Force
capability that will be responsive and deployable and
versatile, agile, lethal, survivable, and sustainable in ways
that today's force cannot be.
We will begin fielding this force by the end of this
decade. That force will have the capability to put a combat
brigade any place in the world in 96 hours, a war fighting
division on the ground in 120 hours, five divisions in theater
in 30 days.
It will be a strong deterrent to potential aggressors. It
will bring unmatched capabilities to the joint team, and it
will give the National Command Authority greater flexibility in
decision-making and crisis response options.
Part of the decision to move to the Objective Force is this
decision to authorize the wear of the black beret to symbolize
to all soldiers that they are part of achieving the Army's
vision.
The Army's first birthday in the new millennium, 14 June
2001, was chosen to symbolize and to honor our heritage and
demonstrate our commitment to the rapid transformation of the
Army that we were asked to undertake.
This timing captures both our proud history and our 21st
century responsibilities for national defense and service to
the nation. We have said that the Army is prepared to adjust
its implementation plan to fit the availability of DLA's
production schedule. On 14 June the Army will begin phasing in
wear of the black beret, and this will continue until complete.
Mr. Chairman, I enjoy the privilege of serving the world's
finest Army. And what makes our Army so magnificent is not just
our equipment, it is our soldiers. They have readily shouldered
burdens that others do not carry. They have accepted hardships
and sacrifice and given us professional discipline and uncommon
courage in return.
It will take every one of them to transform the Army, just
as it will take every one of them to win the next war. And when
those soldiers are called upon to defend this nation and our
way of life, they will be ready to fight and win decisively.
The American people can count on it.
Mr. Chairman, I thank you, and I am ready to answer your
questions.
[General Shinseki's statement may be found in appendix.]
Chairman Manzullo. Thank you, General.
General, as I announced in our opening statement, I am
going to ask you questions about procurement and not get into
the policy issue. And I would hope that the rest of the members
of our Committee would also follow suit on that.
But, General, when you announced on October 17, 2000, that
the black beret would become the Army's standard, were you
aware that most of the berets could not be procured
domestically?
General Shinseki. I was not.
Chairman Manzullo. Okay. And when was the first date that
you were aware of that?
General Shinseki. My recollection is sometime February of
this year.
Chairman Manzullo. Okay.
General Shinseki. Exact date, I can't recall, but some time
around the time when it appeared in the media.
Chairman Manzullo. Do you recall the source of that? Was it
the media, or was it from somebody on your staff.
How did you find out?
General Shinseki. My guess, it would be probably somebody
from my staff bringing to me some information, either from the
media or information gleaned.
Chairman Manzullo. If you had been aware on October 17,
2000, that most of the berets could have not been manufactured
domestically, would you have given flexibility to that June
2001 date?
General Shinseki. Well, that is a hypothetical, and I have
always tried to understand what the question really is. I think
you know that I have directed the return of berets that were
produced in China, and I think the answer would be I would have
adjusted.
We may have gone ahead and begun the process of
implementation on 14 June but phased it over a longer period of
time. Again, that----
Chairman Manzullo. So that you could have had American
production?
General Shinseki. Correct. That would have been generated
by what available stocks could have been generated. And I, in
fact, to this day don't have a solid number, but my guess is
probably yes.
Chairman Manzullo. Okay. That is all the questions I have.
General Shinseki. Okay.
Chairman Manzullo. Thank you.
Ms. Velazquez.
Ms. Velazquez. Thank you, General. General, you were given
a copy of the Justification for Other than Full and Open
Competition?
General Shinseki. I was just handed the document.
Ms. Velazquez. Would you please--can you please read the
highlighted portion of that?
Chairman Manzullo. Could you identify that document for the
Record?
Ms. Velazquez. Justification for Other than Full and Open
Competition.
Chairman Manzullo. And the date of that, Ms. Velazquez?
Ms. Velazquez. November 2000.
Chairman Manzullo. Thank you.
General Shinseki. This is the first time I have seen this
document, Congresswoman.
Ms. Velazquez. General, can you read the highlighted part
of that?
General Shinseki. Yes. ``The Army will be seriously injured
if this action is not approved.''
Ms. Velazquez. General, with all due respect, if Army
personnel are not all wearing black berets by June 14, 2001,
will the Army be seriously injured?
General Shinseki. The statement is not mine, Congresswoman.
I think the fact that I have directed that the berets that were
made in China be returned suggests that I am prepared to make
adjustments here.
Ms. Velazquez. General, that is a statement made by the
Department of Defense. Do youagree with that statement?
General Shinseki. Well, I am not in a position to comment
on it. I don't write these contracts, and so I'd be----
Ms. Velazquez. It is just a simple yes or no answer.
General Shinseki. About the Army being seriously injured? I
don't know that the Army would be seriously injured.
Ms. Velazquez. You don't know.
General Shinseki. No.
Ms. Velazquez. General, did you tell the Defense Logistics
Agency to buy a seamless black beret?
General Shinseki. I don't believe that that was guidance,
but I do believe that the Army's standard beret is something
called a seamless beret. I didn't know there was any other
kind.
Ms. Velazquez. Did you tell the DLA that, under no
circumstances, could the beret they bought to fulfill your
requirement have a seam or be made in two pieces?
General Shinseki. I am not aware that any statement was
made by me to that regard.
Ms. Velazquez. General, I have read and reread your
statements on the beret issue and haven't seen any directions
that you gave DLA regarding a one-piece or a two-piece beret.
Given the fact that many U.S. small businesses could have
manufactured the berets if the berets were made in two pieces,
can I get a commitment from you that the tan berets will be
competed among small U.S. manufacturers?
General Shinseki. Congresswoman, again, I don't--I am not
in the procurement business. I make a request for beret by
color and design. Beyond that, those acquisition authorities,
procurement decisions, are made elsewhere.
And I would respectfully suggest that----
Ms. Velazquez. General, what is your position? You are
chief of staff, aren't you?
General Shinseki. I am.
Ms. Velazquez. So you cannot state such policies so that
you and the Army comply with statutory Congress mandates and
goals and procurement process?
General Shinseki. I do support the law. I do support the
law with regard to the procurement policies outlined.
Ms. Velazquez. General, I am very concerned about the
commitment of federal agencies to achieving their goals for
doing business with small, small disadvantaged, and women-owned
business. Will you assure me, General, that the commitment to
doing business with small, minority owned, and women-owned
businesses comes from the top in the Army?
General Shinseki. Congresswoman, I will be very happy to
provide an answer for the record, but I would suggest to you
that I think the Army has been quite responsive in exceeding
the goals that have been outlined for accomplishing these
parameters.
Ms. Velazquez. Sir, with all due respect, I think that your
staff failed in briefing you. Last year, the Committee staff on
the Democratic side, we produced a study, and we did a research
about how the federal agencies, particularly the department of
defense, failed small businesses in America.
General Shinseki. I can only speak for the----
Ms. Velazquez. And the biggest offender, General, is the
Department of Defense. Were you aware of that study?
General Shinseki. I am not. You have information I don't
have, Congresswoman.
Ms. Velazquez. I will submit it to you, but it is
unbelievable. The Washington Post and many major U.S. papers
covered that research, covered that study, and you are going to
come here today and say that you do not know, you are not
aware?
General Shinseki. No. I am suggesting to you that I can
speak for the Army, Congresswoman. I would be very happy to
provide the details of the Army's performance in these
categories, which I'm led to believe, has exceeded, in most
categories, the goals that were established. And, in fact, in
terms of women-owned businesses, the Army is the first agency,
federal agency, to have exceeded a billion dollars. But I will
provide details for the record.
Ms. Velazquez. Do you have any details in terms of how did
you comply with women-owned businesses? Did you achieve your
goals?
General Shinseki. I think that may be one of those
categories that we may not have achieved, but I would say that
we are the--probably in that regard, the first federal agency
to achieve a billion dollars. But I will provide that in detail
for the record.
Ms. Velazquez. What about the 8(a) goal?
General Shinseki. I will be happy to provide. I just don't
have those details with me.
Ms. Velazquez. Thank you, Mr. Chairman.
Chairman Manzullo. Thank you, Ms. Velazquez.
Mr. Hefley.
Mr. Hefley. Thank you very much, Mr. Chairman. I appreciate
you holding the hearing. I have as much concern as you do about
the berets being purchased in China. I don't think I like this.
I don't think General Shinseki likes this.
And I think from your opening statement and from our
ranking member's questions, I really question why the chief of
staff is here today. I am not sure he's the one we need to have
here.
Chairman Manzullo. If I may, if you would yield on that----
Mr. Hefley. Surely.
Chairman Manzullo. My sole question in asking the general
to come here is that there is a line between the person who
makes the decision and the people that carry out that decision
in terms of procurement. And I requested General Shinseki to
come here and to tell this Congress and, obviously, the nation
of his limited knowledge as to what actually happened with
procurement.
His job is to fight the wars and to make the orders, not to
carry out the procurement. And the procurement people will be
testifying later on.
Mr. Hefley. And that is good. And I think those are the
people we ought to be talking to because the general is
responsible for determining what the needs are to carry out the
mission of the Army. And then he passes those needs on to the
people who purchase the equipment to meet those needs.
I don't think the general is the one we ought to be
directing our fire to this morning. He is not the guy that made
this decision.
I had a question about the decision on the berets, and the
general and I have talked about this considerably, and I
understand it a great deal better now. So I am not worried
about that.
I am concerned, General, about the purchase of the berets
from China. And, as a member of the Armed Services Committee, I
have concern about us purchasing and relying on suppliers from
other countries, particularly countries that aren't known as
our greatest allies for our military equipment.
General Shinseki. Sure.
Mr. Hefley. I think we ought to be very, very careful about
that, and so I do have that kind of concern. So if any good
comes this morning, General, out of your being here, it may be
thatyou will take back with you the strong concern that this
Committee has and I think, in turn, the Congress, as a whole has, that
we don't like military equipment, such as the berets, being purchased
in foreign countries, particularly military equipment that could be
done by small businesses across this country. And I think you share
that feeling.
So since I don't exactly know why we have you here today, I
don't have any particular questions, General. But I do hope
that you understand the concern that we have about the
procurement process. And insofar as you can influence that
process, I would hope you would pass our feelings along.
General Shinseki. I will.
Mr. Hefley. Thank you.
General Shinseki. Thank you, Congressman.
Chairman Manzullo. Mr. Pascrell.
Mr. Pascrell. Thank you, Mr. Chairman. Mr. Chairman, we
hope that some good comes out of this or that we change.
It is obvious that the DOD has not heard the clarion call
from this Committee over the past four years. They are
constantly coming back.
And I know, General, you are not in the business of
procurement, but you and those that preceded you make the
decisions. And there is an organization here. There is a link
between the decision and those in logistics who implement and
follow it out.
And I thank the chairman for stepping up to the plate. This
hearing is a clarion call to me, speaking of clarion calls, to
all small businesses in the United States of America to get
into the process of getting on the bidding list because what
else is being manufactured in other countries for our troops?
We don't have enough money for ammunition, but we have money
for the making of hats.
And God knows how we look to the rest of the world when we
are asking you these questions, General. And all due respect to
your great, outstanding record, but these are the cards that
are dealt with us, and we are going to play those cards.
General Shinseki. Sure.
Mr. Pascrell. The Department of Defense's grade on the
scorecard which we are referred to many, many times is D minus
when it comes to relationships with small businesses, when it
comes to the emphasis of procurement. That is not a very good
record.
And if you are telling us today that you have nothing to do
with where the purchases are made in the process itself, I
personally find that hard to believe. I am not questioning your
honesty. I am questioning here if, as the person in charge
making the decisions, if you say, ``Let us stick to the rules
and the laws that we purchase in America,'' logistics is going
to follow through on what you say.
Do you know of any other items that our troops wear that
are made in foreign countries?
General Shinseki. Not personally, Congressman.
Mr. Pascrell. You are not sure about that?
General Shinseki. I am not. I just haven't done the
research.
Mr. Pascrell. Well, it is interesting that the first
shipment of berets that came into this country, following
through on your order, have been less than what was ordered in
terms of aesthetics, in terms of quality.
And while this is devastating to know that taxpayers' money
was used for inferior products that, I read in the paper today,
we may not even use since we have just made an about face. Is
that correct? Yesterday, last evening, you made a decision.
Could you tell us what the decision is?
General Shinseki. Well, six weeks ago we recommended that--
and it's specifically to the production of berets in China.
When the issue initially came up, the recommendation from the
Army was that we not use these berets. But the decision is not
mine. We don't contract for those berets, and we don't have the
authority to de-contract for them. But last night the directive
was to take those berets that were made in China and to return
them for disposition.
Mr. Pascrell. And where is the money going to go? Who is
paying for these berets that we are not going to use, that we
are going to discard because----
General Shinseki. I don't have an answer, Congressman.
Mr. Pascrell. I am sorry?
General Shinseki. I don't have an answer. Again, I don't--
--
Mr. Pascrell. Well, we are trying to get us all on the same
page, Mr. Chairman. That is what you are trying to do.
General Shinseki. I think you are on----
Mr. Pascrell. It would seem to me we are all trying to get
on the same page so that there is a relationship between the
decision and the procurement so that logistics in DOD knows
quite well the feelings of your office, knows quite well the
feelings of those people who sit on this Committee, because we
have been attacking the question of bundling here for four
years.
General Shinseki. Right.
Mr. Pascrell. And we are getting nowhere, so we would all
like to be on the same page.
Did you know--when did you first know that these berets
were going to be made in China?
General Shinseki. As I indicated----
Mr. Pascrell. By the way--excuse me, Mr. Chairman--it could
be China, it could be Costa Rica.
Chairman Manzullo. Mr. Pascrell, your time is up.
Mr. Pascrell. Just answer the question.
Chairman Manzullo. Well, let the gentleman ask.
General Shinseki. I would--I go back to the statement to--
that I gave the chairman some time in February.
Mr. Pascrell. Some time in----
General Shinseki. Some time in February. I don't have a
date certain.
Mr. Pascrell. 2001?
General Shinseki. 2001, that is correct.
Mr. Pascrell. That is the first you knew about it?
General Shinseki. That is correct.
Mr. Pascrell. Thank you, Mr. Chairman.
Chairman Manzullo. Thank you, Mr. Pascrell.
Mr. Grucci.
Mr. Grucci. General, how are you today?
Chairman Manzullo. Mr. Grucci, before we proceed, I will
remind the Committee that these mikes are live at all times--
and the staff. Go ahead.
Mr. Grucci. Good afternoon. Is it afternoon? No, it is
still morning.
General Shinseki. Good morning.
Mr. Grucci. Good morning, General. It is great to see you
again, and I appreciate the time that you have taken out of
your schedule not only to be here, but certainly to come and to
visit with members of Congress throughout these last sessions.
Chairman Manzullo. Mr. Grucci, could you speak closer to
the mike, please?
Mr. Grucci. Sure. Is that any better, Mr. Chairman?
Chairman Manzullo. Yes.
Mr. Grucci. I appreciate the time that you spent visiting
not only with me, but with others in Congress in expressing
your interest in our views and the issues that are important to
us.
I don't have any specific questions of you, sir. I don't
believe that at your level this issue--I find it kind of
disturbing that this kind of an issue is at your level. I would
have thought that it would--it could be handled more
effectively, more efficiently at a procurement level.
And I understand the chairman's desire to have you here,
and I concur with that to demonstrate, perhaps, what your roll
was in this whole process. And I think that that's healthy.
I think that the issue for me is not what type of head gear
the Army will wear. That's solely in the discretion of folks
like you. The procurement of that does raise some questions,
and I think that would be more appropriately addressed to the
procurement officer.
And we are certainly concerned about small business, about
minority businesses having an opportunity to fully access the
five percent set aside that's there for them. And I believe we
are not at that level yet, and that is of a concern to me.
But this particular issue, and the questions are more
appropriate at a level beneath you. And I appreciate you being
here, and I just wanted to commend you on an outstanding job
that you have been doing with our army and with you taking the
time to visit even with freshman congressman.
So I thank you, and I yield back the rest of my time, Mr.
Chairman for questions of others that I believe would be more
appropriate to ask of.
General Shinseki. Thanks, Congressman.
Chairman Manzullo. Thank you, Mr. Grucci.
Ms. Christian-Christensen.
Ms. Christian-Christensen. Thank you, Mr. Chairman.
First, I would like to commend the chairman and ranking
member for calling this hearing. I realize we haven't gotten
into the real substance of the meeting as yet, but it is
important that we be constantly vigilant on the Department of
Defense and their procurement practices, especially as regards
small and disadvantaged businesses.
I want to welcome General Shinseki and thank you for being
here. Thank you for your service and your efforts and
commitment to transforming and strengthening our army to meet
the challenges that we face today.
General Shinseki. Thank you.
Ms. Christian-Christensen. Like others, I am one of those
who had issues with the change in the beret, as did my husband,
who is a 35 year Army retiree. But I think from your testimony
I better understand, at least, the rationale for why the beret
was chosen whether I agree with it or disagree with it.
As both the chair and ranking member have said, our issue
is with procurement, so that is going to be where most of my
questions would go. But I do have maybe two questions for you.
In light of the decision to change the beret, the
surrounding controversy around it, have you seen any impact on
the morale of the troops? Is it affecting the men and women in
uniform?
General Shinseki. I have not. And, as I indicated, I have
certainly spent a good bit of time walking the Army to talk to
youngsters.
Two nights ago I was with the 3rd Battalion, 75th Rangers,
down in Fort Benning, Georgia, and they were loaded up and
parachuted, ready to do a rehearsal of a night operation. And I
spent hours walking through that battalion, one of three. They
don't have a problem with this, and neither does the vast
majority of the rest of the Army.
Ms. Christian-Christensen. Okay. Thank you for that answer.
And just to further clarify the decision-making process,
because I am not sure that I am clear. Even though I know
Congresswoman Velazquez asked the same question, whose decision
was it to have the beret be a seamless beret since that seems
to have determined where it was going to be produced?
General Shinseki. I don't know whether--well, I would have
to assume it was a decision. But the Army's standard beret for
years has been what I have come to understand as a seamless
beret, and that is the uniform that the Army has worn.
But, frankly, until I saw this statement that was provided
by the Congresswoman and the discussion that there was such a
thing as a seamed beret--not brought to my attention and
unaware of it.
Ms. Christian-Christensen. And I would also, just in
closing, Mr. Chairman, just join my concerns to that of
Congresswoman Velazquez and ask that, given this particular
circumstance and controversy and the fact that the Department
of Defense does have such a poor record with regard to our
small businesses, that in the future that you would use the
influence of your office more in ensuring that, when you have
things that have to be procured, that the department comply
with the Berry Amendment and do more to meet the goals that we
have set for small, disadvantaged, and minority-owned
businesses.
General Shinseki. Certainly.
Ms. Christian-Christensen. Thank you.
General Shinseki. Thank you.
Ms. Christian-Christensen. Thank you, Mr. Chairman.
Chairman Manzullo. Thank you.
Mr. Bartlett.
Mr. Bartlett. Thank you very much.
General Shinseki. Congressman.
Mr. Bartlett. General, welcome.
General Shinseki. Good morning.
Mr. Bartlett. Although I still have concerns about the
policy decision, I just want you to know that does not in any
way impact my respect for you or my admiration for your
commitment to do what you think is best for our Army.
I hope that another symbol can be used to signify the
transformation of the Army. But if berets are to be it, then
can we have your assurance that, to the extent that you have
influence, that you will help to make sure that all future
berets are bought in America in conformity to the Berry
Amendment?
General Shinseki. Yes, sir.
Mr. Bartlett. Thank you. Thank you very much. I have here a
copy of the article from the Washington Times today. And I just
want to read one quote from it made by Mr. Wolfowitz and ask
you what you think that means.
``Therefore, I direct the Army and the Defense Logistics
Agency, DLA, to take appropriate action to recall previously
distributed berets and dispose of the stock.'' Now I need to
put that in context. That's berets made in China. What do you
think ``dispose of'' means?
General Shinseki. I am not sure, Congressman. I am about a
month away from implementing the wear decision of the black
beret, and I needed to get on with distributing and giving
guidance.
And the issue of the berets made in China is still a topic
of discussion, and so my action was to direct that these berets
be returned for disposition. And we would use the available
stocks to get on with the decision of implementing the wear of
the black beret. I am not sure what----
Mr. Bartlett. I am very supportive of your decision. I just
think that most of America is very supportive of the decision
that troops will not be made to wear a beret made in China. But
I am a child of depression, and I hate waste. And to return--to
dispose of these berets in a local incinerator or something is
unthinkable to me. And I am wondering if we can find a way that
we might involve our small business community. And we have got
the lemon here, let us see if we can make lemonade.
And I would hope that we could work together and see if we
can involve our small business community so that some good can
come of this.
General Shinseki. What a great idea.
Mr. Bartlett. I want to thank you very much for appearing
before our Committee today. I know how busy you are. And thank
you very much for coming.
General Shinseki. Thanks, Congressman.
Mr. Bartlett. Mr. Chairman?
Chairman Manzullo. Thank you.
Mr. Udall.
Mr. Udall. Thank you very much, Chairman Manzullo. I very
much appreciate you and the ranking member focusing in on this
hearing. I think it is an important area, and I am glad we are
here today doing that.
I also want to thank the general for his service. And let
me get directly to questions here.
General, in your written testimony you say that the Army's
beret decision is about building trust and confidence in our
formations, formations that will be defending this country in
the 21st century.
I think what you are hearing from this Committee is that
the issue for us is about building trust and confidence in
America's small businessmen and women. And, for us, it is very
hard to build that trust when American's read the morning
newspapers and hear on the evening news that the United States
Army has purchased berets that are made in China, thus
bypassing the American small businessmen and women. Do you
think that this builds confidence in American businessmen and
women to see this kind of action occur?
General Shinseki. I would take your lead here, Congressman,
and I would say probably not. But, again, purchase of berets is
not done within the--inside the Army. And I apologize that I am
not more conversant on it, but I think following panels will be
able to address how those decisions were made.
Mr. Udall. Thank you, General. General, the other context
for why we are here today is a major decline in our textile
industries. We have seen the kinds of industries that produce
these kinds of products decline rapidly. And we have lost
hundreds of thousands of jobs, tens of thousands of jobs in
this country because many of those have gone to low-cost
markets, low labor markets.
And it seems to me one of the jobs of our federal agencies,
including the military is try to help us to rebuild those
industries if we can. And I hope that we have your commitment
and the Army's commitment that you will try to take a look at
doing that in the future.
And I am wondering, what are you doing as a result of this
incident to see that this doesn't happen again?
General Shinseki. Well, I am certainly far better educated
about the procurement process. Again, it is not something that
I am, at least in this instance, involved in directly. But I am
sensitive to the issues.
Mr. Udall. Thank you, General. I appreciate very much you
coming today.
General Shinseki. Thanks, Congressman.
Mr. Udall. Thank you, Mr. Chairman.
Chairman Manzullo. Thank you.
Mr. Ross.
Mr. Ross. Thank you, Mr. Chairman.
And, General, thank you for being with us today.
General Shinseki. Good morning.
Mr. Ross. On the beret issue, the only manufacturer with a
plant located in the United States happens to be from my home
state of Arkansas, Cabot, Arkansas. It is not in my district,
but it is in my home state, so it is the next best thing to be.
You know, the numbers I am looking at, nearly 5 million
berets were made, and, yet, only 1.2 million were made at the
only facility in the United States, which is in Cabot,
Arkansas.
And, to kind of follow up on Congressman Udall a little
bit, I mean, I live in a state where I am sick and tired of
losing population. I am sick and tired of losing jobs. And the
textile industry has especially been hit hard in Arkansas.
And, not only berets, but why can't the Army help us save
what few textile industries are left out there because these
are big contracts. There are a lot of things, berets, uniforms,
shirts, ties that these textile industries could be making.
In the United States, if we would focus on areas that are
economically depressed, in areas that have lost a lot of
textile jobs--you have got a trained workforce in these areas
with a nice facility, but the doors are padlocked.
It looks like we ought to start in America, and we ought to
start especially in light of the fact that we are talking about
taxpayers' money. These are tax dollars, so why aren't we using
them more in economically depressed areas? Do you have any
thoughts on that?
General Shinseki. I agree with you, Congressman. But,
again, I don't write these contracts. I happen to agree with
you, but I understand your concern.
Mr. Ross. Well, I hope that whoever does write them will
take heed to this and recognize that I come from a district
where the average household income is $19,000. There are a lot
of people that would love to work at textile manufacturing
plants, and they would do it with pride and honor, knowing that
they are making uniforms and accessories for our United States
military.
So I hope whoever writes the contracts and whoever's in the
room that has some influence on this will think about that next
time, that there are people in America that are hurting. And we
have a lot of trained workers out there no longer working
because the textile industries have been closed.
And let us try to do better and be better focused in the
future. I think it could be a huge boost economically for
economically depressed areas in Arkansas and elsewhere.
Thank you.
Chairman Manzullo. Thank you, Mr. Ross.
Ms. Kelly, do you have any questions?
Ms. Kelly. Mr. Chairman, I am going to pass for a few
minutes. If you can come back to me, I would appreciate that.
Chairman Manzullo. Okay. You are the last person.
Ms. Kelly. I am sorry.
Chairman Manzullo. I do have one question to ask the
general, and perhaps, during that period of time if you want to
get your thoughts collected, then you would be the last person
to ask questions.
General, could you--in order for clarification, could you
state the relationship that you have as chief of staff of the
Army with the Defense Logistics Agency?
General Shinseki. I am not sure what you mean by
relationship, but there is not a formal one. In other words,
the Defense----
Chairman Manzullo. It is a separate agency, is that
correct?
General Shinseki. It is. It comes under the Department of
Defense. It is outside the Army. I know that they exist, but
the request for filling a requirement normally goes through an
ordering process that results in contracts being written by the
Defense Logistics Agency to fill the requirement that the Army
has requested.
Chairman Manzullo. Okay. And the reason I asked that is
because there are a lot of questions whose answers you don't
know, and I wanted to establish the relationship between you
and the DLA.
General Shinseki. Sure. Thank you, Chairman. The DLA does
not work for me if that is what you are asking. They do not
work for the Army. They are not an Army----
Chairman Manzullo. They are not under your command?
General Shinseki. No, they are not.
Chairman Manzullo. Okay.
Ms. Kelly.
Ms. Kelly. Thank you, Mr. Chairman.
General Shinseki, thank you very much for appearing before
the Committee today.
There is one question I wanted to ask about the manufacture
of the berets. And that is, it is my understanding that there
may not be available in the United States some one agency or
one industry that can produce enough of these in a short enough
period of time. Is that correct?
General Shinseki. I will defer the specifics of that to the
following panel. My understanding though, the part of the
reason we are here, is that it is apparent that they cannot all
be produced here.
Ms. Kelly. I thank you very much. I also want to compliment
you on the terrific job that I think you have been doing for us
as the leader of our army. I want to say that we have had some
dealings with some areas in my district, and you have been
extremely helpful, and I do thank you very much. And I thank
you for appearing here today.
General Shinseki. Thanks, Congresswoman.
Chairman Manzullo. Ms. Velazquez has the last question.
I just want to state that one of the purposes of this
hearing is to try to find out if any additional laws are
necessary in procurement. And I have come to the conclusion--I
am sure Ms. Velazquez would also--that whenever somebody makes
an order and that order cannot be fulfilled domestically, that
there has to be a personal notice given to the person who makes
that order, which may have avoided this entire controversy in
the first place.
General Shinseki. Sure.
Chairman Manzullo. Ms. Velazquez.
Ms. Velazquez. General, are you aware who do the DLA answer
to?
General Shinseki. The DLA is a Defense Department Agency
and responds, I think, most directly to the undersecretary for
acquisition on the staff of the Secretary of Defense.
Ms. Velazquez. Thank you.
General Shinseki. I believe that is the appropriate
relationship. And the following panel will probably have more
specific and a better answer than I have been able to give you.
Chairman Manzullo. General, I want to thank you for your
service to this country. I want to thank you for your patience
in this process. I thank you for taking the time and especially
your candor this morning.
General Shinseki. Thanks, Mr. Chairman.
Chairman Manzullo. Our second panel is Congresswoman Lois
Capps of the 22nd District of California and Congressman Walter
B. Jones, Jr. from the Third District of North Carolina.
Okay. The second panel is here, and let us start with the
Congresswoman Lois Capps of California. Congresswoman?
STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF CALIFORNIA, 22ND DISTRICT OF CALIFORNIA
Ms. Capps. Thank you, Mr. Chairman. It is such a pleasure
to be here this morning.
I commend you, Ranking Member Velazquez, as well as
Chairman Manzullo and the entire Committee for your interest in
this most important subject.
In the interest of time, I am submitting my written
testimony for the record, and I will summarize my statement for
you.
Chairman Manzullo. All the statements will be admitted
without objection. Thank you.
Ms. Capps. Thank you.
As you know, last night, the Pentagon announced that it had
cancelled contracts with three companies for foreign-made black
berets. The Pentagon has said that it did this because of
``late deliveries and substandard work on these contracts.''
I am pleased that the Pentagon has cancelled these
contracts and that plans to seek out the most appropriate
domestic source available.
And I have been calling for this since the middle of March.
I wrote a letter to President Bush. It was cosigned by 79 of my
House colleagues from across the political spectrum requesting
that the administration reconsider the Army's contract. To
date, I have received no response from the administration.
As we said in our letter, the Pentagon had made a decision
to purchase over 4 million black berets from companies
manufacturing them in foreign countries, including China,
Romania, and Sri Lanka. This decision was ill-advised and
poorly thought out.
Purchasing the berets from overseas companies could easily
have undermined the very morale and unity the Army was
attempting to instill in its forces as it set out to outfit
soldiers in matching head gear.
The Army imposed an arbitrary deadline for the purchase of
the berets by June 14, 2001. This resulted in sending this
business to foreign companies and cutting U.S. manufacturers
out of the bidding process. This cost American firms millions
of dollars and has probably wasted a lot of taxpayer dollars as
well.
These contracts which would normally go to U.S. small
businesses reportedly totaled $30 million. But in its decision
to purchase black berets from foreign suppliers, the Defense
Logistics Agency bypassed normal procurement procedures. The
DLA did not generate normal public notification for bidding
prior to awarding two manufacturing contracts.
It appears this action was in violation of the Competition
in Contracting Act. DLA also waived the Berry Amendment. The
Berry Amendment is a staple of Defense procurement law. It
requires the Department of Defense to buy clothing and other
textiles made in U.S. factories of 100 percent American
components.
It is true that waiving the Berry Amendment is permissible
in order to meet high volume requests or tight time
constraints. But I have been informed that the American apparel
industry could have produced the one-piece berets the Army
requested rather than the two-piece sewn items the American
firms currently manufactured if they had been given sufficient
lead time to fulfill this order.
I was also disturbed by press accounts that awarding these
contracts to foreign firms may have been more expensive to
American taxpayers. It was reported that the cost of a beret
made overseas ranged from $4.36 to $7.20 compared to $6.30 that
was being charged by the sole American manufacturer.
And this whole fiasco has cost taxpayers money as the Army
has tried to address the questions raised by buying them
overseas.
The Department of Defense should employ it's traditional
procurement process that ensures fair and open competition and
cost-effective military purchasing standards.
Mr. Chairman, I believe Congress should continue to support
improvements in the department's acquisition programs. I hope
the Pentagon will address the challenges of this complex area
and protect the interests of the department, of American
businesses, and, ultimately, the taxpayer.
Military uniforms are a powerful symbol for U.S. soldiers,
representing who they are and what they stand for. That is why
we must give American companies the first opportunity when it
comes to government purchases. This reflects United States law
as well as basic common sense.
Mr. Chairman, thank you for the opportunity to appear
before your panel.
[Ms. Capps' statement may be found in appendix.]
Chairman Manzullo. Thank you, Ms. Capps.
Mr. Jones.
STATEMENT OF HON. WALTER B. JONES, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NORTH CAROLINA, 3RD DISTRICT OF NORTH
CAROLINA
Mr. Jones. Mr. Chairman, I want to thank you and the
ranking member and Committee members for giving me this
opportunity. I will also summarize very briefly my comments.
As you know, I am a member of the Armed Services Committee
along with some other members of your Committee. And I must say
that when I first heard this decision, as Representative Capps
made reference to, I was incensed and outraged by the decision.
And I also wrote letters to the Department of Defense as well
as to the President of the United States.
In my district, the Third District of North Carolina, we
have three military bases, Camp Lejeune Marine Base, Cherry
Point Marine Air Station, Seymour Johnson Air Force Base, and I
am privileged to represent 60,000 retired veterans and retired
military in that district.
And I would like to say that the majority of those who
communicate with our office were outraged by this decision. I
am pleased to tell you that two former rangers walked all the
way from Fort Benning to Washington, DC to express to the
United States Congress their outrage. Both these gentlemen were
former rangers who had served both in the invasion of Panama as
well as the Vietnam War.
David Nielsen, who is here today--Sergeant David Nielsen, a
former Ranger--actually himself and others walked 750 miles to
Washington, DC from Fort Benning, Georgia to let the American
people as well as the Congress know their outrage.
Chairman Manzullo. Congressman, could you have him stand up
please?
Mr. Jones. Would Sergeant David Nielsen stand if he is
here?
Chairman Manzullo. Thank you. Proceed.
Mr. Jones. Thank you, David.
Mr. Chairman and Ranking Member, I also want to say that
when we have a military that today pilots are not able to fly
because of money for parts, many of the units do not have
ammunition, and a decision was made just because a--the
thinking was changing the color of a hat or the beret was worth
$23 million when our men and women in uniform need the help
now, I think that in itself is a decision that shows that it
was very short-sighted to be honest with you.
Mr. Chairman, what I want to talk about today also in the
two and a half minutes I have left are the small businesspeople
in my district. And you are exactly right. The week before the
decision, 1,000 employees in my district were laid off by two
companies.
In addition, I want to read very quickly I received a
letter from a manufacturer in North Carolina, and this is what
he said. He wrote to me and said that his small textile
business supports 80 families, and, yet, he struggles to keep
his plant operations open because he has to compete with cheap
labor and good from foreign competitors.
He would have gladly spent the money necessary to convert
some of his operations into a facility that could help produce
the berets for our men and women in uniform.
Mr. Chairman and Committee members, I actually talked to
this gentleman, and he told me that he could do it. He could
make the conversion and still make money and ensure the jobs
for those 80 people and their families that work for him.
And I must say that I appreciate this Committee more than I
can tell you because there is no excuse, no excuse, in
bypassing the Berry Amendment. And I am very grateful that you
are taking this issue up.
Let me say that I decided to introduce legislation, this
H.R. 1352 that will hopefully help prevent a situation like
this from ever happening again. The changes my legislation
makes are simple, but my hope is that these minor adjustments
will give pause before any future decision to unnecessarily
waive the Berry Amendment occurs.
Mr. Chairman and Ranking Member, I want to say to you today
that this has been a ill-fated decision made by the Army from
day one. And I hope that we, as a Congress working with the
administration, would do what we can to stop this outrageous
decision that was made.
It is not fair to those men and women who serve in the
military, who respect the Rangers. It is not fair to the small
businesses of this country that they are not given the
opportunity to bid for this work.
So, again, in closing, I want to thank you for giving me
this opportunity to be with you today. Thank you.
[Mr. Jones's statement may be found in appendix.]
Chairman Manzullo. Thank you very much. I want to assure
you, Congressman Jones, that if Ms. Velazquez and I have to
subpoena and examine every Berry waiver, then we are prepared
to do that. We are also prepared to introduce legislation that
would tighten up the authority process on who could waive it.
We noticed that a press release was put out yesterday by
the Senate Small Business Committeeagreeing that it has to go
to the highest level as opposed to somebody six rungs down the ladder.
But we are going to continue to be ever vigilant over this.
We also noticed that there are already laws on the books
that provide for the cardinals of the appropriations
Subcommittees to personally sign off on transfers, I believe,
from one account to the other in the Department of Defense.
And I think the only way that we are going to be able to
straighten out the horrible procurement process going on is to
allow members to be personally involved in it.
Ms. Velazquez's family is involved in the printing
industry, and my family is involved in the restaurant industry.
We are both small businesspeople. We have a passion to protect
the small people of this nation, and we also happen to be
members of Congress.
So we take that passion along with the authority we have to
do everything we can possible do to keep those jobs here in
America. Thank you both for coming.
Ms. Velazquez.
Ms. Velazquez. No. I just echo your views, and I just want
to thank you for your commitment and coming here before us to
share some of the experiences that your own constituency has
been facing with the Department of Defense and other federal
agencies.
And, again, our commitment is to make sure that the
Department of Defense and any other federal agency complies
with the laws as they have been stated by the United States
Congress.
Thank you.
Chairman Manzullo. Mr. Grucci.
Mr. Grucci. I have no comments or questions. Thank you, Mr.
Chairman.
Chairman Manzullo. Does any member have any questions to
ask of our fellow members here? I see Ms. Capps is anxious to
leave.
Mr. Bartlett, and then you are next.
Mr. Bartlett. I want to thank my two colleagues for coming
to testify today.
Walter, you and I served together on the Armed Services
Committee. I know that we both share an admiration for our
military and a commitment to do the very best that we can, and
I know that that is shared also by Lois.
I share with you, Walter, the conviction that the original
decision was a wrong decision. And here we are now this far
down the road. What we need to do now is to stop and take stock
of where we are and what now is in the best interest of our
military and the best interest of our small businesses and the
best interest of our country.
And I continue to believe that perhaps a better symbol
could be chosen as to signify the transformation of the Army.
And we in the Congress, I believe, have a responsibility there
that we share with the military in our hope that the Congress
will step up to its responsibility.
It is a very important hearing today because it holds the
Armed Services Committee in deference to this Committee. And I
am pleased to serve on both of them.
The Armed Services Committee was delaying any pending
action on this out of deference to this Committee. So this is a
very important Committee hearing today. And I want to thank my
two classmates. All three of us came into the Congress
together.
Thank the Chairman and the Ranking Member for calling this.
And I want to tell you, Walter, that I am very supportive
of what you have been trying to do, and I hope that we in the
Small Business Committee and the Armed Services Committee, in
working together now with the Army, can make sure that the
right thing happens for our American troops and our small
businesses in America in general.
Thank you very much.
Chairman Manzullo. Congresswoman Millender-McDonald.
Ms. Millender-McDonald. Thank you, Mr. Chairman.
And I would also like to thank the chairman and the ranking
member for convening such an important hearing.
I would like to thank these two fine congresspersons who
are before us because it makes our life a little easier when we
are here in Committee, and you come before us, and you are not
part of this Committee, but you are also touting those things
that we are touting. Made in America is so important to all of
us, and we want to continue to keep that banner high.
Again, thank you too for coming this morning.
Chairman Manzullo. Okay. The second panel is excused. I
believe we have a vote, is that correct? Okay. We will
reconvene this hearing as soon as we are done with the vote.
[Recess.]
Chairman Manzullo. The Committee will reconvene. I have
been advised that we have about two and a half hours before the
next vote.
The third panel, I believe, is in the process of sitting
down, and, as soon as you are ready, General Glisson, the
director of the Defense Logistics Agency.
General.
STATEMENT OF LIEUTENANT GENERAL HENRY T. GLISSON, DIRECTOR,
DEFENSE LOGISTICS AGENCY
Lieutenant General Glisson. Good morning, Mr. Chairman. I
appreciate the opportunity to be here today to answer questions
and discuss the acquisition strategy followed by the Defense
Supply Center, Philadelphia, to procure the black berets for
the Army.
I have prepared a written statement for the record. I would
like to ask that be entered.
Chairman Manzullo. All written statements will be entered
in the course of this hearing without objection.
Lieutenant General Glisson. Thank you, sir.
I would like to take just a few minutes, if I may, and talk
about the sequence of events that took place that allowed us to
get to the point where we are today. And I would like to start,
if I may, with the requirement.
In October, as was previously discussed, the Chief of Staff
of the Army made the announcement that he intended to place
berets on the heads of all soldiers.
In November of last year, my Supply Center in Philadelphia
received a requirements document from the Army that basically
said that they wanted 1.3 million berets by April 2001 to issue
the first beret to the Army, 1.3 million berets by July of 2001
to issue the second beret to every soldier. That required an
initial sustainment for replacement, and so forth, of an
additional 1.3 million berets or about 3.9 million berets.
What that meant for us in the acquisition community was we
had a requirement for a high production surge during the
February to July time-frame, and then there would be a
sustainment requirement thereafter of about 100,000 to 150,000
berets a month.
Now the Supply Center in Philadelphia was exceptionally
well prepared for this task, and the reason they were was for a
couple of things.
First of all, they are the primary buyer for the Military
Services of all clothing and textile products and,
particularly, enlisted head gear for the military. And they
have been doing this for many, many years. They know the
marketplace very well. They know most of the manufacturers,and
they know the manufacturing process.
And the issue of potential issue of berets to the entire
army was not new. The Army had considered such a thing in 1990;
again in 1996; and as late as 1999, we had done a competitive
award or competition for berets to a Cabot, Arkansas company
called the Bancroft Cap Company, which is the only domestic
producer of berets in the United States today.
Bancroft had been doing this for about 20 years. Their
production capacity during that period of time was about 6,300
berets a month or about 70,000 a year.
Over the past 10 years, then at least, we have talked to
over 50 domestic companies and contractors, trying to find out
if anybody was interested in producing this specific beret for
the military services, and none were.
The question you ask is why wouldn't anyone want to do this
business. Well, a couple of reasons.
First of all, it takes special machinery to do it. It
requires a circular knitted machine, which is really old
technology. It was manufactured years ago, mostly overseas in
Romania and in France. They are hard to find. There is no new
production on these machines. Cabot has the only machines in
the United States, somewhere around 60, I think.
They are not dual-use, so you are only going to use them to
produce this specific beret. There is not a follow-on
application in the commercial marketplace.
And we talked to the vendors. They said it would take 12 to
18 months to set up an operation. It takes a capital investment
to do that, takes training. If you look at it from the
financial return on investment, there really wasn't a lot of
incentive there based on the demand that we had had to produce
berets. It is very labor-intensive also.
I have a story board, if you will, to show how the beret is
manufactured, to give you a sense of that.
Wool is taken, placed on the circular knitting machine, and
produces the shell which you see up in the top corner there. It
is then stitched where that seam is so that it becomes a single
solid beret.
It is then placed in a machine that basically agitates and
produces the material to the look that it has there with the
piling and with the single look that it has.
We take it and put it in a vat where it is both dyed and
mothproofed. It is then put on a machine which actually blocks
it and gives it the shape that you see in the top left corner
there.
Then there is a drawstring, which is attached at the base
of the beret, that allows the soldier to tighten it a little
bit for sizing, and that is attached on there with a leather
band. And then, lastly, there is a stay which is placed behind
on the inside of the beret so that the flashing, which is the
unit insignia or designation, can be placed on that machine.
Now there were only three known manufacturers at the time--
and we have been looking at this at least for the last 11
years--that we knew could produce berets. One was Bancroft,
which was the only domestic producer. The other two were
overseas, one in Canada, which is Dorothea, which makes the
Canadian beret. One was a U.S.-based company out of New York,
which is Denmark, which had a subcontractor plant in Romania.
The first thing we did was say, ``What if we gave it all to
the U.S. to the single source that we had, and what would that
mean to the delivery for the Army requirement?''
Quite frankly, at the production rate that Bancroft was
able to produce, it would have only provided somewhere in the
neighborhood of max capacity of 100,000 a month. It would have
taken Bancroft about six years to meet the Army requirements,
which would not have been a reasonable period of time for what
the Chief of Staff of the Army has talked to you about
previously.
So we had to figure out how to get 3.9 million berets in
about a five-month period with a follow-on of another
sustainment quantity immediately thereafter.
So what we did, basically, is awarded to Bancroft what they
said their maximum capacity was, which was 100,000 berets a
month. We then directed the award to Denmark and Dorothea for
their max capacity, which was 60,000 and 40,000 collectively.
After we had done that, Atlas Headwear came in--and Ms.
Goodman will talk to you later today as another member of the
panel--and submitted a second beret for the Army to take a look
at. I have the two berets here in case you haven't seen those.
Basically, we took that back to the Army. The Requirements
Section for the Army took a look at it and said it would not
meet the needs of the Army and disapproved the use of that
particular beret. So that left us with a requirement and DLA to
figure out how to produce the remainder of the berets to the
original requirement.
We did a worldwide search up in Philadelphia. We identified
20 potential producers. Five were U.S., 15 were foreign. We
asked for requests for proposals. They all sent in samples, we
looked at the samples. We reviewed the company records to
determine responsibility, quality, quantity, price
reasonableness.
Then we had full and open competition, and we made four
awards at that point in time. As you can see on the second
chart, we awarded two to U.S.-based companies, foreign
produced, Northwest Woolens in Rhode Island and Bernard in
Florida, and two foreign, which were to the United Kingdom. One
was Kangol, and the other was C.W. Headdress.
We were concerned about the child labor laws, so we asked
the Defense Contract Management Agency to visit all of the
plants both initially, and frequently thereafter, to make sure
that they were in compliance with the local child labor laws,
and that has been done.
The last thing we did was, in December we actually issued
what we call a sources sought advertisement in the Commerce
Business Daily, which is where you post procurement
requirements, and that is where the bidders come in and take a
look at whether they are interested or not to see if we had any
further interest because we really did want to try to give this
business to domestic sources.
Since that time, we have had 13 telephone or written
inquiries from domestic companies. We have had no serious
follow-on interest after discussion or receipt with the
exception of we have announced that we are going to try to do
an Industry Day on the 23rd of May, at which point we, again,
are working with small business to try to bring in as many
manufacturers and interested parties as we can.
We do have some companies that said they are coming to
that, and so we are hopeful that we will be able to craft out
of that some sort of strategy which will allow us to work on an
industrial base here in the United States.
In regard to small business, as mentioned, we knew the
business well. We have been working over the years with our
Small Business Procurement Center Representative, and, as late
as 1998, we had issued a competitive contract, no set-aside, no
restricted procurements because there was only one producer in
the United States. And we have followed that process
consistently over the years.
I will tell you, however, when Philadelphia did these
awards, these last awards on berets, they did not send the
small business coordination record to the Procurement Center
Representative, which they should have done, so he was not
aware that we had awarded those.
It was an administrative error. The Department had a review
conducted by the Small BusinessOffice to determine was this
something which is a major flaw in the way that we were doing business
in Philadelphia or a one time error.
We went out and randomly pulled about 50 records. They only
found one occurrence where that coordination document was not
there. We believe that this was simply an oversight as they
were trying to quickly meet the needs of the Army. And it would
not have changed the facts and circumstances, at least in our
minds, with the contract.
The bottom line, we don't know of any violation of any
Small Business practices with the exception of that. And, in
fact, as I will mention in just a minute, we have a strong
record of support to the Small Business community.
Finally, in respect to buying American products, I will
tell you that the buying command in Philadelphia, 68 percent of
all the clothing and textile dollars that we spent in Fiscal
Year 2000 or about $750 million went to the Small Business
community.
Within DLA, 40 percent, which is the highest in DOD of all
DLA contracts went to Small Business. That is about $4 billion.
And 90 percent of all of our clothing and textile procurements
went to U.S. companies for products made in the U.S. out of
U.S. components.
I will tell you that Philadelphia used the sole domestic
source to the maximum extent possible, and, only when we saw no
other way to meet the requirement for the Army for quality,
quantity, and timeliness, did we make the proper determinations
of non-availability.
They did have the delegation to waive the Berry Amendments.
They followed the spirit and the letter of the law, at least in
our mind. We take the Berry Amendment waivers very seriously.
In the last 10 years, there are only four instances, that I am
aware of, where end items for products were waived out of
Philadelphia. And we only did that to get through the initial
production and try to get sustainment.
Finally, I will tell you that the Department of Defense did
conduct a separate review of our entire acquisition strategy
and process. What they found is listed basically up here, and
Mr. Oliver can talk more to that than I, but that our
procurement was proper, our Small Business practices were
intact, and we bought American to the maximum extent possible.
I will tell you that at every step of the way, we tried to
follow the spirit and the letter of the law.
The last points I would like to make are, over the last two
days a couple of other things have happened which I think are
important to the Committee.
First of all, the Philadelphia Command terminated three
contracts for default, and these are the companies that you saw
up there earlier. They happen to be Bernard, North West
Woolens, and Denmark, plus, the Chief of Staff of the Army
decision and the Deputy Secretary decision to terminate the
contracts--not to terminate, but to not use the China-
manufactured berets.
What that, in essence, does is put 2.2 million berets back
to us to try to find domestic sources or about $11 million
worth of business which we have the opportunity now to try to
craft a strategy to use Small Business. We hope to be able to
do that at our 23 May Industry Day.
And the last point I would make is that on the delegation
of authority to make waivers of non-availability, that
authority has been withdrawn. I think you all saw the release
from the Deputy Secretary of Defense this morning.
For me in DLA, that means that the Under Secretary of
Defense for Acquisition, Technology, and Logistics, is the only
person now that can approve waivers of the Berry Amendment.
That no longer resides in the Defense Logistics Agency, and
that is true also with the Service Secretary.
Chairman Manzullo. General, you are three minutes over.
Lieutenant General Glisson. Mr. Chairman, I stand ready to
answer questions.
[Lt. Gen. Glisson's statement may be found in appendix.]
Chairman Manzullo. Thank you.
I am going to go out of order for a specific reason and
call Michele Goodman because I think she has some contradictory
statements to you, General.
Lieutenant General Glisson. Okay.
Chairman Manzullo. Michele?
STATEMENT OF MICHELE GOODMAN, PRESIDENT, ATLAS HEADWEAR,
PHOENIX, ARIZONA
Ms. Goodman. Good morning. Thank you for the opportunity to
discuss the treatment of small businesses dealing with
government procurement policies. I am am particularly
grateful----
Chairman Manzullo. Michele, could you pull it closer--there
you are. Thank you.
Ms. Goodman. Is that better?
I am particularly grateful for the leadership shown by the
members of the Committee on this issue.
My name is Michele Goodman, and I appear here today on
behalf of 120 people from Atlas Headwear. This is down from 240
people a year ago. We are located in Phoenix, Arizona, and we
are a woman-owned small business, employing mostly Hispanic and
other minority women. We also have an aggressive policy towards
hiring the developmentally disabled and the physically
handicapped.
Over the last five years, Atlas has joined a partnership
with a school, habilitation school, to hire those people that,
as the chairman pointed out, are defenseless. They have no
other means, except through the training they get in the school
and through private businesses, to find a place, a place where
they can be constructive and a place where they can feel good
about themselves.
I will just cite you a couple of examples. We have an
employee, her name is Chris. She has been working for us for
four years. She is in a wheelchair, and she has all types of
emotional and mental handicaps.
When she first came to our facility four years ago, she had
seizures on a regular basis. It was difficult, but Chris
learned, and felt welcomed, and she was diligent in her efforts
towards trying to make her life better. And she saw that other
people that surrounded her were trying to help her do as well.
I can report that now, after four years or even after six
months, Chris no longer has seizures. She comes to work every
single day, and she does an excellent job, as does Lori and
Crete, who happens to be hearing-impaired, Chris, Stephanie,
Joseph. And the list goes on of those people.
I will just make one final comment on that. When we had to
lay off almost half of our staff over this past year, we made a
conscious effort to keep the people that were least able to
find a place. And all of the emotionally, developmentally
handicapped are still working for us, and they represent five
percent of my workforce.
This year we will complete 20 years of manufacturing for
the Department of Defense. We currently make the hot weather
cap for both the Army and the Air Force for the Defense Supply
Center in Philadelphia, known as the DSCP, and the Navy and
recruit hat for NEXCOM in Virginia.
We have manufactured in the past the Temperate BDU cap, the
Desert Sun hat, and the Marine Corps utility cap. We have
commercial work as well, manufacturing for golf, fashion,
outdoor products, theme parks, and other industries.
I was asked to speak today about two issues, first, the
issue of the Pentagon's decision to waivethe Berry Amendment
when it decided to purchase berets from foreign sources and, secondly,
the larger issue of Pentagon procurement policies.
In the interest of time and because General Shinseki was
available to be here today, I would like to focus my oral
testimony on the beret issue and leave the other issues to my
written testimony.
I would encourage the Committee, however, to read the
written statement regarding other procurement issues as I
believe they are as important to small business as the beret
issue has become.
I submit to you that I was closely involved in the events
that took place regarding the beret decision, and my testimony
is accurate from a firsthand perspective.
On October 17, 2000, General Shinseki, the Army chief of
staff, announced a directive to provide all Army personnel with
berets by the Army's 225th birthday. The due date for having
the first berets in hand in order to meet the June 14th
deadline was April 2000, meaning contracts had to be let
quickly, placed for millions of berets with more than a million
to be delivered in only five months.
General Shinseki apparently paid little attention to the
fact that the task he was ordering had many obstacles before it
and should not have been rushed. Quite honestly, we had 225
years to prepare for this.
It was not a surprise situation. Proper planning for this
transition could have prevented not only the serious waiver of
the Berry Amendment, but also would have prevented excess cost
to the U.S. government, the U.S. taxpayers, and us, the small
business community.
Normally, when a procurement solicitation is made by the
officers of the DSCP, there is a fair and transparent process
that takes place where the DSCP works to ensure that not only
does the military get quality products at an affordable price
and in a timely manner, but that those items are procured from
American manufacturers who make up the industrial base that
support the military in both war and peace.
These small businesses live and die by the fairness of the
process and the people at DSCP who work closely with business
to meet this goal. However, in this case, the DSCP was forced
to act in a manner that would shut out American manufacturers
because they were given an impossible deadline to meet. The
lack of planning and foresight exhibited by General Shinseki
created this problem.
As a part of my written testimony I have provided a
timeline of the key events that occurred from the date the
general's decision was announced, and this timeline highlights
my company's attempts to be awarded part of the contract.
When General Shinseki gave the beret order, the DLA,
Defense Logistics Agency, did not question his decision. It is
my understanding that they are not permitted to. The result was
that contracts were let in a manner that conflicted with two
laws, the Competition in Contracting Act and the Berry
Amendment.
The Competition in Contracting Act was violated when two
contracts were awarded to two companies even before a public
notice was announced that the contracts were open for bidding.
When the solicitation for other bids was finally made public,
the Berry Amendment was waived within days of the announcement,
and the contracts were awarded to foreign manufacturers. Both
of these actions shut out potential American manufacturers who
could have mobilized to fill the orders.
I have with me a sample beret that I made in my attempt to
bid for the contract. I was rejected. I was told, ``It doesn't
look right.'' My attempts to work with the Army on designing a
beret they could accept were repeatedly ignored.
And I have also brought with me two berets. This is the
current beret that they are using. I don't know which beret
they showed you of ours.
We have made two attempts, without the help of the Army and
their design people, to make a beret very similar to their
beret, and it is two-piece stitched. And I am going to tell you
that none of you from there can see that, okay. I don't know,
the one you have up there could have been the first attempt,
but I would be more than happy for you to see those.
I do not believe the Congress created laws such as the
Berry Amendment and the Competition in Contracting Act for
frivolous purposes. I believe that abusing them is a serious
matter. I believe that American companies could have fulfilled
the orders had DSCP given enough time to properly proceed and
if the Army had been more open-minded.
The question then is, what can be done at this point. As I
was prepared to testify a month ago, it was my opinion that
these contracts should be carefully reviewed for adherence to
specification and delivery requirements.
As the general has testified today, rightfully though, some
of those contracts have been cancelled for those exact reasons,
which were predicted at the outset.
We cannot recover the last six to seven months, but we are
still left with the need for berets. It should be directed that
the Army work with domestic manufacturers and equipment
companies to explore alternatives to the current requirement
for a one-piece knit beret.
The knit beret that the Army has requested is manufactured
on machinery that is antiquated and more labor-intense than the
more modern equipment used to produce the stitched beret.
The labor requirements for the knitted beret is the main
reason that the cost is so high. Additionally, the one-piece
beret is going to have to be replaced in the near future
because the machinery and the spare parts for the machinery are
no longer manufactured.
Forward-thinking countries, such as Italy, are already
contemplating this change. They have been perfecting the two-
piece beret and could offer assistance in perfecting ours to
the Army's liking.
The Army needs to explore other types of headwear that
would express the general's wish for unity, excellence, and
values. The current decision and the result of this decision,
buying from Third World countries at significantly higher
prices, do not achieve any of these goals.
An American-made stitched beret would provide the following
advantages to the Army. They would provide the Army with a
beret for which the manufacturing machinery will be there in
decades to come. They will reduce cost, improve the response
time, increase quality consistency, and save American jobs and
protect the military's warm industrial base of American
suppliers.
In closing, I would like to thank all of you for the time
you have given me to address the struggles American small
businesses have in trying to stay alive. We are not asking the
government for a handout, simply a hand up. I would be happy to
answer any questions.
[Ms. Goodman's statement may be found in appendix.]
Chairman Manzullo. Thank you, Michele.
The next witness will be David Cooper. I have granted some
latitude to witnesses who have a personal side of the story as
opposed to those with an academic. So if you would mind
adhering to the five minute rule, Mr. Cooper, please.
STATEMENT OF DAVID COOPER, DIRECTOR, ACQUISITION AND SOURCING
MANAGEMENT, U.S. GENERAL ACCOUNTING OFFICE
Mr. Cooper. Absolutely. I can do that.
The Army's decision to issue the black berets to all of its
forces in just eight months placed----
Chairman Manzullo. By the way, Mr. Cooper is with the GAO.
Mr. Cooper. Thank you.
The decision to equip the forces with these new black
berets in only eight months placed a tremendous burden and
enormous demand on the normal contracting process followed in
the Department of Defense.
In a very short order, DOD awarded contracts to purchase
nearly 5 million black berets. The chart that is being put up
now will show the suppliers that were selected and the
quantities and unit prices of those contracts.
The total cost there is almost $30 million, and roughly 75
percent of those berets will be made overseas by foreign
sources.
Serious problems have been encountered in this contracting
strategy. Deliveries of the berets are falling far short of the
contractual requirements. And we have heard earlier that some
of the contracts are being terminated. The DOD is also
experiencing a lot of quality problems with the fit of the
berets, the coloring of the berets, and I think in one case
there was an odor from the berets.
And now we found out just yesterday that the Army is going
to recall the berets that are made in China and those made with
Chinese content and dispose of them.
The key event that drove the process that resulted in this
outcome clearly is the urgency that was placed on getting the
berets to all the Army forces by the Army's birthday on June
14th of this year.
We have already heard about the actions and strategy that
was undertaken to do that. I have spent the entire week looking
at nearly 1,500 pages of contract documents and e-mail traffic
and studies and so on and so forth. Clearly, this was not a
business as usual approach to procuring these berets.
Due to the extremely short time frame for delivery, a
number of actions had to be taken to expedite the awards of the
contracts. According to the contract documents, the situation
was considered to be a ``unusual and compelling urgency.'' The
basis for that urgency, again, was the timing of June 14th, and
we have already heard a statement read this morning that the
documents said the Army will be seriously injured if this
action is not taken.
During the process of contracting for the berets, the Small
and Disadvantaged Business Utilization Office review was
bypassed inadvertently. I don't think there was an intention to
do that, but, in the haste to award the contracts, that review
was not done.
A recently issued DOD study concluded that such a review
wouldn't have made any difference anyway, but I would like to
make a point about that. That study accepted the June 14th
requirement, and that is the basis for that conclusion in that
study.
As another example of the haste, I would like to quote from
one of the contract documents.
And this has to do with the contract award to the Canadian
firm.
The contracting officer must make immediate awards to
attempt to meet the initial fielding requirements of the Army,
so there is no time to obtain detailed cost or pricing data,
analyze that data, develop a negotiation position, negotiate
with a firm, and, then finally, make award.
We looked at some of the competitive awards that occurred
after the initial non-competitive situation, and the concern
that was raised in some of the documents about the Canadian
price being higher than perhaps warranted was borne out because
we found that the competitive prices were 27 percent below what
that non-competitive price was.
And I would like to now put up a second chart that shows
the sequence of events that surround the waiver of the Berry
Amendment. To meet the deadline for fielding the berets, DLA
determined that sufficient domestic sources were unavailable
and that additional contracts needed to be awarded to the
foreign firms.
The center in Philadelphia that did the contracting for
this procurement prepared three waivers. And the deputy
commander at Philadelphia approved the first two waivers on
November 1 and December 7.
As the first waiver approval was being processed, questions
arose from the headquarters of DLA about whether, in fact,
Philadelphia had the authority to waive the Berry Amendment.
In fact, on November 8, DLA senior procurement executive
put in a request to the undersecretary of acquisition's office
to have a delegation of authority be given to DLA to waive the
Berry Amendment. That occurred on February 1, with a delegation
of authority to the DLA director and a senior procurement
executive but not any further than that.
Let me back up for just a second. Using that delegated
authority, the senior procurement executive at DLA went back
and reviewed the previously approved waivers and, in fact,
ratified the approvals that had been made earlier.
And then, on April 24th, the delegation of authority was
pulled back into the Pentagon. So there is a lot of--seems like
a lot of confusion on who had the authority to make the
waivers.
In summary, Mr. Chairman, the imposition of the June 14th
deadline clearly placed DOD in a high risk contracting
situation. In their desire to serve the customer, procurement
officials were forced to take extraordinary measures to
purchase the berets. However, the date allowed very little time
to plan for the purchase, as we have just heard, and little
room to respond to the problems that had been encountered in
deliveries and quality.
In the end, Mr. Chairman, in my view, it is clear that the
Army asked the procurement system to do something that it
couldn't do. In fact, DOD officials now expect that less than
half the Army forces will get the new berets by the June 14th
date.
That concludes my statement.
[Mr. Cooper's statement may be found in appendix.]
Chairman Manzullo. The next witness is John Whitmore, who
is the acting director of the SBA.
Mr. Whitmore.
STATEMENT OF JOHN D. WHITMORE, JR., ACTING ADMINISTRATOR, U.S.
SMALL BUSINESS ADMINISTRATION
Mr. Whitmore. Thank you, Mr. Chairman and distinguished
members. I am John Whitmore, the acting administrator of the
Small Business Administration. I appreciate the opportunity to
appear today.
Chairman Manzullo. Could you pull the mike closer to your
mouth? Thank you.
Mr. Whitmore. We are here today to discuss a situation
where procedures were not followed. But before I discuss the
beret issue, let me explain SBA's role in government
contracting.
SBA is responsible for ensuring that America's small
businesses receive a fair share of federal government
contracts. One of the agency's responsibilities is to review
proposed acquisitions to identify both prime and subcontracting
opportunities.
SBA's PCRs will recommend alternative procurement methods
when small business contractparticipation is unlikely due to
quantity, dollar value, restrictive delivery dates, or requirements for
non-commercial specifications.
If the SBA and the contracting activity disagree regarding
the procurement strategy, SBA may appeal to the head of the
procuring activity. However, it is important to note in the
last five years we have been successful less than 50 percent of
the time.
Ordinarily, such acquisitions such as the beret purchase
are coordinated with SBA's procurement center representatives.
They are located at major buying activities. Their goal is to
ensure maximum small business participation.
During the last few years, an increasing amount of PCR's
responsibility is involving and evaluating cases of contract
bundling. Some positive results of PCR oversight include
initiating small business set asides, removing work from
consolidated solicitations and including them in the 8(a)
program or in the small business set aside program, and
ensuring that subcontracting to small businesses is included as
an evaluation factor in the solicitation.
In terms of procedure, the PCR and the small and
disadvantaged business utilization specialist review the
agency's strategy, including the extent to which small
businesses will be used. The PCR reviews the procurement
strategy to determine the capacity for small businesses to meet
the particular requirement.
With regard to the beret acquisition, the procurement was
not sent to SBA for review as required by the Federal
Acquisition Regulations. Had it been sent to SBA, we could have
been effective in suggesting the use of modern machinery,
suggesting delivery dates that are in line with developing a
domestic supplier pool, and recommending improvements to the
commercial item description as envisioned by FAR. In this
instance, the commercial item description was 15 pages.
In general, our overall goal is to maintain a significant
and meaningful procurement opportunity for small business.
Congress has repeatedly acknowledged that participation of
small business is vital to the growth of the U.S. economy. More
specifically, small business participation and procurement
increases competition, diversifies the supplier network, and
generates the majority of innovations. It also creates many new
jobs.
While the data suggests that the percentage of government
contracting dollars to small business has remained relatively
constant, the actual number of contracting opportunities is
declining.
New contracting opportunities declined almost 50 percent
from fiscal year 1995 through fiscal year 1999. Obviously, this
reduction has significantly reduced contracting opportunities
for small businesses wishing to compete for federal contracts.
This is a classic supply and demand problem. An increasing
number of small businesses are interested in a decreasing
number of federal contracts. This is a serious obstacle to the
growth of America's small business community.
In particular, small businesses are concerned because
purchases under $2,500 are no longer reserved for small firms,
and a large percentage of that is going to the large office
supply stores.
They are troubled by multiple award contracts, government-
wide acquisition contracts that are now used extensively, both
limiting small businesses' contracting opportunities. And, as I
previously stated, contract bundling continues to be a major
impediment to small business.
Free markets thrive on competition. Small and new companies
epitomize that competition. The federal marketplace needs small
businesses to ensure competition and to provide the taxpayers
with the best value for goods and services.
Acquisition reform has had success. However, we must make
certain that, in the process, small businesses are not
precluded from participating in the federal contracting
opportunities.
If we followed procedures in this instance, we would have
appealed the Defense Personnel Support Center's decision to buy
in this way. Had we appealed this, these questions would have
been raised quite a while ago, and we probably would not be
here today.
Thank you, and I would be happy to answer any questions.
[Mr. Whitmore's statement may be found in appendix.]
Chairman Manzullo. Appreciate your testimony.
Mr. Joffe.
STATEMENT OF EVAN JOFFE, SPRINGFIELD LLC, NEW YORK, NEW YORK
Mr. Joffe. Chairman Manzullo, members of the Committee, I
appreciate the opportunity to appear before you today. My name
is Evan Joffe. I am the market manager for government and
military fabrics for Springfield LLC, a small textile company
headquartered in New York with manufacturing in Gaffney, South
Carolina.
My full statement has been submitted for the record.
However, I would like to summarize some of my points before the
Committee today.
A little background on Springfield: we are a small business
that employs approximately 370 associates. We manufacture
apparel fabrics worn by U.S. Air Force pilots, Army helicopter
crews, Navy seamen, and all servicemen in garrison as well as
fabrics for civilian, career, and uniform applications.
I am also the immediate past chairman of the Government
Textile Procurement Committee for the American Textile
Manufacturers Institute, the national trade association for the
U.S. textile industry.
First, I would like to applaud the Army chief of staff,
General Eric Shinseki, for his efforts to modernize the U.S.
Army and bring it into the new millennium. And, also speaking
for the entire textile industry, I commend Lieutenant General
Henry Glisson of DLA for his partnership with our industry.
From his days as commander at the Defense Personnel Support
Center, now known as Defense Supply Center, Philadelphia, where
he led the efforts to modernize textile and apparel
specifications to his innovations with the best value
contracting currently being employed by DLA, our industry had
enjoyed a solid working relationship with him and also with the
new head of the clothing and textiles at DSCP, Colonel
Diamante, who has continued by reviving the modernization
effort. Will be working with him in the fall to get some of the
modernization Subcommittees started again.
If it sounds that I am pretty supportive of the military, I
am because for people who spin yarn, weave fabrics, manage
markets, and executives who lead those businesses, they are a
very big customer with a very big open-to-buy. And it is very
important for us as we start, because we actually have declined
in membership in our industry, to keep what's left here.
So today, my desire is to continue to support this defense
supply team and facilitate a closer working relationship
between all team members, services, DLA, and the supplier base
to keep our forces ahead of the edge.
I would like to emphasize that the partnership between the
United States Armed Forces and the domestic textile industry is
fundamentally sound. But, like any good relationship, there are
always improvements that can be made.
A foundation of this relationship is the Berry-Heffner
``Buy American'' Amendments. Since World War II, this law has
ensured a warm U.S. industrial base for clothing and textiles,
and amajor component of this base is small business. But the
landscape is changing.
Over the past 10 years the U.S. textile and apparel
industries combined have lost over 540,000 jobs, and there are
new plant closings being announced every week. We have lost
over a third of our textile industry. We are now down to about
530,000 in the textile industry. So we have lost, like I said,
about 33 percent. However, if it weren't for the Berry-Heffner
Amendment, our industrial base would have been eroded even
further.
General Henry Shelton, the chairman of the Joint Chiefs of
Staff recently spoke at ATMI's annual meeting here in
Washington. His undergraduate degree was actually in textile
technology.
Referring to the threat posed by chemical and biological
weapons to American service personnel and to our industry's
efforts to provide protective fabrics and clothing, General
Shelton said, ``I am thankful that we can continue to call upon
the American textile industry to help us meet that threat. You
are an indispensable partner of our military forces, improving
their prospects for success in future conflicts.''
This hearing today was prompted by the U.S. Army's decision
to waive the Berry-Heffner Amendment in order to allow the
expeditious purchase of black berets in time for the Army's
225th birthday celebration. A more realistic deadline, as we
have seen, would have allowed U.S. manufacturers to gear up to
produce these items.
In recent years, there has been a trend towards
consolidation in all sectors of the defense supply industry,
including textiles. As small businesses are acquired by larger
companies, these larger companies may not be able to make
smaller run but nevertheless crucial items for the military.
Therefore, we need to maintain a small business supply sector
to provide these vital niche products.
And, as we were talking about a little bit before, I think
what we are coming to is a challenge between having a warm
industrial base for our defense purposes as opposed to going
into completely commercial procurement strategies.
In conclusion, my message is basically this. U.S. small
businesses are a vital part of the military supply chain and
must be maintained. And the Berry-Heffner Amendment is
important to these small businesses that supply the needs of
American armed forces.
I commend the Committee for your support for a reliable
defense industrial base which needs to continue to include a
strong small business sector.
Thank you for your invitation to appear, and I would
welcome any questions you might have.
[Mr. Joffe's statement may be found in appendix.]
Chairman Manzullo. Thank you very much. Our next witness is
Professor Schooner, Associate Professor of Government Contracts
Law, George Washington University Law School here in
Washington.
Professor.
STATEMENT OF STEVEN L. SCHOONER, ASSOCIATE PROFESSOR OF
GOVERNMENT CONTRACTS LAW, GEORGE WASHINGTON UNIVERSITY LAW
SCHOOL, WASHINGTON, DC
Mr. Schooner. Chairman Manzullo, Congressman Velazquez, and
members of the Committee, I appreciate the opportunity to
appear before you today.
I believe the black beret provides a unique opportunity to
consider the role of congressionally mandated policies in the
federal procurement process. Procurement statutes and
regulations long have required that the procurement system
further a broad range of social policies.
In buying black berets, Congress's intent was clear. The
military must purchase clothing manufactured in the United
States unless the military's needs cannot be met at market
prices by domestic manufacturers.
If the military's needs cannot be met in a timely fashion,
the statute permits clothing purchases from foreign
manufacturers. Thus, the statutory language permits DLA to
procure foreign berets if domestic capacity could not produce
the berets when needed.
As the Army described its requirement to DLA, the Army
needed the berets by a certain date, June 14, 2001, and DLA
acted accordingly. Yet, as this Committee has heard, no pending
crisis in October 2000 required the Army to obtain millions of
berets by June 14th.
Under a strict reading of the relevant statute, this self-
created exigency proudly provided sufficient legal
justification to permit purchases of foreign berets despite
Congress's wishes.
So DLA could procure the foreign berets if domestic
capacity would not produce the berets when needed. And if you
look at contemporary dictionaries, you'll see that need is
defined as a lack or something required or something desirable
or something really wanted.
So here the Army wanted a large number of berets rather
quickly, and the DLA wanted to fulfill the Army's desires. The
statute permits this behavior. But the behavior nonetheless is
inconsistent with congressional intent.
The Competition in Contracting Act, which we have already
heard about today, requires full and open competition in
government procurements and offers a useful analogy here. There
are seven statutory exceptions to the Competition in
Contracting Act that permit the use of other than competitive
procedures.
These exceptions exist because Congress did not intend
government business to screech to a halt in the name of
competition. But the exceptions are narrowly construed because
the acquisition planning process is intended to overcome all
but the most compelling urgency situations.
Unusual and compelling circumstances will not be found if
the agency is slow to conduct the procurement, and it won't be
found where there is a lack of advanced planning. In other
words, poor planning which results in compressed time frames or
crisis management does not justify avoidance of competitive
procedures.
In the classroom I attempt to impress upon my students
that, as future lawyers, just because they can get away with
something doesn't necessarily mean it is a good idea. This
message plays out today in the constantly evolving relationship
between program managers and contracting officers.
Program managers, such as, in this case, the Army chief of
staff, define requirements based upon missions they are tasked
to achieve. Contracting officers attempt to fulfill those
requirements.
The message of the 1990s acquisition reform movement was
that customer service, pleasing the program manager, merited
increased emphasis. Accordingly, DLA bent over backwards to
fulfill a need described by the Army.
Now government buyers should have every motive to please
their customers. Unfortunately, these customers rarely
appreciate the value of congressionally mandated social
policies that may delay or deter their ability to obtain needed
goods or services.
The not-so-subtle message trumpeted during the 1990s was
that it was more important to please the program manager than
to adhere to long-standing procurement policies, particularly
certain social and economic policies mandated by Congress.
It is not enough for our procurement professionals to focus
on satisfying the program manageror the end user. Procurement
involves the expenditure of public funds, and the federal government
has been and always will be different from the commercial sector.
The federal procurement process need not be slow,
ponderous, or inefficient. And, in fact, DLA demonstrated that
they can move quickly to meet needs. But no crisis required
that the Army obtain these berets quickly. Almanacs and
reference books teem with dates commemorating births,
achievements, and epochal events.
The arbitrary selection of such a date is not a compelling
reason to avoid a congressionally mandated policy. If it were,
nothing would stop program managers from routinely mandating
delivery of what they ask for by next Friday.
Better acquisition planning or, more specifically, more
realistic definition of the Army's actual requirements could
have avoided this situation.
Mr. Chairman, that concludes my statement, and I would be
pleased to answer any questions you may have.
[Mr. Schooner's statement may be found in appendix.]
Chairman Manzullo. Thank you, professor.
The next witness is the Honorable David Oliver, Acting
Undersecretary of Defense Acquisition, Technology, and
Logistics.
Mr. Oliver.
STATEMENT OF HON. DAVID R. OLIVER, ACTING UNDERSECRETARY OF
DEFENSE, ACQUISITION, TECHNOLOGY, AND LOGISTICS
Mr. Oliver. Yes, sir, Mr. Chairman, distinguished members.
Let me sketch this, beginning where I--the office I occupy
is in the chain of command because we are talking about this to
General Shinseki. We have questioned him a great deal on
procurement practices.
There are four offices that report directly to the
secretary and deputy secretary of Defense in OSD. I occupy the
one responsible for all procurement.
Now, for example, General Glisson then is two levels down
from me. And, as General Shinseki said, it is a completely
different chain of command, so he is not responsible for
procurement.
Now I appreciate why we are all interested in this and it
is because the United States Department of Defense spends $48
billion a year on small businesses, doing business with small
businesses. And you would like to increase that amount, as
would we.
Let me talk about what I was interested in this issue. I
was interested when this came up as to whether or not the
people working for General Glisson as well as General Glisson
had followed all the rules. So I took the person who was
responsible for contracts and some other people, a tough team,
put them together and said, ``I want you to go review that.''
They did that. The results are generally what General
Glisson said, which is that they performed, in general, rather
well.
The bigger question then becomes should we make some
changes. And I have made some changes as a result of this which
you may not recognize.
One is I don't think the responsibility for the Berry
Amendment waivers should be in Philadelphia, where they are
being made by someone who is subjected to lots of different
pressures and may not understand why the Berry Amendment is
important and also is not a political person responsible to you
all directly.
And so, as the general accounting office pointed out, I
pulled that back a couple of weeks ago, pulled back all the
authority for that to my office, to me.
And the deputy secretary of Defense yesterday directed the
services to do the same thing, and he pulled--told them to pull
back responsibility for waivers to the Berry Amendment to the
Secretary of the Service.
And, in addition, he told them that any time they are going
to waive the Berry Amendment, they have to examine all the
alternatives, and they have to present the required activity,
that is, for example, General Shinseki, with alternatives that
would not require a waiver under the Berry Amendment. And then
they have to evaluate that, and only after doing so can they
waive them. So that is a significant change, and the effort was
to make sure that we were reflecting the issues I told you.
Secondly, the question is why, as you may ask, how many
waivers do we have--I have reviewed all the Berry Amendment
waivers, and there are not very many. But the question is why
do you have any.
There is one for a Muslim religious garment, and that may
still ride because I am not sure anybody's going to make that.
But there are two others that exist. Therefore, ``Tom is going
to hold an open house in Philadelphia later on this month, and
we are going to do our best to do whatever is possible to get
American small businesses to make that.''
And in Atlantic City the next month we are going to have
another open house to see if we can do the same thing for
substance providers, essentially fruits and vegetables, et
cetera. So we are making every effort to eliminate the need for
Berry waivers.
In addition, I have promised some members of the Congress
that once we have started the berets, that we will make sure
that the berets that are used for subsistence, in other words,
the replacement berets--and you need, as Tom has said, about
1.2 million a year--that all those will be produced in the
United States.
So we hope this outreach effort will produce significant
additional small businesses and will ensure future Army beret
procurements will be from domestic sources.
That is all I have, sir, because I don't want to repeat
other people's testimony. Thank you.
[Mr. Oliver's statement may be found in appendix.]
Chairman Manzullo. Thank you very much.
Could you put up the two page memo, the fact sheet there?
All right. Now what that fact sheet says--it is dated
October 8, 1996. I can't read it. All right. This is a fact
sheet on Army berets that comes from DLA, prepared October 8,
1996. And it states generally that DLA knew what the exact
capacity of domestic production of berets were going back to
1996, which means this was nothing new. Is that correct,
General Glisson?
Lieutenant General Glisson. That is correct, Mr. Chairman.
We knew as early as 1990, again in 1996, and all the way to
present what the domestic capacity was in the United States.
Chairman Manzullo. So you knew when the order came down you
would have to get a foreign requirement.
Lieutenant General Glisson. When I received the
requirement, I knew that I would have to find other sources
other than Bancroft, that is correct.
Chairman Manzullo. Well, you knew you would have to get
foreign sources because Bancroft is the only domestic supplier.
Lieutenant General Glisson. That is correct. But as we do
with all contracts, Mr. Chairman, we always go back out to try
to make phone calls to see if there is anybody else that we
didn't pick up on.
Chairman Manzullo. Did you ever convey to General Shinseki
that you couldn't have the requirement fulfilled domestically
by the June date?
Lieutenant General Glisson. Congressman, I did not. And, if
I may take a minute to explain how that communications flow
went in terms of this acquisition.
Chairman Manzullo. Evidently, there were no communications.
Lieutenant General Glisson. No, sir, that is not true. On
an ordinary procurement what would happen is the buying office
in Philadelphia would communicate directly with the Army
Requirement Command, whoever that is. It would never be
elevated above that level.
In this particular case, we actually had three levels going
on. Number one, I contacted and maintained direct communication
with the Army Deputy Chief of Staff for Logistics, a Lieutenant
General, who is my counterpart on the Army staff. He was
designated by the Army as the point of contact for the Army on
the beret acquisition.
In addition to that, my Senior Enlisted Advisor was working
with the Sergeant Major of the Army on the wear of the beret
and on distribution. And, below that, the buying command was
working with the PM soldier, which is the requirer/generator
for the Army.
So we actually had three levels of people working this and
communicating on this particular acquisition to make sure we
all understood what was going on at any one time.
Chairman Manzullo. Well, you heard General Shinseki, that
he didn't know there could not be domestic requirement until
February. You heard him testify to that.
Lieutenant General Glisson. I did, Congressman. I can't
speak to what General Shinseki knew or didn't know. I can only
tell you who I dealt with and who my people dealt with during
that period of time.
Ms. Velazquez. Mr. Chairman, would you yield?
Chairman Manzullo. Sure.
Ms. Velazquez. General, why did you not notify General
Shinseki immediately that providing the June 14, 2001, deadline
would not allow for a U.S. company to produce those berets
here?
Lieutenant General Glisson. Because I was talking to his
Deputy Chief of Staff for Logistics, who is his designated
point of contact for the acquisition process.
It would have been extremely unusual for me to step outside
the bounds of the Army staff and go directly to the Chief of
Staff of the Army on an acquisition issue.
Chairman Manzullo. So the members of the staff knew, but
they never told him?
Lieutenant General Glisson. Sir, I can't tell you that. I
don't know.
Ms. Velazquez. This is unbelievable.
Chairman Manzullo. Did you personally examine the waivers?
Lieutenant General Glisson. I have.
Chairman Manzullo. And could you take a look at them and
tell me where in the waivers it states that there be sufficient
quality?
Lieutenant General Glisson. Congressman, I would offer the
following in regard to quality. I am aware of what the
requirement is to waive the Berry Amendment, and it does talk
to both quality and quantity.
I would agree with the contracting officer who said, when
they looked at the only domestic source that was available, the
only product that was available in the United States was
Bancroft. Once you had exhausted their maximum capacity----
Chairman Manzullo. You are not answering my question. That
is quantity. Under the law, the waiver must specifically state
three things, the necessity to go over seas, the quantity, and
the quality.
Lieutenant General Glisson. Right.
Chairman Manzullo. Could you show me in these waivers where
the quality is discussed?
Lieutenant General Glisson. Congressman, I cannot because
there is no product to which to evaluate quality. You have to
have a product to evaluate quality. And once you exhaust what
Bancroft has, there is no product to make a quality
determination.
Chairman Manzullo. The product is the beret. Did you ask
these foreign firms for samples of the beret and look at them?
Lieutenant General Glisson. We did, Congressman. We looked
at samples from all of the manufacturers who submitted under
our request for proposal.
Chairman Manzullo. Then why didn't you place that in the
waivers, the fact that you have examined these berets, and they
meet your quality standards?
Lieutenant General Glisson. Sir, the first thing we did was
a technical evaluation to determine quality. Once the quality
was determined, then it becomes a quantity and a timing issue.
Chairman Manzullo. But the quality does not appear in the
waivers. The law says--and the professor can back me up--that
these waivers must state quality.
Now I understand that some of these waivers relate to
contracts on berets that have been cancelled for lack of
quality, is that correct?
Lieutenant General Glisson. That is correct.
Chairman Manzullo. So you didn't do your job.
Lieutenant General Glisson. Congressman, I think the
contracting officer did do their job.
Chairman Manzullo. Well, wait a second. Wait a second.
Lieutenant General Glisson. Yes, sir.
Chairman Manzullo. There is nothing in these waivers to
indicate the quality. And then I think just yesterday, on the
eve of this hearing, the contract is cancelled for lack of
quality. And you are telling me that the contracting officer
did his job?
Lieutenant General Glisson. Congressman, I would tell you
that the contracting officer did review quality on each and
every contract. The fact that it is not so stated in the
waiver, which you are referring to, does not negate the fact
that the very first thing that the contracting officer did was
look at quality.
Chairman Manzullo. I understand that. But this is a legal
requirement. You have an obligation to review these waivers,
isn't that correct, they pass under your hand?
Lieutenant General Glisson. Sir, I don't have that
obligation. I have general counsel who does that.
Chairman Manzullo. But he works for you.
Lieutenant General Glisson. That is correct.
Chairman Manzullo. That is correct. So, ultimately, you are
the one responsible for these contracts, isn't that correct?
Lieutenant General Glisson. That is correct.
Chairman Manzullo. And you are familiar with the law?
Lieutenant General Glisson. Yes, sir, I am.
Chairman Manzullo. And the law specifically states that
quality has been examined. And don't you think that should have
been put into the waivers?
Lieutenant General Glisson. Sir, had that waiver required
that piece in there, I would say yes.
Chairman Manzullo. The law required it.
Lieutenant General Glisson. Sir, our understanding of the
law was what the law required was that we examine quality,
quantity, and reasonable price.
Chairman Manzullo. And that is supposed to be put into the
document.
Lieutenant General Glisson. Sir, I can't speak to whether
it needs to be specifically in the document. I know it has to
be considered.
Chairman Manzullo. Well, I would suggest to you, General,
that because the law was violated, that the companies that made
these berets should not be paid by the United States government
because it is their obligation to review all the documents. And
this document is insufficient by law. Would you agree with
that?
Lieutenant General Glisson. Congressman, I would not. I
have been advised by both Department of Defense counsel and my
own counsel that what we did was legal and appropriate and did
not violate the law.
Chairman Manzullo. Well, Professor?
Mr. Schooner. As I suggested in my testimony, I guess where
I begin on this, Chairman Manzullo, is that it seems like a
fair reading of the statute that DLA did not violate the law.
And, in fact, my perception coming in was that the major
problem here lies in the requirement, not in DLA's actions.
In addition, at least one reasonable way to interpret the
statute is that the Berry Amendment requires that, in this
case, DLA determine the quality and quantity of domestic
manufacture. And so, once we determine, if, in fact, they
determine that Bancroft is the only alternative--and I am not
going anywhere towards one-piece versus two-piece beret.
Once they make a determination with regard to domestic
quality and quantity, and they put--and they make that
determination, they have pretty much fulfilled their
requirement. And, on my reading, I am not sure that what the
statute requires is they make any determination with regard to
foreign-produced quantity and quality. The exception deals with
domestic quantity and quality.
Chairman Manzullo. All right. I can appreciate that.
General, these contracts were signed on what dates?
Lieutenant General Glisson. Congressman, I would have to go
back and look. There was one in November, one in December, and
another in February.
Chairman Manzullo. So there were three contracts. One
contract was signed November 2nd to Bancroft.
Lieutenant General Glisson. Right.
Chairman Manzullo. Another one to Dorothea November 2nd,
and the other one was November 6th.
Lieutenant General Glisson. Right.
Chairman Manzullo. Now do you know the date that the open
solicitation was released?
Lieutenant General Glisson. Sir, there was no open
solicitation for those first three contracts. We waived the
CICA requirements because they were the only known source and
because of the urgent and compelling----
Chairman Manzullo. So you didn't even ask if anybody out
there could do it.
Lieutenant General Glisson. Sir, we did not, and that was
because we had been looking at this since 1990. We knew the
industry.
Chairman Manzullo. But you didn't ask if anybody out there
in the community, in the textile community, had the ability to
do it.
Lieutenant General Glisson. That is correct. Other then we
did make phone calls, but we did not do an open competition.
That is correct, Congressman.
Chairman Manzullo. So you did no open competition.
Lieutenant General Glisson. That is correct.
Chairman Manzullo. With the open competition you would have
found out what's available, isn't that correct?
Lieutenant General Glisson. Congressman, we would have
found if we had missed anything, that is correct.
Chairman Manzullo. Now you thought it insignificant the
fact that the SBA representative in Philadelphia made an error
in not being contacted, is that correct?
Lieutenant General Glisson. Congressman, I didn't mean to
imply that was insignificant.
What I said was that was an administrative oversight. We
require that. We demand that. It was not done. It was something
that should have been done.
Chairman Manzullo. But it wasn't done.
Lieutenant General Glisson. That is correct.
Chairman Manzullo. Why wasn't it done?
Lieutenant General Glisson. My guess is that in the haste
of trying to meet the Army requirement and do all of these
contracting actions, there was simply an oversight.
Chairman Manzullo. An oversight.
Lieutenant General Glisson. That is correct.
Chairman Manzullo. Now Mr. Whitmore says that if they had
been notified, they could have actually gone to court in order
to stop the procurement.
Is that correct, Mr. Whitmore?
Mr. Whitmore. What I said was we could have appealed this
and raised a number of issues. One, if this is a brand new
requirement that is going to be going on for a number of years,
we certainly would have tried to point out that a domestic
supplier should--we should broaden the domestic supplier base.
We would also raise a number of questions on a commercial
standard, which is supposedly to be able to buy off the shelf,
certainly not a 15 page standard.
We also pointed out that the delivery dates and the
quantities here certainly were not the right size and scope to
be able to deal with small business.
If we are making a major change in what we are buying for
the Army head gear, we certainly would try to point out that
domestic suppliers, small domestic suppliers, should be
involved in this because there will be follow-on procurements
for this type of thing year after year.
If we were to appeal this, Mr. Chairman, and it would have
raised it to the highest levels over there, and these questions
would have been brought to light very early on in the process.
Chairman Manzullo. So there would have been another
opportunity for domestic requirement?
Mr. Whitmore. Certainly. And it would also have been raised
to the highest levels of the Army, and the questions that were
not asked about are they being purchased out of the country,
where would they have been done, and what quantities certainly
would have been raised. And they would have had to address that
very early on.
Chairman Manzullo. When was the SBA finally notified by the
DLA?
Mr. Whitmore. I am not sure of the exact date, but I think
it was three to four months after----
Chairman Manzullo. March 24th.
Mr. Whitmore. Right. It was after the awards were already
made.
Chairman Manzullo. After we sent out notice of our hearing
and after members of Congress were continually raising hell
over the fact that these berets were being made in China, Sri
Lanka, Romania, and elsewhere.
Mr. Whitmore. Yes, sir.
Chairman Manzullo. I have another question that I wanted to
ask, and I will try to be as short as possible, on the line of
authority and the chain of command which I find--well, would
you give me a minute?
General, were you in charge of supplying the documents to
me and Ms. Velazquez pursuant to our subpoena duces tecum?
Lieutenant General Glisson. I was.
Chairman Manzullo. I got these yesterday, last night. There
must be 400 pages in there. Could you explain to me why it took
you until last night to come up again with this latest batch of
documents? I haven't even had a chance to read them.
Lieutenant General Glisson. Congressman, is that the first
book or the second book? I don't know which one you have there.
Chairman Manzullo. Try the fourth book.
Lieutenant General Glisson. Congressman, that was a follow-
on. In your subpoena you told me to continue to provide you
with documents as they occurred. And that is what we have tried
to do, as those have been developed, to continue to provide
those as we put them together.
Chairman Manzullo. But these documents are dated prior to
the date of our subpoena duces tecum.
Lieutenant General Glisson. Congressman, all I can tell you
is, as we locate the documents, as we find them, we try to be
as open and honest with the Committee as we can.
Chairman Manzullo. Do you know what you didn't give us?
Lieutenant General Glisson. No, sir.
Chairman Manzullo. You didn't give us General Shinseki's
memo that he gave to you six weeks ago that said that he didn't
want to have Chinese procurement. Did you hear him testify to
that?
Lieutenant General Glisson. Congressman, I do not have that
document.
Chairman Manzullo. You don't have that document?
Lieutenant General Glisson. I do not.
Chairman Manzullo. Where is it?
Lieutenant General Glisson. Congressman, I have no idea.
Chairman Manzullo. I think it is extremely relevant. I
mean, that is what this hearing is about. The chief of staff
said as long as six weeks ago to your agency that he did not
want to have Chinese procurement. And you don't have the
document?
Lieutenant General Glisson. Congressman, I have never seen
such a document.
Chairman Manzullo. You have never seen such a document?
Lieutenant General Glisson. Have not.
Chairman Manzullo. Is there anybody on your staff here that
has the document?
Lieutenant General Glisson. Congressman, I don't know of
anybody who has seen such a document.
Chairman Manzullo. I would like you to bring all of your
documents relating to this to my congressional office tomorrow,
at which time Ms. Velazquez and I can go through everything to
see if there are anymore surprises there. I mean, that is a
critical document.
Lieutenant General Glisson. Congressman, I would agree. I
have not seen such a document. Obviously, you say one exists.
It has not been given to me.
Chairman Manzullo. General Shinseki says it exists, and I
believe him.
Lieutenant General Glisson. Yes, sir. Congressman, the only
document I saw was a release that was made last evening where
General Shinseki agreed to not wear the China-manufactured
beret.
Chairman Manzullo. Ms. Velazquez and I sent you a letter
April 5th on our Small Business Committee letterhead to your
liaison that states,
Pending completion of congressional investigation into the
procurement of U.S. Army berets in whole or part from non-
domestic U.S. sources, in light of possible violations of
federal law and unanswered questions that may seriously
undermine the validity of the procurement, we must insist that
you suspend any contracts or orders coming from non-domestic
U.S. sources.
Do you remember getting that letter?
Lieutenant General Glisson. I do.
Chairman Manzullo. Was there any production made in China
after April 5th?
Lieutenant General Glisson. Congressman, there was.
Chairman Manzullo. Did you ever answer my letter?
Lieutenant General Glisson. Congressman, I did not.
Chairman Manzullo. Why?
Lieutenant General Glisson. For several reasons. Number
one, I was under a review at the time which had not been
completed by the Department of Defense.
Chairman Manzullo. I am not part of the Department of
Defense. I am the chairman of the Small Business Committee with
subpoena powers.
Lieutenant General Glisson. Sir, I understand.
Chairman Manzullo. And you did not answer this letter. You
knew there was concern. And now General Shinseki said that he
sent you a note six weeks ago, and you still continued
production in China. Is that correct?
Lieutenant General Glisson. Sir, I have never seen a note
from General Shinseki telling me that.
Chairman Manzullo. But you saw my letter.
Lieutenant General Glisson. Sir, I did.
Chairman Manzullo. And you ignored it.
Lieutenant General Glisson. I did not ignore it.
Chairman Manzullo. You didn't answer it.
Lieutenant General Glisson. Congressman, I did not ignore
it even though I didn't answer it.
Chairman Manzullo. You didn't answer the letter.
Lieutenant General Glisson. No, sir.
Chairman Manzullo. Don't you have an obligation to answer
letters from members of Congress?
Lieutenant General Glisson. Sir, I do. The Office of the
Secretary of Defense said it was fine----
Chairman Manzullo. Did he tell you not to answer our
letter?
Lieutenant General Glisson. Sir, the instructions I had
were they were trying to gather all of the facts to give you a
proper response and that we should not provide an interim until
that was concluded.
Chairman Manzullo. We got no response.
Lieutenant General Glisson. Right.
Chairman Manzullo. This Committee got no response, none.
And it is apparent that, until the U.S. Congress became active
in this situation, you wouldn't have done anything. In fact,
Mr. Oliver, what we have got here on this designation of people
who have the authority to sign theBerry waiver were all over
the place on this.
First, we have somebody at DSC in Philadelphia. Would you
put up one of the waivers? There it is right at the bottom
there, the one waiver that is dated November 11, 2000, that
document right there. Do you see that?
Why don't you put it so Mr. Oliver and the general can see
it. That is one of the waivers signed by George Allen. Now who
is George Allen?
Lieutenant General Glisson. George Allen, Mr. Chairman, is
the Deputy at the Defense Supply Center in Philadelphia.
Chairman Manzullo. All right. And then read underneath that
date. Read to us what that says. What is typed in underneath
and who signed it?
Lieutenant General Glisson. Sir, on the other side is Mr.
William Kenny, who is my Senior Procurement Executive.
Chairman Manzullo. And what is the date of that?
Lieutenant General Glisson. The date on that is 23 March
2000.
Chairman Manzullo. And what does it say?
Lieutenant General Glisson. I can't see that far.
Ms. Velazquez. 2000 or 2001?
Chairman Manzullo. 2001.
Lieutenant General Glisson. 2001.
Chairman Manzullo. And what does it say?
Lieutenant General Glisson. ``Reviewed and approved.''
Chairman Manzullo. Reviewed and approved four months after
it was signed.
Lieutenant General Glisson. Yes, sir.
Chairman Manzullo. Signed by somebody who had no authority
in the first place, is that correct?
Mr. Oliver.
Lieutenant General Glisson. Not to my understanding, Mr.
Chairman. Mr. Allen was serving in the capacity as Acting
Commander. And, under the Directive which we have, he had
authority to sign that.
What Mr. Kenny did is, when I was given the authority from
Mr. Oliver at a later date, what we did is, we went back. I
asked Mr. Kenny to take a look at the records and to review to
see if there had been any wrongdoing on the part of the Supply
Center in Philadelphia in the acquisition strategy. His comment
there and his signature indicates he did review those and that
he approved what they had done.
Chairman Manzullo. That he reviewed the contract?
Lieutenant General Glisson. He did.
Chairman Manzullo. Or that he is trying to ratify the
validity of this?
Lieutenant General Glisson. No, sir. He reviewed the entire
acquisition process and ratified exactly the process that had--
--
Chairman Manzullo. Did he sign every single document with
that same type of signature?
Lieutenant General Glisson. No, sir, he did not.
Chairman Manzullo. But just the waivers?
Lieutenant General Glisson. That is correct.
Chairman Manzullo. And, General, I mean, it is obvious that
whenever there is an investigation of documents, and the
documents are shown to be true, the person who did the
investigation doesn't sign off on the bottom and say, ``This is
okay.'' You don't sign documents in that manner.
Lieutenant General Glisson. Congressman, what Mr. Kenny was
attempting to do was to show that he had reviewed the files,
concurred with the actions taken by the Supply Center in
Philadelphia. And this happened to be the document that he
signed to so ratify.
Chairman Manzullo. What he was attempting to do was to give
retroactive ratification to the document.
Lieutenant General Glisson. That is not correct, sir.
Mr. Oliver. He was attempting to follow my guidance, Mr.
Chairman.
Chairman Manzullo. And your guidance was?
Mr. Oliver. By the way, I had my attorney write down what
had happened. They were researching the Berry Amendment for the
purpose of drafting language for a potential legislative
initiative. And, during the course of the research, they were
unable to locate a copy of the written delegation of DLA for
the authority to make determinations. They couldn't find a
paper trail.
Chairman Manzullo. There is no--there is no document on
written authority for the Berry Amendment.
Mr. Oliver. They could not find a paper trail. The people
who had been involved told me that for more than 11 years
Philadelphia had exercised that waiver authority, and there
were certainly indications that people did not think they were
doing things dishonestly.
Chairman Manzullo. This isn't a matter of honesty. It is a
matter of competence, chain of command.
Mr. Oliver. Yes, sir. I understand.
Chairman Manzullo. And authority.
Mr. Oliver. So what happens is they said, ``We want a
letter of delegation.'' 1 February they came up to me and gave
me a draft letter. And, as you can see, because I made pen and
ink changes, I was thinking at the time that I did not want to
give authority for waiver of the Berry Amendment down further
than someone that I knew well. And so I limited it at the time
to General Glisson and his procurement executive.
Chairman Manzullo. That would be somebody down further than
the one who had signed it, isn't that correct?
Mr. Oliver. No. No.
Chairman Manzullo. George Allen?
Mr. Oliver. No, he is down further. No, sir.
So what happens, Mr. Chairman, is when we looked at the
Berry Amendments--and, first of all, we reviewed all of them to
see where they were there--I said to Tom, ``Under the new
guidance, I would like your procurement executive to go back
and re-sign all those if he agrees with them because I would
like to find out
if----''
Chairman Manzullo. To re-sign and thus ratify the
documents, is that correct?
Mr. Oliver. Well, the real purpose is to see if there are
waivers in force that shouldn't be. In other words, I would
like someone more senior to look at that and say that.
Chairman Manzullo. In other words, to make sure the
documents were legal.
Mr. Oliver. No, to make sure that he agreed with the
decisions. My attorneys believe the documents are legal.
Chairman Manzullo. Wait a second. There is no document
showing who had the authority to sign, is that correct, that
George Allen had the authority to sign.
Mr. Oliver. That is correct.
Chairman Manzullo. Would you agree on that? So he signs.
Congress gets involved. Westart asking inquiries. We send a
letter dated April 5th. There is no authority. There are all kinds of
problems. No one answers it. Then, all of a sudden, there is this
flurry of activity to find somebody who has the authority to do so.
Mr. Oliver. The time frame doesn't hold, does it, sir,
because in November they came to my office saying that they
could not find the paper trail. And I signed that waiver
authority on 1 February and was distributed----
Chairman Manzullo. But why did that take so long?
Mr. Oliver. A good question, sir, and I can ask----
Chairman Manzullo. You knew February 1st there was no
authority, no signing authority?
Mr. Oliver. Actually, what I did was I knew there wasn't a
piece of paper, and I signed a piece of paper to give them
that.
Chairman Manzullo. But that wasn't until after the person
down the line who had no authority or questionable authority
had already signed and contracts had been awarded and
production started.
Mr. Oliver. You wouldn't believe this at the time, but we
weren't focused on berets at the time, nor did I have any idea
that they were doing--this is just a matter of routine. In
fact, I have a paper to that effect.
Chairman Manzullo. This is routine? The authority to waive
the Berry Amendment is a matter of routine?
Mr. Oliver. No. It is a decision. It is not related to
the----
Chairman Manzullo. The statute says that only the secretary
or his designee can sign it.
Mr. Oliver. That is correct.
Chairman Manzullo. This is not routine. This is authority
to sign a contract, to sign a waiver.
Mr. Oliver. Yes, sir. And I think, in fact, the fact that I
marked this letter up and changed it shows that I was thinking
about that very carefully.
Chairman Manzullo. Evidently, thinking about it from
November until February.
Mr. Oliver. It landed on my desk.
Chairman Manzullo. Ms. Velazquez please.
Ms. Velazquez. I regret, Mr. Chairman, that the witnesses
were not put under oath. Do you hear me?
Chairman Manzullo. I am sorry?
Ms. Velazquez. I regret the fact that, you know, the
witnesses here are not being put under oath.
General, I am going to ask the same question that I asked
to General Shinseki. And this is in regard to the justification
for other than full and open competition, the comment that was
there that says that the Army will be seriously injured if this
action is not approved.
He said that he couldn't comment because this was the first
time that he saw that. So I guess this is not the first time
that you saw that.
Lieutenant General Glisson. That is not the first time I
have seen that. That is correct.
Ms. Velazquez. So what is your reaction to that?
Lieutenant General Glisson. Congresswoman, that the wording
leads one to believe that there would be serious harm or
damage. And our opinion, based on the requirement from the
Army, the chief of staff had said he had an urgent and
compelling reason to have these ready in June. I had no reason,
nor did any of my people have any reason to question that
requirement.
Ms. Velazquez. Professor Schooner.
Mr. Schooner. Yes.
Ms. Velazquez. Would you please comment on that?
Mr. Schooner. I guess what I had hoped that my testimony
would suggest is that at some point in the process it would be
nice if someone asks that question.
One of the most difficult issues that frequently arises in
any procurement is the tension between the procurement people,
the contracting officers or, in this case, DLA, and the
requirement's determiners, the program manager, the people who
say, ``I want this.''
It seems to me that in a good dialogue in a working
organization it would be perfectly reasonable for someone at
DLA to, as we might say, push back and ask the question, ``Is
this necessary.''
Similarly, I think it is perfectly reasonable to expect
from DLA's perspective that someone in the chief of staff's
office, whether they are general counsel's office or some of
their staffers, would have already asked those reasonable
questions.
But the concern here is that it appears that no one asked
the question or, if they did, the question wasn't asked in a
manner that it got the attention of the people that realized or
would have realized that this was going to be a problem.
Ms. Velazquez. Thank you.
General, I am trying to get a handle on the number of
berets that you were buying with the Berry Amendment Waiver. My
understanding is that the immediate need is for 1.3 million
berets so that the June 14th deadline can be met.
Lieutenant General Glisson. That is correct.
Ms. Velazquez. An additional 1.3 berets will be required so
that each soldier can have a second beret by October of this
year. A third 1.3 million are sustaining berets, meaning that
they will be used for new Army personnel and in case berets get
torn or damaged in some way.
My question is, this adds up to 3.9 million, and yet you
are ordering 4.17 million, an additional 860,000 beyond your
immediate need. In fact, it could be argued that your immediate
need is only 1.3, isn't it?
Lieutenant General Glisson. Not quite, Congresswoman. If I
may explain what the additional buy is for.
Ms. Velazquez. Would you please explain to me why are you
using the urgency waiver of the Berry Amendment for all these
4.76 million?
Lieutenant General Glisson. Yes, ma'am. There are three
increments really. The first 1.3 gets to the issue of the first
beret to every soldier, another 1.3 to get the second beret
issued.
The wear-out rate on a beret is about--you are going to run
through those on an annual basis, so if you issue 1.3, you are
going to use up 1.3 million berets in a year, so you have to
have a replenishment stock for that.
It is not quite so simple in pure numbers because you have
size differences and tariffs that you have to meet. So you need
additional quantities in order to cover the large number of
sizes that you have.
In addition to that, you also have distribution issues that
you must consider. These are soldiers stationed around the
world, and the issuing sites for these are stationed at various
places. So you have to have quantities of sizes at all of these
places.
And then the third part of this is that you have to offer
sale of these items into the Army/Air Force Exchange for
soldiers who lose them and/or somehow damage them, and it is
their own fault, that they have an opportunity then to either
go buy, or someone else can go buy those.
That total requirement adds up to about 4.8. They are all
part and parcel of the same requirement document that we had
received from----
Ms. Velazquez. General?
Lieutenant General Glisson. Yes, ma'am.
Ms. Velazquez. The rationale to use the waiver----
Lieutenant General Glisson. Yes, ma'am.
Ms. Velazquez. It was that you needed them to be ready by
June 14th.
Lieutenant General Glisson. That is correct.
Ms. Velazquez. Did you need all of them, 4.76 million by
June 14th?
Lieutenant General Glisson. I did not.
Ms. Velazquez. Thank you.
Ms. Goodman, I find it really ironic that your business was
awarded an Innovative Business Partner Award by the DLA and, in
fact, by General Glisson, and yet the DLA did not want to
consider your innovation to the beret to make a more updated
product. How do you respond to that?
Ms. Goodman. Well, it is my understanding that the Army has
the final decision on what the beret looks like, not DLA. So I
am not sure that that really holds true that DLA didn't want
to. But I find it ironic though that they are the buying
activity for the Army, and the Army still refuses to look at
that.
I did want to add something though, if I may on what you
were talking about the waiver.
Ms. Velazquez. Mm-hmm.
Ms. Goodman. Atlas, at a cost of $20,000 in legal expenses,
on November 24th, as outlined in my timeline, filed a protest
exactly based on what you just brought up, the fact that there
was a known quantity. And this protest originally was filed
with the GAO.
But, however, on December 7th, the DLA issued an
authorization for contract award and performance
notwithstanding a protest. And in that they basically said that
they couldn't wait for the GAO's decision on my protest, so
they awarded the contracts. So they were aware of that.
Additionally, when they did that, I turned around and filed
an injunctive action in the Court of Federal Claims,
challenging the awards based on both the violation of the CICA,
the Competition in Contracting Act, and the Berry Amendment.
Ms. Velazquez. Thank you, Ms. Goodman.
Mr. David Oliver, I am happy to see you again. Now that you
have admitted, and you said that you have pulled the Berry
Amendment waiver authority back to your office from
Philadelphia, my question is, would you have approved these
Berry Amendment waivers for the beret procurements?
Mr. Oliver. I don't know, Congresswoman. It is really hard
to say in retrospect and for all the reasons that we have
talked about.
What we tried to set up with new guidance that went out is
that you have to evaluate the alternatives. And you essentially
do a three step process to determine if there is somebody who
will come in, and then you go back with the alternatives. For
example----
Ms. Velazquez. Mr. Oliver, excuse me.
Mr. Oliver. I don't know the answer to that.
Ms. Velazquez. With all this time, and you don't have an
opinion of this?
Mr. Oliver. Yes, ma'am.
Ms. Velazquez. You didn't have time to evaluate this?
Mr. Oliver. No. I think it is very complicated because of
what the chief of staff said about he actually needs the
berets, and there are really good reasons that he made that
decision whether or not everyone agrees. And he wanted the
berets, and he wanted to buy them for what I happen to think
are tremendously important reasons to the integrity of the
Army.
Then the question becomes, should we do a different design
than the other berets in the world--and these are fighting
berets--or should we do this different design. I don't know the
answer because we didn't go through that process. So I am
giving you an honest answer. I don't know the answer.
Ms. Velazquez. Mr. Oliver, I would like to ask you a
question that is related to procurement but not to the beret
procurement.
Mr. Oliver. Yes, ma'am.
Ms. Velazquez. Would you please read the highlighted
portion of the letter that you sent to Chairman John Warner?
Mr. Oliver. ``I believe strongly the department must remain
the final authority on how to structure its procurements as it
is in other matters that relate to the accomplishment of its
mission,'' a letter of November 17, 2000, having to do with
bundling.
Ms. Velazquez. Correct.
It appears, Mr. Oliver, from your statement in this letter
to Senator Warner that you do not believe that Congress has
jurisdiction over Defense procurement matters as they relate to
small businesses.
Mr. Oliver. Absolutely not. You certainly have
jurisdiction, and that is the reason I am here. I mean, all I
said in this case is I don't think you should change rules on
bundling. It is just, as in the Berry Amendment, I was trying
to tighten bundling up to change things so you would not have
to change the law so we could remain responsive to the soldier.
We went to Desert Storm. They had to go out and do a Berry
waiver to provide tents so the Army had enough tents to
actually fight the war. Now the Army did not buy them in the
end, but they needed to be prepared.
I don't want to set up situations in which you have
something like the berets. We want to fix those problems so we
don't make war-fighting problems.
Ms. Velazquez. You want to fix. I am going to give you some
numbers so that you realize that you haven't fixed. And let me
just say this to you. As I said it before when you came before
our Committee, you know, when the Department of Defense
misplaces small businesses whom we all know are the primary
employers in this country, this Committee is going to have and
to tell you what to do.
When the numbers of contracts to small businesses are
decreasing by nearly 35 percent over the past three years, and
the department is telling us that purchasing berets is urgent
and implies that national security is at stake, this Committee
is going to tell you what to do.
I have seen nothing from your agency so far that leads me
to believe that you care even the slightest bit about small
business participation in Department of Defense contracts. This
is even confirmed by the LMIS study.
I want for you to tell me, Mr. Oliver, don't you think that
if a contract bundle doesn't show cost savings, it should be
unbundled?
Mr. Oliver. I think, as you know, that you should not do a
bundling unless you can think that you are going to get a cost
savings.
Ms. Velazquez. General Glisson, I believe that the reason
contract bundling as well as the beret procurement are
problematic is because the underlying procurement processes
within the DOD are flawed. Because of this, this Committee is
going to stay and deal with this until these laws are
corrected. In light of this, can you tell me, General, has the
DLA set an 8(a) programgoal?
Lieutenant General Glisson. We have.
Ms. Velazquez. What goal have you set?
Lieutenant General Glisson. I don't recall the number right
now. I don't know the answer to that, Congresswoman. I will
have to provide it for the record.
Ms. Velazquez. You knew that we would be discussing today
procurement processes in the DOD.
Lieutenant General Glisson. I did. I did.
Ms. Velazquez. And you come here, and you are not prepared
to answer that question?
Lieutenant General Glisson. I cannot.
Ms. Velazquez. So, Mr. Chairman, I will request from the
general to submit a written answer to my question, to that and
other questions that I will be submitting to you----
Chairman Manzullo. I think the general stated that he is
willing to do that. Ms. Velazquez, the procurement is a little
bit different than 8(a) here. We are dealing with this
particular situation. I will give you plenty of latitude, but
just keep that in mind.
Ms. Velazquez. General Glisson, how many hours of training
do contracting officers in your command receive regarding the
Berry Amendment?
Lieutenant General Glisson. They don't take specific
classes on Berry Amendment. It is part of the overall
acquisition training which all contracting officers receive. It
varies at what level they are and how much training and
experience they have had.
Ms. Velazquez. General, are you aware that in 1998 DOD's
inspector general report said that 59 percent of contracts
issued in fiscal year 1996 and '97 did not include the proper
contract clauses?
Lieutenant General Glisson. I am, Congresswoman. I would
also point out though that that report highlighted the military
services and did not include the Defense Logistics Agency.
Ms. Velazquez. Thank you, Mr. Chairman.
Lieutenant General Glisson. So I would like to be careful
that we are not included in those numbers.
Chairman Manzullo. Would you yield on that?
Ms. Velazquez. Sure.
Chairman Manzullo. I just have to put this in general. This
is a summary of recommendations by the Office of Inspector
General, dated October 29, 1998. ``Summary of Recommendations.
We recommend the director Defense procurement----''
Lieutenant General Glisson. That is not me, Congressman.
Chairman Manzullo [continuing]. ``Issue guidance, emphasize
the requirements to incorporate and enforce the Buy American
Act and Berry Amendment provisions and clauses and
solicitations and contracts for clothing and related items. The
guidance should also remind contracting officers, when they
procure incidental non-federal supply schedule items, that they
should verify that the procurement complies with the Buy
American Act.
``We recommend that the Deputy Undersecretary of Defense
Acquisition Reform ensure that the Defense Acquisition
University stress the ramifications of not buying with the Buy
American Act.''
The Deputy Undersecretary of Defense for Acquisition
Reform----
Mr. Oliver. Works for me.
Chairman Manzullo. Did he ever institute this report?
Mr. Oliver. Yes, she did. Yes, she did. On 30 September
1998 she got a report back from the Defense----
Chairman Manzullo. Which would have been two months before
this report was issued.
Mr. Oliver. What happens is, when the report is issued, of
course, as you know, you pass these things around, and, if
people are really doing their job, they, of course, take action
before it even comes out if they agree with it.
Chairman Manzullo. If they had been doing their job, we
would have had the written authority.
Mr. Oliver. Mr. Chairman, the answer to your question is
yes, they did issue the guidance, and it is taught at the
school, sir.
Chairman Manzullo. Who are the contracting officers
referred to in this? Are they the ones that work with DLA?
Mr. Oliver. All the contracting officers.
Chairman Manzullo. It says, ``Additional instructions
should emphasize the important responsibility that contracting
officers have to incorporate and enforce the Buy American
Act.''
Mr. Oliver. Yes, sir.
Chairman Manzullo. The Berry Amendment Act.
Why don't you finish with----
Ms. Velazquez. I am finished with my questions, Mr.
Chairman.
Chairman Manzullo. Okay.
Then Mr. Bartlett? I am sorry.
Mr. Bartlett. Thank you very much.
Mr. Oliver and General Glisson, can I assume that you now
have an appreciation of the intensity of the commitment of our
Committee to protect small business interests?
Lieutenant General Glisson. Absolutely, Congressman.
Mr. Oliver. Yes, sir.
Mr. Bartlett. Okay. We don't need to pursue that any
further. You understand that we take our responsibility very
seriously.
Mr. Oliver, who first became aware that there was not a
defensible paper trail for the waivers that were made on
November 1 and December 7, and when did that happen?
Mr. Oliver. Let me read this. It doesn't say. It says they
were ``unable to locate a copy of the written delegation to DLA
of the authority. The DLA federal regulations supplement,
however, for many years has provided delegations of authority,
et cetera.''
Since they couldn't do it in November 2000, it says the
acquisition procurement executive of DLA submitted a formal
request. It doesn't say who it was.
Mr. Cooper. Mr. Bartlett, I think I can answer your
question more specifically.
Mr. Bartlett. Yes, sir.
Mr. Cooper. I looked at the e-mail traffic that surrounded
all this. And I think it was on November 2nd that the question
was raised by DLA headquarters about whether Philadelphia had
the authority. That is where it started. And then on November
8th the request letter was sent to Mr. Oliver's office.
Mr. Bartlett. What sort of paper trail is there for this
delegation of authority? The statute gives that authority to
only two individuals, is that correct?
Mr. Oliver. The Secretary of Defense and the military
service secretaries, sir.
Mr. Bartlett. Or their designee.
Mr. Oliver. Right.
Mr. Bartlett. Okay. So that is two levels of--okay,
Secretary of Defense or----
Mr. Oliver. My lawyers tell me it is to whomever that is
delegated down, sir.
Mr. Bartlett. When was this delegated to Philadelphia? Is
there a paper trail for that, or was this just an assumption
that was made in the past?
Mr. Oliver. That is what I am saying. The people could not
find the paper trail. When they looked back, they knew it had
been assumed for at least 11 years, but they could not find a
paper trail, which is the reason they asked me to provide that.
Now I chose, as you know, not to delegate it to Philadelphia.
Mr. Bartlett. Understand. The next question I want to ask
is one that just would appear there ought to be a reasonable
answer to. Somebody must have asked themselves did General
Shinseki really want these berets that bad.
Somebody should have told him, ``General, I am not sure
that the juice is worth the squeezing here. If you are going to
get those berets by June 14th, you are going to have to procure
a whole bunch of them outside the country, and a bunch of those
are going to be made in China. General, is that really what you
want?'' Now it is incomprehensible to me that somebody didn't
have those thoughts.
Mr. Oliver, do we have such a structured system that nobody
down the line could raise that question? I think General
Shinseki was very honest when he told us that he didn't know
they were being procured overseas. He didn't know they were
being procured in China. But somebody sure as heck knew that.
Mr. Oliver. I am sure he didn't. And, as General Glisson
has told you, he was informing people at the three-star level
in the Army and General Glisson's staff at the senior enlisted
E-9 level and also through some other--in other words, I don't
know where that broke down, sir.
Mr. Bartlett. But you don't think that there were more than
one person who wondered whether or not this was a wise course
of action to be procuring berets from overseas and particularly
from communist China, that our military people, when they took
that off their heads, were going to see a ``Made in China'' on
it, and that was going to be a problem?
What I am looking for is a way of providing an open door. I
worked at IBM for eight years. We had an open door policy. If I
had a serious enough question, I could go to Tom Watson
himself.
Mr. Oliver. Right.
Mr. Bartlett. And there would be no recriminations for
that. Can we have kind of an open door policy so when
something--and this was dumb. I think, looking back on this,
procuring these things overseas and from China was dumb. And I
think that General Shinseki would have said, ``Yeah, let us not
do that.''
But, apparently, the system did not permit that several
people who must have had that question in their mind--because
we don't have a bunch of dummies in procurement. And several
people must have had that question in their mind, and the
structure of the system did not permit them to voice that, is
that correct?
Mr. Oliver. Yeah. And when Alan did the review for me, a
whole bunch of e-mails came up of conversations, and you could
see that people were doing that. And it obviously didn't get up
to General Shinseki, didn't get to me. That is my thought on
pulling back the waiver authority to me, that it will have to
get up to me then.
You know, if I am aware of each of the waivers that are
made and become the decision authority, then, obviously, people
bring their thoughts and complaints to me. So I agree that is
what happened. That is my fix to it.
Mr. Bartlett. I have a concern about a chain of command
that is so rigidly adhered to that if one person--and I can
understand that any one person may not have had this question
in his mind because he may not have had all the information.
But a chain of command that prohibits this kind of concern
from coming up so that it gets to you or General Shinseki, if
it had gotten to anybody at a responsible level, I think that
the plug would have been pulled on this a long time ago,
wouldn't it?
Mr. Oliver. Well, we certainly have cancelled some
contracts and cancelled some other things and spent a great
deal of time on this, sir, since we became aware of it.
Mr. Bartlett. But that was only when the fire was burning
pretty hot, wasn't it?
Mr. Oliver. Yes, sir.
Mr. Bartlett. Can we do something so that this kind of
thing in the future doesn't happen because we have a system
which permits people, at whatever level they are, if they have
a real serious concern, an anonymous suggestion box or
something?
Mr. Oliver. Yes, sir.
Mr. Bartlett. ``Hey, Chief, this is dumb.'' Can't we have
some way so that this kind of thing won't happen again because
I am certain there were a whole bunch of people out there--e-
mails verify that--that had some serious concerns about whether
the juice was going to be worth the squeezing in this
operation.
Mr. Oliver. Yes, sir.
Mr. Bartlett. Well, we would like a report, I think, as to
how you might implement such a system so that we can avoid this
in the future.
Mr. Oliver. I will give you one. I will give you one, sir.
Chairman Manzullo. If you would yield, it is pretty simple.
The head of DLA just calls the man who made the orders. That is
how simple it is.
Mr. Oliver. It is even more simple now because, since it
has to come up to me, I can do this. I mean, do you understand?
What I am doing is I am taking the responsibility up to the
political appointee who is confirmed by you all who has to
answer to you.
Chairman Manzullo. You took direct action on that.
Mr. Pascrell.
Mr. Pascrell. This is a civics lesson. It really is. Of
course, it may not rise to the level of $700 hammers, but the
more we talk, it is getting there.
The only document that we have from Walter Holten, who is
colonel of the infantry, a memorandum he sent to Paul Diamante,
Director of Clothing and Textiles, Defense Supply Center
Philadelphia.
This is the order for, when you add it all up, first
requirement for 1.3 million berets to be available on the April
14, 2001. The berets would be issued to how many active
soldiers, how many reserve National Guard soldiers. The
additional quantity required is for an appropriate size tariff
for the force. Now this went November the 1st.
Now these are followed by three contract actions. And if I
listened to Mr. Cooper correctly--correct me if I am wrong, Mr.
Cooper--you say on page one of your testimony that the first
three contract actions in November 2000 were taken by DLA
without providing for full and open competition as required by
the Competition in Contracting Act of 1984. You stand by that
statement?
Mr. Cooper. That is correct. Yes, sir.
Mr. Pascrell. And what do you think of that statement,
General?
Lieutenant General Glisson. That is an accurate statement,
Congressman.
Mr. Pascrell. That is an accurate statement.
Lieutenant General Glisson. Yes, sir.
Mr. Pascrell. That is what he said.
All right, the second point, the quality of work. We have
had a review of what's been already produced, and the quality
of work is not up to standard. That is interesting. And it
would seem to me that because of expediency we have not only
changed what is law or not regarded it, but the results of that
have been a product that is not acceptable. Now who is going to
eat that?
Mr. Oliver. They are. That is one of the key things perhaps
that I meant to bring up when they were talking about earlier
because she asked someone else. You have to realize that the
quality that is not accepted is not paid for. And the United
States government is not bearing that, the company has to eat
it.
Mr. Pascrell. So we don't have to worry about that?
Mr. Oliver. Absolutely do not at all.
Mr. Pascrell. The company has agreed.
Mr. Oliver. It doesn't matter whether they agree.
Mr. Pascrell. Oh, it doesn't?
Mr. Oliver. They don't get the money.
Mr. Pascrell. Well, that leads me back to the general's
question. You were starting to get into the conditions that you
reviewed in factories where these are going to be produced, and
I am particularly interested in that.
And I realize that there are 3,000 sweatshops in the city
of New York itself where people work 120 hours a week. You said
that there were no child labor laws being broken in any of
these factories where these berets would be produced. I think
you said that.
Lieutenant General Glisson. Congressman, I think what I
said is I asked the Defense Contract Management Agency to visit
these plants and make frequent visits to ensure that they
complied with local child labor laws.
Mr. Pascrell. The local child labor laws?
Lieutenant General Glisson. That is correct.
Mr. Pascrell. You mean in the country that the factories
existed in?
Lieutenant General Glisson. Congressman that is correct.
And we had taken their local labor laws and compared them to
our own. And what we found is they met the minimum standards
that we would ask in this country.
Mr. Pascrell. Do you know where the berets were
manufactured in China?
Lieutenant General Glisson. Yes, sir, I do.
Mr. Pascrell. Do you have a list of those?
Lieutenant General Glisson. Sir, there is only one
manufacturing plant in China.
Mr. Pascrell. And who visited this particular factory?
Lieutenant General Glisson. The Defense Contract Management
Agency sent a representative there, and they have made a visit
since then.
Mr. Pascrell. Can you tell us what wages were paid at these
factories?
Lieutenant General Glisson. I cannot.
Mr. Pascrell. Could you tell us whether there was any
overtime involved in these factories?
Lieutenant General Glisson. I cannot, Congressman.
Mr. Pascrell. We have a Kathy Lee syndrome here. Nobody
knows where anything is done.
Lieutenant General Glisson. Sir, the Contract Management
Agency can give you those numbers. I just don't know what they
are because that is what they do for a living.
Mr. Pascrell. Well, we request through the chair those
numbers to see where these berets were being made, whether it
be China or any other foreign country.
Chairman Manzullo. I would like to have a list of where
every beret has been made, the city, the company, how much
money was paid on each contract, and the date that each was
made, especially any payments made after April 5th.
Lieutenant General Glisson. Okay.
Chairman Manzullo. The date which you got the letter which
you refused to answer to this date.
Lieutenant General Glisson. Okay.
Mr. Pascrell. You say, General, that only 10 percent of the
garments made for our men and women in the forces that protect
us every day are made overseas, is that correct?
Lieutenant General Glisson. That is not exactly what I
said, Congressman. I think what I said was 90 percent are made
by U.S. companies, with U.S. products in the United States,
which means there are 10 percent that are not fully total U.S.
components.
Mr. Pascrell. Well, could you have a list of those products
that are made outside of this country?
Lieutenant General Glisson. I would have to----
Mr. Pascrell. Now I am saying can you provide for this
Committee all of those items that are manufactured for our
armed forces, the people who defend us day in and day out.
Lieutenant General Glisson. Right.
Mr. Pascrell. I am not talking about any armament. I am
talking about the very uniforms that they wear, from fatigues,
hats, boots. Ninety percent of that is made in the United
States of America, you are telling us today.
Lieutenant General Glisson. That is correct.
Mr. Pascrell. So I want to know what about the 10 percent.
Lieutenant General Glisson. I can provide that,
Congressman.
Mr. Pascrell. And would you do that for the Committee and
have that as soon as possible? We would like to review that to
see what other things we could discover, Mr. Chairman, that we
don't know anything about.
Lieutenant General Glisson. I certainly will.
Mr. Pascrell. I am sorry. Go ahead.
Chairman Manzullo. For the record, we are requesting that
you furnish us the letter stating the location of manufacture
of all items furnished to the DLA that are not made in this
country.
Lieutenant General Glisson. I understand, Congressman.
Chairman Manzullo. Okay. And then we will probably have
follow-up letters from that, which I trust you will answer,
unlike my April 5th letter, which has still not been answered.
Lieutenant General Glisson. I will, Congressman.
Mr. Pascrell. Mr. Chairman, there has obviously been an
avoidance of competitive bidding here. I mean, it is clear. And
I would like the Committee to reserve through you, the chair
and ranking member, the ability to bring folks back here under
oath to discuss the question of bidding and to discuss the
question of how, through avoidance, how we have avoided
competitive bidding in not only this particular matter, but any
other matter.
Chairman Manzullo. I don't know about the issue of under
oath, but let me put it thisway. Every member of the Committee
will have 21 days within which to submit questions. And if we don't get
responses within 14 days, I will very seriously consider another round
of subpoenas plus the people testifying under oath.
Mr. Pascrell. Well, I think, Mr. Chairman, that the
question of without providing for a ``full and open
competition'', again, Mr. Cooper, I think is devastating, I
think needs thorough examination. And it is not very different
than what members from both sides of the aisle have said in the
last four years in this Committee on various occasions beyond
the subject of putting contracts together, simply understanding
the bidding process and the competitive nature or the lack of
it.
And we are not going to accept that. I can say that, and
most of the members of this Committee could say I voted for the
four defense budgets that I had to vote for since being here.
So I unequivocally support the military.
But we are not going to accept what we have heard today.
And it is got to go beyond this Committee. The American people
aren't going to accept it. And for us to be a blink and a wink
with the Chinese authorities and then give them contracts that
our armed forces will be using is an insult to every man and
woman in the armed forces. There is no question about it.
Morale? You are talking about the boosting of morale when
you take off the hat made in China? Tell me how that works.
Tell me what I am missing, General, please. I will listen. I
sympathize and I respect your position. I respect you as a
person. Tell me what I am missing when I say that. You tell me.
Lieutenant General Glisson. Congressman, I can't tell you
on the wear of the beret. That is an Army decision. I can only
tell you that we told the Army. We were very vocal with the
Army on where we would have to buy these berets in order to
meet the requirement.
I can tell you that I feel like we did that at the
appropriate levels and that we thought we were acting in the
spirit of the law and in the procurement practices.
Chairman Manzullo. Would you yield?
Mr. Pascrell. Sure.
Chairman Manzullo. Do you have documents to that effect?
Did you put anything in writing to those individuals?
Lieutenant General Glisson. Sir, we have memoranda from
both meetings, and we have other memorandums which they
produced which so indicate.
Chairman Manzullo. Those were not furnished to us either.
Lieutenant General Glisson. Sir, they should have been in
book one. If they are not, I can----
Chairman Manzullo. Should have been, would have been.
Lieutenant General Glisson. I will check, sir. They should
have been there.
Chairman Manzullo. I am sorry. We do have them.
Lieutenant General Glisson. Yes, sir.
Chairman Manzullo. I apologize.
Ms. Christian-Christensen?
Ms. Christian-Christensen. Thank you, Mr. Chairman.
I apologize for having to step out, and I understand from
speaking to staff that many of the questions that I would have
asked have been answered.
But I would like to just run the risk of asking this if it
has been asked already on the Berry Amendment and the confusion
that we saw in the chart as to who had the ability to waive and
not waive and the fact that it was waived. I direct my question
to Professor Schooner.
Mr. Schooner. Schooner.
Ms. Christian-Christensen. Schooner. And you may have
answered it already. You indicated in your testimony that,
because the standard that might have been used would have been
what someone wanted to happen and that it still fell within the
purview of that amendment.
Is there a way in which that amendment should be
strengthened to tighten up the language to preclude the
possibility of waivering the use of companies in the U.S. to
just make it stronger?
Mr. Schooner. I think that is an interesting question,
Congresswoman. The language itself, I think, is actually
reasonably good. What the language basically says is that no
part of the appropriation shall be available for the
procurement of an article, so it is very broad, basically,
unless it is produced in the United States. And then the
exception is unless it cannot be procured as and when needed at
United States market prices.
As I suggested in my testimony, the problem that you have
from a semantical standpoint is the word ``needed,'' I think,
many of us would suggest has been diluted over the last
generation. I think that if we compared, for example, Webster's
I versus Webster's II versus the more contemporary
dictionaries, what some of us think the word ``need'' means
might have something closer to a definition like requisite as
opposed to want.
Unfortunately, from your perspective, I think the
frustration is that, under a dictionary definition, need, in
contemporary American usage, means want. And the Army wanted
it.
And I think that while they may or may not win in the court
of law, I think that that is a perfectly defensible position
and one that would have a pretty good chance of success, given
the contemporary meaning of the word.
Ms. Christian-Christensen. Did anyone else want to answer
that question? Okay.
Mr. Joffe. Yes, if I may.
Ms. Christian-Christensen. Sure.
Mr. Joffe. Excuse me, Michele. Please go ahead.
Ms. Goodman. Well, excuse me. Because we filed a suit that
dealt with this issue, I believe that the exception though says
clearly, Professor, that the need cannot have arisen out of a
lack of proper planning. And I believe that in this instance
that is the key thing. We all, I think, can agree that there
was a lack of proper planning.
So I would ask the professor to verify that. I think that
is part of the statute.
Mr. Schooner. As I suggested earlier in my testimony, the
best analogy here, being the Competition in Contracting Act,
suggests that poor planning or crisis management isn't a
legitimate exception.
I think, in terms of the actual words of the Berry
Amendment though, your escape hatch that I think is available
to DOD here is the ``as needed'' language. But I think the
point that she is made is a valid one.
Mr. Joffe. There is also in the House right now, House of
Representatives Bill 1458 to strengthen that.
Ms. Christian-Christensen. Yes.
Mr. Joffe. And it says to limit the exceptions to certain
Buy American requirements and to expand such requirements. So
that is already, I think, being worked on right now by the
Committee on Armed Services.
Ms. Christian-Christensen. Okay. One of the reasons that
DOD is here and will probably pretty assuredly be back again is
because there--we found that there are many obstacles to small
businesses participating in contracting with the department.
We have a businesslady here with us today, Ms. Goodman, who
attempted to appeal her beret procurement, and yet she was
found not to have ``standing,'' as her company was not capable
ofproducing one piece berets.
Mr. Cooper, I direct this question to you. Could you help
us understand the concept of standing as it applies to
procurement?
Mr. Cooper. Well, that is more of a legal term.
Ms. Christian-Christensen. Okay.
Mr. Cooper. But I can, I think, get at what you are after.
This whole issue and the reason we are all here today trying to
explain this--and it is difficult to explain.
Ms. Christian-Christensen. Yes, it is.
Mr. Cooper. It goes back not just to the contracting people
that took the actions, it goes back to the requirement that was
established. Once the requirement was established to have these
berets by June 14th and only a one-piece beret, all the normal
contracting processes went out the window. That is what drove
this situation simply.
Ms. Christian-Christensen. Well, I don't have any further
questions, Mr. Chairman.
As I said, I did have to step out, and I am sure most of
the questions have been asked.
Chairman Manzullo. Appreciate that.
I have a couple of questions. Thank you.
General Glisson, who specifically told you not to answer
the letter of April 5th that was signed by Ms. Velazquez and
me?
Lieutenant General Glisson. Sir, the decision came from the
Office of the Secretary of Defense Public Affairs. They had
been inundated, as I understand, with many letters. They knew
the investigation was on. They were trying to gather the right
information in order to make the response to you.
Chairman Manzullo. The Office of Public Affairs?
Lieutenant General Glisson. Yes, sir. Congressional
liaison, yes, sir.
Chairman Manzullo. Who sent it there, you did?
Lieutenant General Glisson. Pardon me, sir? Sir, they had
recalled all documents which had been sent to us in writing.
Those were to be consolidated and tried to be answered out of
the Office of the Secretary of Defense.
Chairman Manzullo. I think maybe somebody consolidated them
and put them in a shredder.
Lieutenant General Glisson. Congressman, I don't know the
answer to that.
Chairman Manzullo. I mean, you knew why you were coming
here today.
Lieutenant General Glisson. I did.
Chairman Manzullo. Is that correct?
Lieutenant General Glisson. I did.
Chairman Manzullo. I mean, you knew you were aware that you
didn't answer this April 5th letter.
Lieutenant General Glisson. Congressman, I am.
Chairman Manzullo. Were you aware of the fact that money
had been paid to vendors after April 5th?
Lieutenant General Glisson. I am.
Chairman Manzullo. Who wrote the check?
Lieutenant General Glisson. The Department of Defense
probably. We obligated that one to the Defense Contract
Management Agency.
Chairman Manzullo. Who authorized the writing of the check?
Lieutenant General Glisson. Sir, it was based on a legal
document, a legal contract which we have out of Philadelphia.
Chairman Manzullo. That doesn't answer the question. Legal
contracts don't write checks, people do.
Lieutenant General Glisson. Yes, sir. The way that----
Chairman Manzullo. Who wrote the check to pay for----
Lieutenant General Glisson. Sir, the Defense Finance and
Accounting Office wrote the check.
Chairman Manzullo. They wrote the check.
Lieutenant General Glisson. That is correct.
Chairman Manzullo. Did you ever contact them when you got
my letter, saying, ``Here's the letter from the ranking
minority member or the chairman of the Small Business
Committee, saying that there could be possible violations of
applicable federal law?'' You never contacted them?
Lieutenant General Glisson. Congressman, I did not. I sent
a copy of that letter to the Office of the Secretary of Defense
and to their Legislative Liaison, Public Affairs.
Chairman Manzullo. Now who is that?
Lieutenant General Glisson. I will have to ask Mr. Oliver
for the name of the person there, Congressman. I don't know.
But it was not----
Chairman Manzullo. Was it Larry Dorita at the time?
Lieutenant General Glisson. Congressman, I don't know. I
guess the point that I would try to make to you it was not an
effort to ignore you or anything like that. I think they
honestly were trying to gather the right facts from which to
make a public response.
Chairman Manzullo. Our office contacted yours when this
letter wasn't answered. Were you aware of that?
Lieutenant General Glisson. Congressman, I was not.
Chairman Manzullo. Mr. Oliver, do you know anything about
this letter, April 5th?
Mr. Oliver. I think it is sitting on my desk, sir, because
what happens is, as Tom said, is we got several letters and we
were trying to get organized to make sure we gave you good
answers.
Chairman Manzullo. And we got none.
Mr. Oliver. Yes, sir.
Chairman Manzullo. It is sitting on your desk? This letter
is sitting on your desk?
Mr. Oliver. It is not physically on my desk, but I know it
is someplace in a----
Chairman Manzullo. This is a letter from two members of
Congress.
Mr. Oliver. Yes, sir.
Chairman Manzullo. We are here representing thousands of
small business people in this country that are losing contracts
on a daily basis because of bungling going on by the federal
government. And this letter is sitting on your desk, and it
hasn't been answered. That is what you are telling me.
Look at Michele Goodman. She is the one that lost 100
employees. Why can't you answer a letter from two members of
Congress?
Mr. Oliver. It will be answered this week, sir.
Chairman Manzullo. It will be answered this week probably
along with the contract bundling report that you were supposed
to have before us a year ago, and it got filed last week.
Ms. Velazquez. Eighteen months later.
Chairman Manzullo. Eighteen months later.
Ms. Velazquez. Correct?
Mr. Oliver. Yes, sir.
Chairman Manzullo. You know, I am just too totally shocked.
So it was up to you to answer this letter, correct?
Mr. Oliver. No, it was not up to me. You asked physically
where it was, I gave you an honest answer. It is on my desk
right now with the----
Chairman Manzullo. But it is up to you to answer the
letter, is that correct?
Mr. Oliver. No, sir.
Chairman Manzullo. You had authorized General Glisson to
answer the letter.
Mr. Oliver. Congressman, as you know, we have spent a great
deal of time on this issue, and we really have tried to think
through this. And there is lots of things that have gone on.
Chairman Manzullo. It is a very simple question. How do you
answer a letter to two members of Congress? Or you just ignore
it, you think we are insignificant?
Mr. Oliver. No, sir.
Chairman Manzullo. Or does it go with your philosophy that
the Department of Defense has the final answer? I mean, have
you seen this letter?
Mr. Oliver. I have seen that letter, sir.
Chairman Manzullo. And when did you first see it?
Mr. Oliver. Probably the day you sent it over, sir.
Chairman Manzullo. April 5th or the day that General
Glisson sent it.
Mr. Oliver. Whenever----
Chairman Manzullo. General, I presume you sent it over as
soon as you got it.
Lieutenant General Glisson. That is correct.
Chairman Manzullo. And it is just sitting on your desk. It
has taken you a month to think about answering this letter.
Mr. Oliver. Actually, I have had several answers to that
letter, Congressman.
Chairman Manzullo. No, I understand. But you know what we
are asking for? We asked that you cancel contracts. And do you
know what you did? First, you paid money to the Chinese, isn't
that correct, for Chinese production. And then you canceled it.
Mr. Oliver. Not that one.
Chairman Manzullo. What do you mean, not that one.
Mr. Oliver. Not the Chinese one.
Chairman Manzullo. The Chinese one has been canceled.
Mr. Oliver. No, it hasn't. It will be completed at the end
of this month.
Chairman Manzullo. Are the Chinese still in production at
this point?
Mr. Oliver. The Chinese are still in production, and----
Chairman Manzullo. Did you tell them to stop production?
Mr. Oliver. We can't sir.
Chairman Manzullo. So you are going to take all these
berets and pay for them?
Mr. Oliver. We are going to. By contract, we have to.
Chairman Manzullo. You are going to take all the berets and
pay for them?
Mr. Oliver. Sir----
Chairman Manzullo. Yes or no?
Mr. Oliver. Yes. Yes, sir. Absolutely.
Chairman Manzullo. And then what are you going to do with
them?
Mr. Oliver. Then we are going to resell them. We are going
to consider some of the suggestions about how we dispose of
them. What we have thought about is disposing them by reselling
them by foreign military sales to those countries who use them.
Chairman Manzullo. We are a middleman for small businesses.
When members of Congress send letters, these are red flags. Did
you ever offer to come into my office and talk to me about
this?
Mr. Oliver. No, sir.
Chairman Manzullo. Did anybody from your office say, ``You
know, two members of Congress have requested an answer''?
Mr. Oliver. No, sir.
Chairman Manzullo. And how many of these letters did you
have from members of Congress?
Mr. Oliver. I don't recall, sir.
Chairman Manzullo. Was it five, 10, 15?
Mr. Oliver. I didn't count them, sir.
Chairman Manzullo. You have no idea?
Mr. Oliver. We were trying to answer the best possible
answer to you.
Chairman Manzullo. But you didn't give us any answer.
Somehow I can't get that across.
Mr. Oliver. Yes, sir. I understand, and I accept it.
Chairman Manzullo. And you----
Mr. Oliver. No, I understand it, sir. I just don't have an
answer for it.
Chairman Manzullo. I mean, do we have to go through this
every time there is a waiver of Berry?
Mr. Oliver. Well, I am trying to fix that. I told you how I
did. I pulled that back so that I have to make that
determination.
Mr. Pascrell. Mr. Chairman?
Chairman Manzullo. Yes?
Mr. Pascrell. I have one more question to add on to yours.
Chairman Manzullo. Yes.
Mr. Pascrell. What is the quality of the work of the berets
that are made in China?
Mr. Oliver. Congressman, that isn't a good question. It
happens to be the best possible.
Mr. Pascrell. It is the best possible?
Mr. Oliver. It is the best.
Mr. Pascrell. In other words, if we went to an outfit that
knew what they were doing, we would have a better product. So
this is the best we can expect from that factory where they
are.
This is the best work they can do. You don't mean that.
Mr. Oliver. No.
Mr. Pascrell. What do you mean?
Mr. Oliver. I mean it is the best beret we are getting.
Mr. Pascrell. It is basically the beret that we saw before.
Mr. Oliver. It is the best beret of any of the people we
contracted with.
Chairman Manzullo. Is this better than Bancroft's?
Mr. Oliver. I will ask Tom to answer that.
Lieutenant General Glisson. Yes, sir, it is.
Chairman Manzullo. How is it better?
Lieutenant General Glisson. Better quality, better
workmanship.
Chairman Manzullo. And at what price?
Lieutenant General Glisson. At less than the Bancroft
price, sir.
Ms. Velazquez. Ms. Goodman? She would like to comment.
Chairman Manzullo. Ms. Goodman.
Ms. Goodman. Yeah. I believe that the Chinese berets were
bought by Kangol.
Lieutenant General Glisson. That is correct.
Ms. Goodman. Wasn't their price considerably higher than--
--
Lieutenant General Glisson. The price on the Kangol beret
is $6.24 each. The price on the Bancroft Beret is $6.30 each.
Ms. Goodman. And the labor cost of the two?
Lieutenant General Glisson. I mean, that is the acquisition
price that we paid.
Chairman Manzullo. Ms. Goodman, you could have made these
berets, is that correct, the one piece?
Ms. Goodman. No, sir.
Chairman Manzullo. No. I mean, if you had some time to gear
up and get some equipment.
Ms. Goodman. The situation is a little bit more complicated
than that. The machinery that is currently used hasn't been
made in over 50 years.
Chairman Manzullo. Okay.
Ms. Goodman. There are no spare parts for it.
Chairman Manzullo. What about the blocking machine?
Ms. Goodman. There is machinery to make a two piece beret,
okay? The Army has failed to even consider sitting down with
industry, not just myself, but other small businesses who have
put forth the effort to try and work with them to come up with
a solution.
As far as the one-piece knitted beret, there are many
obstacles. The only way that they can get what they want is by
doing it over a long-term basis. Machinery would have to be
made that would copy the process of a very antiquated machine
into a new machine.
And whether the equipment people are willing to put forth
the effort and the funds to do that is yet to be determined
because the Army never gave American small businesses the
opportunity to present this position.
Mr. Pascrell. Mr. Chairman?
Chairman Manzullo. Yes.
Mr. Pascrell. Doesn't that sound rather peculiar that one
item was $6.30 per beret, and the other, coming across the
ocean, is $6.24? We have a word for that in New Jersey which I
won't repeat. But doesn't that strike you as rather strange,
General?
Lieutenant General Glisson. Congressman, based on the
prices that we saw with the other contracts, they are all
reasonably in line with each other within a dollar or so of
each other. The lowest is $4 and something up to the range of
$7 and something. So they are all within that price range.
Mr. Pascrell. Did Atlas bid first? Did you have their
number in first before you got the number from China?
Lieutenant General Glisson. Sir, we never got that far as
she testified because the Army rejected her beret. So she never
made an offer that I am aware of on a price.
Mr. Pascrell. Well, who bid besides this----
Ms. Goodman. I did make a bid. Excuse me.
Mr. Pascrell. You did make a bid.
Ms. Goodman. I did bid on a two piece stitched beret, yes.
Mr. Pascrell. You did?
Ms. Goodman. Mm-hmm.
Mr. Pascrell. Is that correct, General?
Lieutenant General Glisson. Congressman, I don't know
whether she bid or not. There was no requirement for a two-
piece beret. What she offered was, in fact, a two-piece beret
at a price. The Army rejected that, so it was never considered
as part of the----
Mr. Pascrell. Well, how did you wind up in China?
Lieutenant General Glisson. Congressman, basically, what we
did is, as I said previously, at the time we knew three
manufacturers, Bancroft, Dorothea in Canada, and Denmark out of
New York City. Those were the three that we did directed awards
to because we knew them to be in business today, and we knew
they could make the beret.
We then did an open competition worldwide, and we invited
anybody who could produce berets to come in. We called people
who had berets, asked them where they got them from.
Mr. Pascrell. Did you call the Chinese manufacturer?
Lieutenant General Glisson. We talked to Kangol, which is a
United Kingdom manufacturer who manufactures berets for the
British army and other countries. And they did produce a beret.
We got samples from all of the proposals. We looked at
them, examined them for quality. We took a look at the
companies to see if they were responsible companies, went
through the normal contracting procedures that one would go
through before we made the award. And we ended up then with the
four additional awards, two U.S.-based foreign produced and two
foreign-located foreign producers.
Mr. Pascrell. They were all produced outside the United
States.
Lieutenant General Glisson. That is correct. Yes,
Congressman.
Mr. Pascrell. Who was the contact with the Chinese? Who has
the responsibility in the chain of command as far as these
kinds of manufacturing contracts are concerned, what office?
Lieutenant General Glisson. Well, the acquisition took
place in my Philadelphia buying office through the contracting
officer there. He also has a Senior Procurement person there
who watches him. That then flows back up to the Senior
Procurement Executive in the Agency.
Mr. Pascrell. So you would expect that the Philadelphia
office would reach out to foreign countries and companies, and
that is how they reached out to the company in China? Is that
how that works?
Lieutenant General Glisson. At the point in time when it
was determined there was no domestic capacity to produce these
berets and still meet the Army requirement, at that point in
time, then they did a worldwide search, which they are
authorized to do. And then they can go offshore to try to
determine if, in fact, there are sources to meet the compelling
requirement.
Mr. Pascrell. Are you also telling us that because of the
disqualification of some of the berets that were made in some
parts of the world, we are still in contract with the Chinese
company. That is right?
Lieutenant General Glisson. The United Kingdom----
Mr. Pascrell. We are not going to be able to meet the
deadline anyway, are we?
Lieutenant General Glisson. Based on the production
schedule, that is correct, Congressman.
Mr. Pascrell. So we did all of this. It is amazing.
Chairman Manzullo. If the Chinese cannot meet the deadline,
then they are breaching thecontract, isn't that correct?
Lieutenant General Glisson. Sir, the Kangol contract from
the United Kingdom, which has a production plan in China is, in
fact, ahead of schedule. They accelerated schedule. They have
been our best producer to date.
Chairman Manzullo. General, did you ever convey to General
Shinseki or anybody on the staff that perhaps they could
consider making a two piece beret so it could be homemade?
Lieutenant General Glisson. Congressman, we did. We
actually took the sample that Ms. Goodman gave us. We gave it
to the Army to look at. The Army came back and said they
disapproved it. They would not use that beret.
Chairman Manzullo. Who gave it to whom? Who from your
agency----
Lieutenant General Glisson. Sir, my Supply Center in
Philadelphia gave it to the PM soldier, which is the
requirement generator for this particular contract and for this
requirement.
Chairman Manzullo. Mr. Bartlett.
Mr. Bartlett. I would just like to ask for a point of
clarification.
Lieutenant General Glisson. Yes, sir.
Mr. Bartlett. We did not directly contract with the Chinese
firm, did we?
Lieutenant General Glisson. We did not, Congressman.
Mr. Bartlett. Okay.
Lieutenant General Glisson. We contracted with the United
Kingdom company.
Mr. Bartlett. Okay. Yes. And then they subcontracted to
China?
Lieutenant General Glisson. That is correct, Congressman.
Mr. Bartlett. Okay. I just wanted to make that clear.
Lieutenant General Glisson. We knew their plant was in
China.
Mr. Bartlett. Yeah.
Lieutenant General Glisson. I don't want to mislead you.
Mr. Bartlett. But our contract was not with the Chinese
company. It was with the----
Lieutenant General Glisson. With Kangol, which is the
United Kingdom.
Mr. Bartlett. Okay. And then they had the work done in
China.
Lieutenant General Glisson. They own that plant in China.
That is not a sub-contractor.
Mr. Bartlett. Yeah. And you knew when you let the contract
that it was going to be made there.
Lieutenant General Glisson. I did. I did, Congressman. And
we were concerned at the time about child labor, not about
procurement from China. Hindsight is wonderful, obviously.
Mr. Bartlett. How many of our weapon systems do we procure
from China?
Lieutenant General Glisson. Sir, I don't buy weapon
systems. I can't tell you.
Mr. Bartlett. You don't. Okay. Do we buy other clothing
from China?
Lieutenant General Glisson. Generally not, no, sir.
Mr. Bartlett. Thank you.
Chairman Manzullo. Well, we want to thank you all for
coming. It is obvious what has happened here is that when we
started off----
Ms. Velazquez. Mr. Chairman?
Chairman Manzullo. I am sorry?
Ms. Velazquez. I have a last question for General Glisson.
Chairman Manzullo. Yes. Go ahead. Please.
Lieutenant General Glisson. Yes, ma'am.
Ms. Velazquez. You mentioned to us before that you
communicated with a staffperson from the chief of staff about--
you know that it will require to award the contract to a
foreign company.
Lieutenant General Glisson. That is correct. Yes, ma'am.
Ms. Velazquez. Can you please tell us the name of that
person?
Lieutenant General Glisson. Yes, ma'am. My counterpart on
the Army staff is Lieutenant General Mahan, M-a-h-a-n.
Ms. Velazquez. Thank you.
Lieutenant General Glisson. Yes, ma'am.
Chairman Manzullo. I want to thank you all for coming. I
don't know how you summarize this incredible weave of events,
but the victims out there are the people that this Small
Business Committee is trying to protect.
It is obvious to me that General Shinseki was never advised
as to the availability or the unavailability of domestic
production until some time mid-February. He stated that, and I
believe him.
It is also obvious that if he had known about that, that he
would have changed the procurement date or the date necessary
to fulfill the needs. He stated that, and I believe him.
But what has happened here is this incredible maze of
people, lack of accountability, failure to give this Small
Business Committee documents that it needs. We did request
them, we had to subpoena them. And as a result of all these
memos and everything going back and forth, we end up with the
incredible situation of American people having to buy these
Chinese berets, having to pay for them, and now they are not
being used.
And I would suggest the following, that if the cries of the
members of Congress had been heeded initially way back when,
that efforts could have been made to stop the production of
these berets in China. But no one heeded that, not until the
eve of this hearing when yesterday, miraculously, all kinds of
things happened. Three contracts were cancelled. The Chinese
berets would no longer be used. That happened as the order came
down from Mr. Wolfowitz yesterday.
And yet General Shinseki stated it, and I believe it, that
as long as six weeks ago he was imploring procurement not to
use Chinese berets.
Now isn't that interesting? He is the one who gave the
order for June 14th. He is the one that could have changed that
date. He is the one that could have put an end to Chinese
production, and no one listened to him.
This meeting is adjourned.
[Whereupon, at 2:12 p.m., the Committee was adjourned.]
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