[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
  NATIONAL YOUTH ANTI-DRUG MEDIA CAMPAIGN: HOW TO ENSURE THE PROGRAM 
                  OPERATES EFFICIENTLY AND EFFECTIVELY

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON CRIMINAL JUSTICE,
                    DRUG POLICY AND HUMAN RESOURCES

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 1, 2001

                               __________

                           Serial No. 107-86

                               __________

       Printed for the use of the Committee on Government Reform


   Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform
                               ___________
                             
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                     COMMITTEE ON GOVERNMENT REFORM


                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
DOUG OSE, California                 JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JIM TURNER, Texas
JO ANN DAVIS, Virginia               THOMAS H. ALLEN, Maine
TODD RUSSELL PLATTS, Pennsylvania    JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida                 WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              ------ ------
C.L. ``BUTCH'' OTTER, Idaho                      ------
EDWARD L. SCHROCK, Virginia          BERNARD SANDERS, Vermont 
JOHN J. DUNCAN, Jr., Tennessee           (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

   Subcommittee on Criminal Justice, Drug Policy and Human Resources

                   MARK E. SOUDER, Indiana, Chairman
BENJAMIN A. GILMAN, New York         ELIJAH E. CUMMINGS, Maryland
ILEANA ROS-LEHTINEN, Florida         ROD R. BLAGOJEVICH, Illinois
JOHN L. MICA, Florida,               BERNARD SANDERS, Vermont
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JIM TURNER, Texas
DOUG OSE, California                 THOMAS H. ALLEN, Maine
JO ANN DAVIS, Virginia               ------ ------
DAVE WELDON, Florida

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          Christopher Donesa, Staff Director and Chief Counsel
                       Sharon Pinkerton, Counsel
                          Conn Carroll, Clerk
                     Tony Haywood, Minority Counsel
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on August 1, 2001...................................     1
Statement of:
    Jurith, Edward H., Acting Director, Office of National Drug 
      Control Policy; Bernard L. Ungar, Director, Physical 
      Infrastructure Team, General Accounting Office; Robert H. 
      Hast, Director, Office of Special Investigations, General 
      Accounting Office; John Conney, Senior Special Agent, 
      General Accounting Office; Mark D. Westin, Officer in 
      Charge, Fleet and Industrial Supply Center Norfolk 
      Washington Detachment, Department of the Navy; Susan L. 
      David, Deputy Chief of Prevention Research, National 
      Institute on Drug Abuse; and John Cooney, Office of Special 
      Investigations, General Accounting Office..................    11
Letters, statements, etc., submitted for the record by:
    Barr, Hon. Bob, a Representative in Congress from the State 
      of Georgia, prepared statement of..........................    68
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............     5
    David, Susan L., Deputy Chief of Prevention Research, 
      National Institute on Drug Abuse, prepared statement of....    59
    Jurith, Edward H., Acting Director, Office of National Drug 
      Control Policy:
        Information concerning actual expenses...................   103
        Information concerning money paid to Ogilvy & Mather.....   101
        Prepared statement of....................................    15
    Ungar, Bernard L., Director, Physical Infrastructure Team, 
      General Accounting Office, prepared statement of...........    39
    Westin, Mark D., Officer in Charge, Fleet and Industrial 
      Supply Center Norfolk Washington Detachment, Department of 
      the Navy, prepared statement of............................    52

  NATIONAL YOUTH ANTI-DRUG MEDIA CAMPAIGN: HOW TO ENSURE THE PROGRAM 
                  OPERATES EFFICIENTLY AND EFFECTIVELY

                              ----------                              


                       WEDNESDAY, AUGUST 1, 2001

                  House of Representatives,
 Subcommittee on Criminal Justice, Drug Policy and 
                                   Human Resources,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2154, Rayburn House Office Building, Hon. Mark E. Souder 
(chairman of the subcommittee) presiding.
    Present: Representatives Souder, Gilman, Barr, and 
Cummings.
    Staff present: Christopher Donesa, staff director and chief 
counsel; Conn Carroll, clerk; Sharon Pinkerton, counsel; Tony 
Haywood, minority counsel; and Earley Green, minority assistant 
clerk.
    Mr. Souder. The subcommittee will come to order.
    This afternoon the subcommittee will consider how to ensure 
that the billion dollar Youth Anti-Drug Campaign, now in its 
4th year, operates effectively and efficiently to enable it to 
have a meaningful impact to prevent drug abuse among youth. The 
fundamental question is simple: Are the program's funds being 
administered in a way to ensure that the program is efficient 
and influences attitudes and actions and keeps more Americans, 
especially teenagers, drug-free?
    Our subcommittee has the responsibility to ensure that the 
Nation's largest and most expensive drug prevention program is 
accomplishing the goals we set for this critical campaign. 
Congress first funded the media campaign in 1997 to address the 
dramatic spike in youth drug use starting in 1993. Clearly, 
this campaign is an unprecedented private sector initiative, 
and Congress, with bipartisan support, has committed to 
spending $185 to $195 million a year for 5 years. While the 
campaign has stirred some controversy over a variety of issues 
in the past, we continue to support the important goal of 
educating kids and parents about the dangers of drug abuse.
    I personally am a strong supporter of effective prevention 
programs to ensure that we are not ignoring the demand side of 
the equation as we seek to find a balanced approach to reducing 
drug use in this country. This particular program, because of 
its breadth and depth, is far too important to allow it to get 
off track. We must all pull together toward the goal of 
reducing drug use in this country.
    While it is too early to draw a final conclusion about the 
effectiveness of the campaign, the indications of continued 
youth drug use strongly suggest the importance of careful 
oversight to make sure that its future direction is chosen 
carefully. A recent survey from CASA, The National Center on 
Addiction and Substance Abuse at Columbia University, found 
that 61 percent of 12 to 17-year-olds are at moderate or high 
risk of substance abuse; 19 percent are at high risk, and 42 
percent are at moderate risk.
    There are other indications that drugs remain a serious 
threat to our children. In 1999, 60 percent of teens said they 
expected to never try an illegal drug in the future; in 2000 
the figure dropped to 51 percent. In 2000, more than 60 percent 
of the teens in high school said drugs were used, kept, or sold 
at their school. It is clear that drug abuse remains a 
widespread problem in this country. We cannot and will not sit 
idly by while our Nation's most precious resource is destroyed 
by drugs. Accordingly, I have worked with our leadership in 
Congress and the White House to support efforts to reduce the 
demand for drugs. I believe we can and must make a difference, 
which is why we are focusing today on this important program.
    Last year the subcommittee conducted several oversight 
hearings on the campaign at which the General Accounting Office 
reported concerns about potential contract mismanagement, 
overbilling, and possible fraud. As a result of the GAO study 
and the subcommittee's oversight, the Department of Justice now 
is conducting an investigation into the charges of fraudulent 
behavior. The issues before the subcommittee today include: 
What actions have been taken to improve administration of the 
contract?
    How is ONDCP handling up to $7 million of outstanding costs 
which were previously ``disallowed'' because of inadequate 
justification or documentation?
    What is the decisionmaking process at ONDCP involving 
renewing the largest media buying contract?
    Are the taxpayers' dollars being spent on actual media buys 
or on overhead and other peripheral items?
    Today we have asked ONDCP, the GAO, and the new contract 
administrators, the Navy, to update us on those and other 
program issues and report to us on the changes that have been 
implemented to ensure that ONDCP's media contracts are well 
managed and that the taxpayer is getting value for their tax 
dollars.
    Finally, the National Institute of Drug Abuse will report 
to us on the initial findings of their Evaluation Study. Again, 
while these findings may be preliminary, it is important for 
the subcommittee to understand the trends and implications of 
this effort on the overall effectiveness of the program.
    I want to thank all the witnesses for appearing here today 
and will yield to the ranking member for an opening statement.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    The Office of National Drug Control Policy's Youth Anti-
Drug Media Campaign plays an important role in the Government's 
efforts to reduce demand for illegal drugs. The goal of the 
campaign is to halt youth substance abuse before it starts by 
spreading the word and encouraging the belief that drugs are 
harmful and inconsistent with success in life.
    The campaign also stresses the importance of frank and 
honest discussion about drugs among parents and their children. 
Because the majority of drug users are introduced to drug use 
during their pre-teen and early teen years, the media 
campaign's focus on this age group and parents of children in 
this age group is a prudent one. Because marijuana and 
inhalants are the illegal drugs that children in this age group 
are most likely to use first, the campaign's emphasis on these 
drugs also makes sense.
    The comprehensiveness of the Anti-Drug Media Campaign is 
impressive. Its multimedia approach is designed to reach as 
many teens and parents in as many settings as possible. 
Television advertising is at the core of the campaign and it is 
this component that receives the most attention.
    But I have been impressed to learn about the program's 
other components. These include partnerships with youth 
organizations and the entertainment industry, targeted outreach 
to minority groups, and cooperation with community anti-drug 
coalitions. The ONDCP has also exceeded its congressionally 
mandated 100 percent pro bono media match requirement.
    The early evidence seems to suggest that this young 
campaign is having an impact, and, indeed, accountability is an 
important element of the campaign itself. To this point, 
ONDCP's own surveys, the Nielsen surveys, and the ongoing 
evaluation study being conducted by the National Institute on 
Health's Institute on Drug Abuse all suggest that awareness of 
the campaign is high among parents and children, and that the 
campaign's aggressive anti-drug message is getting across.
    It is important that we not lose sight of the campaign's 
goal and early accomplishments. Even as we delve, as our 
oversight responsibility compels us to, into questions about 
management and administration of the campaign's phase III 
contract with the advertising firm of Ogilvy and Mather, the 
Government Accounting Office's June 2001 report makes it 
abundantly clear that both Ogilvy and the Government erred in 
their management of the phase III contract.
    The report concludes that Ogilvy improperly charged the 
Government for certain labor costs and lacked an adequate 
accounting system to support a cost reimbursement Government 
contract. The report also concludes that the Department of 
Health and Human Services did not properly manage parts of the 
contract, in part by failing to determine beforehand whether 
Ogilvy's accounting system was adequate.
    Whether Ogilvy or any of its employees engaged in fraud 
under Federal statutory law is the focus of a separate ongoing 
investigation by the U.S. Department of Justice. It does not 
seem to me that Ogilvy entered into phase III with a malicious 
intent to defraud the Government out of money, and in any 
event, Ogilvy has undertaken extensive and expensive efforts to 
reform its accounting and management systems and to help 
Government investigators gain a clear picture of what problems 
occurred. Indeed, GAO's report acknowledges that the problems 
that gave rise to these problems are being addressed 
aggressively, conscientiously, and thoroughly by all parties 
involved.
    Obviously, the Navy, as new contract manager, has an 
important role to play, and it appears to be taking all 
appropriate steps to ensure that the problems do not reoccur on 
its watch. The Defense Contract Audit Agency has completed a 
review of all these revised accounting and management systems, 
has concluded that they are adequate to handle a Government 
cost reimbursement contract going forward.
    It is important, Mr. Chairman, that we not allow past 
contract management problems to overshadow the good work that 
ONDCP is doing to prevent substance abuse from entering, 
degrading, and destroying the lives of young people across the 
country. As I have often said, our children are the living 
messages we send to a future we will never see.
    There are no doubt some who take issue with the 
Government's use of funds for some of these activities. In the 
hands of such parties, administrative problems such as we have 
seen can be used to cast doubt upon the basic thrust of the 
program itself. I trust that is not what we are up to today.
    As the title of today's hearing suggests, our objective 
ought to be to ensure that the media campaign operates as 
efficiently and effectively as possible. We should be united in 
our desire to see the campaign maximizes positive impact on the 
lives of America's young people.
    I look forward to hearing the testimony of our witnesses 
today, and I hope that this hearing will serve the purpose of 
putting some of these problems behind us, so that we can focus 
on moving our anti-drug efforts forward. The challenge before 
us is too enormous to do otherwise, and the role of the Anti-
Drug Media Campaign is too critical.
    With that, Mr. Chairman, I yield back.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]
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    Mr. Souder. Thank you. Before proceeding, I would like to 
take care of a couple of procedural matters.
    First, I ask unanimous consent that all Members have 5 
legislative days to submit written statements and questions for 
the hearing record; that any answers to written questions 
provided by the witnesses also be included in the record. 
Without objection, it is so ordered.
    Second, I ask unanimous consent that all exhibits, 
documents, and other materials referred to by Members and the 
witnesses may be included in the hearing record; that all 
Members be permitted to revise and extend their remarks. 
Without objection, it is so ordered.
    Now would the witnesses please rise and raise your right 
hands, and I will administer the oath. As an oversight 
committee, it is our standard practice to ask all our witnesses 
to testify under oath.
    [Witnesses sworn.]
    Mr. Souder. Thank you very much. Let the record show that 
all the witnesses answered in the affirmative.
    Witnesses will now be recognized for opening statements. As 
many of you know, we typically ask our witnesses to summarize 
our testimony in 5 minutes, and you may include your full 
statement in the record as well as other materials.
    This afternoon we first welcome the Acting Director of the 
Office of National Drug Control Policy, Mr. Ed Jurith. Mr. 
Jurith, you are recognized for your opening statement.

  STATEMENTS OF EDWARD H. JURITH, ACTING DIRECTOR, OFFICE OF 
   NATIONAL DRUG CONTROL POLICY; BERNARD L. UNGAR, DIRECTOR, 
PHYSICAL INFRASTRUCTURE TEAM, GENERAL ACCOUNTING OFFICE; ROBERT 
 H. HAST, DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL 
 ACCOUNTING OFFICE; JOHN CONNEY, SENIOR SPECIAL AGENT, GENERAL 
ACCOUNTING OFFICE; MARK D. WESTIN, OFFICER IN CHARGE, FLEET AND 
    INDUSTRIAL SUPPLY CENTER NORFOLK WASHINGTON DETACHMENT, 
    DEPARTMENT OF THE NAVY; SUSAN L. DAVID, DEPUTY CHIEF OF 
PREVENTION RESEARCH, NATIONAL INSTITUTE ON DRUG ABUSE; AND JOHN 
 COONEY, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL ACCOUNTING 
                             OFFICE

    Mr. Jurith. Thank you, Mr. Chairman. On behalf of the 
entire staff of ONDCP, I really welcome this hearing today. 
It's interesting. For the last 8 months we've been a 
professional staff, career employees of the Federal Government, 
that have been running this agency. It's my pleasure to do 
that.
    I've been involved with the drug policy of this Government, 
under President Reagan, President George Bush, then Clinton, 
and now President George W. Bush, for the last 20 years. I'm a 
career employee of this Government dedicated to the resolution 
of drug abuse. And it's with that intention that I bring my 
testimony today. I've got a written statement for the record 
that I submit to the committee.
    Since I've taken over the office in January, we've taken 
very seriously our responsibility for campaign management and 
administration. Over the past year we've taken numerous steps 
to address contract administration issues that Mr. Cummings 
addressed in his remarks.
    Last October we told this committee that we would transfer 
contract administration from HHS to the Navy. We did this in 
December, and we have a close, effective working relationship 
with the Navy in the implementation of the media campaign 
contract.
    What we like about what the Navy brings is that they bring 
with us the Defense Contract Audit Agency, probably the best 
entity of this Federal Government to review each and every 
audit of the Government submitted by our contractors, whether 
it be Ogilvy, the Ad Council, or Fleishman-Hillard.
    We've also reorganized the Media Campaign and Program 
Office. All Media Campaign staff has been trained and certified 
as COTRS, Contracting Officer Technical Representatives. This 
will allow additional time for management and technical 
direction to the contractors to make sure that we're on the 
same page, to make sure that we know where the contract is 
heading, and that was an issue before this committee back in 
October. We fixed that problem.
    Moving to a new program this year, under my leadership, if 
you would, as the Acting Director, we are examining our options 
for the advertisement course in the campaign that we need to 
award this year. ONDCP and the Navy are conducting market 
research to determine whether the current contract terms meet 
the Government's requirements, whether the current contractor 
is best suited to meet those needs.
    It's kind of interesting. That's a requirement of the 
Government. We need to look right now whether or not the 
current contractor meets our needs, not whether or not there 
were past questions about contract administration. The issue is 
whether or not right now that current contractor will meet the 
Government's needs. We're doing that research right now because 
we need to answer that question.
    ONDCP and the Navy are conducting market research to 
determine whether the current contract terms meet the 
Government's requirements and whether the current contractor is 
best suited to meet those needs. Our decisions will ensure the 
current level of services are provided by the contractor to the 
best value to the Government.
    In the original authorization of the campaign, Congress 
required that ONDCP report to the Government on campaign 
effectiveness. We take this mandate very seriously. You know, 
it is kind of interesting, as you know, Mr. Chairman, as a 
former staff director of a congressional committee, very often 
the evaluation of a Government campaign is 2 to 3 years after 
the Government does its work. This campaign we do it every 6 
months. I don't know of any other campaign in the Government 
where we're accountable to the Congress every 6 months or every 
8 months, depending on the reporting requirements, to give you 
a report. That's so unique. This campaign is doing that. We 
take that mandate very seriously.
    We've contracted with NIDA, the National Institute on Drug 
Abuse, and I love to say this when I'm overseas because when 
I'm in Europe, as I was a couple of weeks ago, and they talk to 
us about harm reduction, whether or not the U.S. policy is 
effective. I said to my European colleagues: Where is your 
research? The National Institute on Drug Abuse does that, 90 
percent of the world's drug abuse research--90 percent. About 
another 5 percent is by my friends in Britain. The other 5 
percent is scattered around the world.
    We contracted with NIDA. We went to the experts to 
determine whether or not this campaign is going to be 
effective, and I will defer to Susan David to give you greater 
detail about the results of their own research.
    But results today show that our parent and youth audiences 
have a high awareness of our campaign. NIDA surveys indicate 
that the response of this campaign is trending in the right 
directions, although more conclusive data is not expected until 
earlier next year, but we're on the right path. Parents and 
young people understand where this campaign is going. They see 
the ads. They understand the importance of what we're doing. 
That's critical.
    It's kind of funny, I sat back in that chair back in the 
early eighties when Congress was debating with then the Reagan 
administration: What is our drug strategy? How do we respond to 
the cocaine epidemic? What do we do about our national--how do 
we address the cocaine epidemic? And everybody uniformly said 
we need a media campaign, but it kind of floated around out 
there for a number of years. Finally, somebody stepped forward. 
Congress, under the leadership of this committee, with the last 
administration, said yes, we need a paid media campaign to 
effect those attitudes, to make sure that our young people are 
not tempted by drugs.
    It's kind of interesting, Mr. Chairman, you know, it's 
great talking public policy in the abstract, but I think we 
need to look at it in a longitudinal point of view. We have 
advanced so far on drug policy in this country in the last 20 
years. We knew a media campaign was required, and between the 
Congress in a bipartisan approach came together and said, yes, 
we're going to put this campaign together. It's required. We 
need it. It's the right thing to do.
    It's kind of interesting that, even though our initial 
reports of this campaign show that it's kind of equivalent in 
terms of, what are the direct effects of this campaign? We know 
our adults who are using are identifying with the ads; our 
young people are. But reports from other surveys of drug use 
suggest that the campaign is influencing attitude 
significantly. The Monitoring Survey study, Dr. Lloyd Johnston 
at the University of Michigan, reports that 34 percent of 
eighth graders said anti-drug ads are making them less 
favorable to drugs.
    What I find the most fascinating in my 11-year-old, on 
Saturday morning, when he sits down in the basement watching 
TV, he's funny--we allow him to watch TV on Saturday morning--
tells me how many of our ads he sees and which of those he 
thinks are the most important. I bring that back every Monday 
morning to my staff--my own child.
    I was down at the National Boy Scouts Jamboree over the 
weekend on Sunday in the slushy, rainy episode. Unfortunately, 
the President could not make it down because of the weather, 
but we went ahead anyhow. And we have a tent down there 
sponsored by the Media Campaign. Talking about a branding 
activity for anti-drugs, 15,000 Scouts--15,000 Scouts--signed 
up with the anti-drug wars, part of our branding effort because 
our experts in this campaign told us that the best thing that 
we can do is tell America's youth what stands between them and 
drug use, whether it's family, Scouting, basketball, tennis, 
whatever it might be--15,000.
    Now my son was down at the Jamboree. He shaved his head 
down there, but what the heck, I'll deal with that when he gets 
home tomorrow. [Laughter.]
    We've engaged children of America with this campaign, so 
that it includes them. We're very proud of this campaign. Yes, 
we've had some contracting issues, and we're going to deal with 
them. I really thank GAO and DCAA and Navy for helping this 
ONDCP deal with those issues, but the bottom line, Mr. 
Chairman, is what we're doing for America and America's young 
people, and we're having an effect. I saw it on Sunday 
personally. The President was going to be down there himself. 
The weather deterred the helicopter from coming down there, but 
he was going to be down there witnessing the same thing. That's 
what we're trying to do. Thank you so much.
    [The prepared statement of Mr. Jurith follows:]
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    Mr. Souder. Thank you for your testimony.
    Our second witness, from the General Accounting Office, is 
Mr. Bernard Ungar, who is Director of the Physical 
Infrastructure Team. Mr. Ungar will provide the GAO's 
testimony. He is joined by Mr. Robert Hast from the Office of 
Special Investigations, who will be available for questions. 
Mr. Ungar.
    Mr. Ungar. Mr. Chairman, Mr. Cummings, we're pleased to be 
here today to discuss our work with respect to the Anti-Drug 
Youth Media Campaign. Mr. Hast and I are also accompanied by 
our able staffs who assure us that they will help bale us out 
when the questions come, and they assure us they're right 
behind us. Hopefully, they'll stay there.
    GAO, within the last 13 months or so, has looked at this 
program three times. The first report we issued was in July 
2000, which looked at various programmatic aspects of the 
program. During the course of our work on that review, 
allegations came to the surface about potential overbilling by 
the contractor at that time, Ogilvy and Mather, as well as 
problems with the Government's award and management 
administration of the contract.
    In October 2000 Mr. Hast presented the results of our first 
review that we completed with respect to those allegations. He 
advised the subcommittee of what we had found in connection 
with the extent to which ONDCP was aware of these allegations 
and what actions it had taken as a result of them, in 
particular, what actions with respect to an audit that had been 
recommended.
    Our third review was just completed in July, at the request 
of a House Subcommittee on Appropriations, and it dealt 
specifically with the issue of the allegations; that is, the 
contractor overbilled the Government for time not worked. It 
also addressed the allegations concerning the management of the 
Government's part of the award and administration of the 
contract, at least those aspects that were related to the 
allegations of overbilling.
    Indeed, as you and Mr. Cummings indicated, we had found in 
our report relative to our review that the contractor, Ogilvy 
and Mather, did overbill the Government for labor costs. The 
full extent of that is not clear yet, but we certainly found 
that there were some cases in which that did happen.
    There were at least two types of situations, one in which 
certain Ogilvy employees were instructed by certain Ogilvy 
managers to add time to their timecards for hours they did not 
work on the contract. This apparently stemmed from discussions 
from within the company that the company was not earning as 
much as it had projected in terms of labor hours in the 
contract during the summer of 1999. A second set of 
overcharges, overbilling, resulted from employees who worked at 
Ogilvy whose timecards were changed; hours were added by 
somebody else other than the employees, not to their knowledge.
    Both of these situations occurred. Again, we really feel 
that this was an improper situation, and as you know, we have 
referred this issue to the Department of Justice, and the 
Department of Justice is currently looking into that.
    In addition to the overbilling issue on the contractor's 
part, we did look, as I mentioned, at the management of the 
contract. We focused in on the award of the contract. In this 
case it was HHS who awarded the contract on behalf of ONDCP. 
Indeed, we did find that, unfortunately, HHS did award this 
contract without assuring that the contractor had an adequate 
accounting system to deal with a cost reimbursement contract of 
over a half a billion dollars. In addition, the contractor 
failed to provide to the Government, to HHS, a disclosure 
statement that would have identified its proposed accounting 
practices. These problems, in our view, contributed to the 
problem the Government had then subsequently without being able 
to prevent and detect the problems that were experienced with 
the overbilling.
    Finally, another problem on the part of the Government in 
this particular case was the oversight and administration of 
the contract. In this particular situation we had a dilemma in 
that for a period of time the Government had disallowed a 
number of the costs claimed by the contractor and raised a 
number of concerns about the billing practices. In our view, 
there was plenty of warning to the Government that something 
was amiss.
    In addition to that, allegations of fraudulent conduct came 
to the attention of the Government in the early part of 2000, 
and as we similarly reported, the Government decided at that 
point that there should be an audit but decided to put it off 
until the ONDCP transferred responsibility for the contract 
from HHS to the Navy. In our view, that was a substantial 
period of time that elapsed, and we really feel that action 
could have and should have been taken sooner to deal with the 
billing problems and the allegations of fraud.
    Even as we were doing our review, as we completed our 
review, we did discuss our findings a number of times with 
ONDCP and with the contractor's representatives, and both have 
been quite responsive. In fact, both had started corrective 
actions before we had completed our review.
    The most significant issue in our mind that remains today 
is whether or not the Government should recompete this 
contract. That really depends upon a number of issues on which 
I think information is yet to be fully obtained. It has to do 
with such factors as: What will be in the best interest of the 
Government in terms of the costs that would be associated with 
retaining the current contractor by exercising the next option 
or obtaining another contractor through a recompetition? What 
effect a recompetition might have on the program goals, the 
program objectives, and the timing of program services? 
Finally, the current integrity and responsibility of the 
contractor in a sense of while the contractor has taken 
certainly a number of corrective actions very aggressively, the 
question that still remains in our mind is: Who in the company 
is really responsible for these overbilling situations? That's 
still not clear, and I think, hopefully, the Department of 
Justice will help resolve that. But that is a question we think 
that really needs to be addressed at some point in the near 
future.
    Thank you, Mr. Chairman. That concludes my summary.
    [The prepared statement of Mr. Ungar follows:]
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    Mr. Souder. Thank you very much.
    Our next witness is from the Department of the Navy, which 
now administers the contract for the media campaign. We are 
joined today by Captain Mark Westin. Captain Westin, you are 
recognized for 5 minutes.
    Captain Westin. Mr. Chairman, distinguished members of the 
committee, thank you for the opportunity to discuss the Navy's 
role in providing contract administration support to the Office 
of National Drug Control Policy's Youth Media Campaign. I'm 
Captain Mark Westin. I'm the Officer in Charge of Navy Fleet 
and Industrial Supply Center in Norfolk's Washington 
Detachment. We provide logistics support, including contract 
services, to Navy and some non-Navy customers, primarily in the 
National Capital Region.
    As a field contracting office under the Naval Supply 
Systems Command, we also leverage expertise from throughout the 
Command to deploy the best service possible to our customers. 
As a DOD contracting office, we follow applicable Federal 
contracting statutes and agency regulations, including the 
Federal Acquisition Regulation [FAR]; the DOD Supplement to the 
FAR, and implementing DOD and Navy guidance.
    ONDCP previously obtained their contract administration 
support for the Youth Media Campaign from the Department of 
Health and Human Services, and they awarded three contracts for 
this effort. One contract was awarded in March 1999 to the 
Advertising Council for media match coordination of pro bono 
public service announcements to match paid advertising. A 
contract for media outreach and partnership and alliance-
building was awarded to Fleishman-Hillard in December 1998 to 
coordinate non-advertising communications strategies and 
activities. A third contract was awarded to Ogilvy and Mather 
in December 1998 for the overall management of the advertising 
component of the campaign. A June 25, 2001 General Accounting 
Office report cited several problems with the Ogilvy contract.
    In October and November 2000 several meetings were held 
with ONDCP about the Navy assuming contract administration over 
these three contracts. We were informed by ONDCP and HHS that 
there were payment delays with all the contracts and a number 
of other issues with the Ogilvy contract. We agreed to this 
request because we felt that our professional Navy staff, with 
the availability of the services of the Defense Contract Audit 
Agency [DCAA], and the Defense Contract Management Command, had 
the ability to improve this contract administration. We also 
have experience with Navy advertising contracts. On November 
29, 2000, at the request of ONDCP, HHS transferred all the 
contracting responsibilities and files for these three 
contracts to the Navy.
    Since assuming contracting responsibility, the Navy has 
made notable improvements in contract administration. We have 
worked to correct previous discrepancies and establish controls 
relating to the contractor's accounting and billing systems. 
There has been significant progress in these areas, allowing us 
to resolve a backlog of unpaid bills with the help of DCAA. We 
clarified the role of the contracting officer and increased the 
number of trained Contracting Officer's Technical 
Representatives at ONDCP. The contracting office has 
established proactive communication and coordinated actions 
between the Government and all of the contractors.
    One contract was for media match coordination with the 
Advertising Council. We obtained a favorable DCAA audit of the 
contractor's internal controls and compliance with the 
requirements applicable to Federal public service campaigns. In 
March 2001, at the request of ONDCP, we exercised the next 
contract option extending this contract through March 21, 2002. 
DCAA audited the unpaid backlog of 11 invoices and authorized 
payments of more than $340,000. In summary, the administration 
of this contract is on track.
    A second contract with Fleishman-Hillard covered media 
outreach, as well as partnership and alliance-building. Upon 
request of ONDCP, we exercised the option to extend that 
contract through December 3, 2001. We obtained favorable DCAA 
audit reports on the adequacy of the contractor's accounting 
system, related internal controls procedures, and the billing 
system. DCAA audited 19 backlogged invoices and authorized 
payments of more than $6.1 million to Fleishman-Hillard. 
Significant progress has been made on this contract, including 
the resolution of longstanding payment delays.
    A third contract was with Ogilvy and Mather for advertising 
management. On January 4, 2001, the contracting officer 
exercised option II to extend this contract through January 3, 
2002, as requested by ONDCP. We instituted regular biweekly 
progress reviews with the contractor, ONDCP, and DCAA. We 
requested an audit of the contractor's accounting and billing 
systems and all past unpaid invoices. The contractor hired 
PricewaterhouseCoopers in November 2000 to restructure its 
accounting system to meet Government contracting standards for 
a cost-reimbursable contract. The DCAA audit of the accounting 
system was completed on July 25, 2001, and the report received 
July 31, 2001, yesterday, stated that Ogilvy's accounting 
system and related internal control policies and procedures 
were adequate. A review of the billing system is underway. DCAA 
is performing a 100 percent audit of all invoices before 
authorizing payments.
    In March 2001 Ogilvy made a disclosure to the Navy, DCAA, 
ONDCP, and the Department of Justice regarding costs that they 
could not certify. Due to this disclosure, the Navy contracting 
officer referred the matter to the Navy Criminal Investigative 
Service to coordinate with the Department of Justice and the 
investigative arm of DCAA. On July 11, 2001, Ogilvy certified 
their incurred cost proposals for 1999 and 2000, and DCAA has 
not yet provided a final report on these.
    It is our intention to comply with all Federal Acquisition 
Regulation requirements regarding the exercise of any future 
options under the contract to include, among other things, all 
requirements related to the adequacy of accounting systems. We 
are working with the customer to plan for contracting 
alternatives to ensure continuity of the media campaign 
services.
    The Navy's Fleet and Industrial Supply Center Norfolk, 
Detachment Washington, has provided a valuable service and 
significantly improved contract administration. We implemented 
a structured approach to acquisition planning and contract 
management. This included improvements in financial controls, 
payment processing, training, and Government and contractor 
relations. These actions are consistent with our mission to 
provide quality services and supplies to a wide range of 
customers.
    This concludes my statement. I am prepared to answer your 
questions.
    [The prepared statement of Captain Westin follows:]
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    Mr. Souder. Thank you very much.
    Our final witness this afternoon is from NIDA, and we're 
joined by Ms. Susan David, the Deputy Chief of Prevention 
Research. Ms. David, you are recognized for 5 minutes.
    Ms. David. Mr. Chairman and members of the subcommittee, 
good afternoon. I am pleased to be here on behalf of the 
National Institute on Drug Abuse to discuss the status of the 
phase III evaluation of the ONDCP Media Campaign. I am Susan 
David, the NIDA project officer for the evaluation. Today I 
would like to provide some background, present some early 
findings, and discuss plans for future reporting on evaluation 
results.
    In January 1998, ONDCP, in response to a congressional 
mandate, asked NIDA to develop an independent science-based 
evaluation to assess the outcomes and impact of the phase III 
campaign on parents and children. After an open competitive 
process, NIDA awarded the contract in September 1998 to the 
nationally known health survey research company, Westat. Westat 
and its subcontractor, the Annenberg School at the University 
of Pennsylvania, one of America's leading communications 
research centers, assembled a team of scientists and survey 
experts to work on the project.
    The overall objective of the phase III evaluation is to 
measure the impact of the television and radio advertising in 
the campaign on the knowledge, beliefs, attitudes, and 
behaviors of parents and children in regard to drug use. A 
rigorous research design was developed that focuses on the 
specific targets, messages, and content of the ONDCP campaign. 
The evaluation will also tell us whether any attitude or 
behavioral changes that occur can be linked to campaign 
exposure.
    To accomplish this, we developed a new evaluation survey, 
the National Survey of Parents and Youth, which was approved by 
OMB in the summer of 1999. The survey involves interviews 
conducted in the home with youth and their parents or 
caregivers three times over the course of the evaluation. 
Interviewers bring laptop computers to each household and ask 
about some of the following: the drug use, knowledge, beliefs, 
attitudes, and behaviors of youth; the attitudes and behaviors 
of parents toward preventing drug use among their children; 
family and other demographic factors, and exposure to the media 
campaign.
    Exposure to the campaign is measured by asking parents and 
youth if they can recall seeing specific campaign ads which are 
shown to them on the computer. Linking this exposure to changes 
in attitudes and behaviors is the key to this evaluation 
approach. The data collection, while continuous, is divided 
into seven waves over a 3\1/2\ year period. This allows NIDA to 
report results at the end of each wave as feedback to the 
campaign. Since the beginning of the project, we have been 
pleased to keep this committee informed about all of these 
activities by submitting copies of our monthly progress 
reports.
    Now I would like to talk about some early results of the 
evaluation. So far two semi-annual reports have been released. 
Based on the first and second waves, here are some of the 
things we found.
    About 70 percent of parents and youth across the country 
report that they see anti-drug ads on a weekly basis. Between 
these two waves, one and two, we have not yet seen changes in 
marijuana use so far. We are starting to see, however, a 
positive shift in anti-drug attitudes, beliefs, and intentions 
among teens, but we cannot yet attribute these changes to the 
campaign.
    For example, between waves, we saw a 4 percentage point 
increase among 14 to 18-year-olds who said they have no 
intention of using marijuana in the next year. There was also 
an increase in this group in the belief that parents would 
strongly disapprove of their trying marijuana, from 92 percent 
to 97 percent.
    The next report, covering January through June of this 
year, will be released in October. This report will include 
expanded data information on effects for different populations 
such as ethnic minority youth. Future reports, due in May and 
October of next year, will yield more definitive results as the 
report on followup interviews with youth and parents.
    NIDA has also asked the Westat Annenberg team to prepare 
data on a variety of influences that may have some effect on 
campaign impact, such as news coverage of drug issues and 
events that are happening at the community level.
    To conclude, I would like to thank you on behalf of NIDA 
for providing us with this opportunity. I would be happy to 
answer questions.
    [The prepared statement of Ms. David follows:]
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    Mr. Souder. I thank you each for your testimony.
    Mr. Gilman has an opening statement he would like to give 
when he gets back, and I believe Mr. Barr said he wanted to do 
his in the record.
    [The prepared statement of Hon. Bob Barr follows:]
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    Mr. Souder. So we'll go to questioning, and I presume we 
will do several rounds because I know I have a number of 
questions.
    One, just off the top of my head, that I don't fully 
understand, and I ask Captain Westin: Do you know if the Navy 
was approached originally to do this contract administration?
    Captain Westin. To my knowledge, sir, no, we were not. Do 
you mean before HHS, sir?
    Mr. Souder. Yes.
    Captain Westin. No, sir.
    Mr. Souder. Mr. Jurith, you said that you felt that they 
were clearly the best choice to do it. So why weren't they 
contacted the first time then?
    Mr. Jurith. Mr. Chairman, in all honesty, I'm sorry, Mr. 
Chairman, when the initial coverage of this campaign was given 
to HHS, I was on sabbatical overseas, so I can't answer why it 
didn't initially go to Navy.
    Early in the year 2000, after we ran into a number of 
difficulties with HHS, ONDCP looked at a number of different 
vendors--Navy, other Government agencies--that would be able to 
provide us with good service on this contract. The decision was 
made within ONDCP between our legal shop and the program 
agency. The program office said the Navy was the best vendor to 
assist us in this contract. It was done through an analysis of 
which contracting shop in the Government could give us that 
service.
    Mr. Souder. Would you see if, for the record, you can give 
us a statement--we may have that from our previous hearings--of 
why ONDCP, provide that?
    Mr. Jurith. Absolutely. I'd be happy to.
    Mr. Souder. Mr. Ungar, my understanding is that there is 
approximately $850,000 in billings in question, is that 
correct?
    Mr. Ungar. Mr. Chairman, it is a little more than that. The 
$850,000 is the amount of money that Ogilvy and Mather believes 
ought to be disallowed. The Government actually disallowed over 
$1 million in the process of going through the billings. And 
what yet is to be determined is exactly how much should be 
disallowed, based on costs, either the billings for time that 
was not actually spent on the contract or for other bills that 
would have been submitted for items that would not be 
appropriately reimbursed by the Government. So until DCAA 
finishes its audit, I don't think it will be clear how much 
actually ought to be paid back--or one way or the other.
    Mr. Souder. So they admit $850,000, but it could be higher, 
basically?
    Mr. Ungar. Ogilvy has suggested $850,000, but it could be 
more, that's correct.
    Mr. Souder. And this is predominantly labor or production 
costs? It's not media purchase time?
    Mr. Ungar. That's correct. The issues that we're aware of 
have to do with the labor charges. Now there's also an overhead 
issue that needs to be resolved in terms of what overhead rate. 
Perhaps the Navy would be in a better position to address that 
specific question.
    Mr. Souder. Do you know what percent commission they were 
getting on the contract?
    Mr. Ungar. Excuse me, sir? What?
    Mr. Souder. Often, when you buy TV time, you get 15 
percent, and your amount of overhead you factor in depends how 
much of that, in fact, gets rebated by the stations. Do you 
know what percent they were working on, the 15?
    Mr. Ungar. That I don't know, sir.
    Mr. Souder. Does anyone else know the answer to that 
question?
    Mr. Jurith. Mr. Chairman, I don't think this concept works 
that way. I think that at least what we're looking at is a 7 
percent labor rate. This is not a fixed-price contract. In 
fact, one of the things that----
    Mr. Souder. I understand the answer to that then. Because 
if you are working on a fixed-rate, that means, in effect, the 
Government got the 15 percent discount. That is the standard 
way it works. I want to ask a direct followup to that. If you 
are working on a 7 percent fixed rate, is that 7 percent then 
cost-plus on top of the 7 or how does that work?
    Mr. Jurith. Well, I'm not sure. Right now this is for our 
own staff to look at the possibilities. I think we need to 
change that. OK? So you get better value to the Government. So 
as you go about exercising next year's option, I think Navy and 
ONDCP need to look at that issue. We have market research going 
on right now to look at that before we decide the option in 
December. I think that's the best thing to do for the 
Government, the best thing to do for this campaign.
    Mr. Souder. Thank you.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Ungar, let me just go to you. You have said some things 
here this morning, this afternoon, which should concern 
everybody in this room. I think, as I understand it, we have a 
situation where you did an investigation, you and your staff, 
and you made a determination, and it seems to be unequivocal 
that the Government, the U.S. Government, paid for some work 
that was not performed. Is that a fair statement?
    Mr. Ungar. Yes, sir, it is.
    Mr. Cummings. Now if Ogilvy--I mean, is there any room 
there for--first, let's go back for a moment. I find it 
phenomenal that we would have a contract worth a quarter or a 
fifth of a billion and in the RFP process--I mean, I have done 
small RFPs, I think, when I was practicing law and worked with 
clients in preparing responses, and whatever, to like million 
dollar contracts. They really laid out every single thing you 
needed. I'm just wondering what happened here. I mean, this is 
a lot of money.
    Mr. Ungar. Right.
    Mr. Cummings. So I was just wondering--I was trying to 
start from the very beginning of how this process started. Do 
you see a problem in that part of it?
    Mr. Ungar. Yes, sir.
    Mr. Cummings. What would your comments be?
    Mr. Ungar. Yes, sir. Unfortunately, let me start: The RFP 
for this particular procurement did specify that this contract 
would be subject to the cost accounting requirements in the 
FAR, in the Federal Acquisition Regulation, and that there 
would be the need for an accounting system that met those 
requirements, plus there would be the need for a disclosure 
statement under which the prospective--the bidder, and 
eventually the contractor, would have provided to the 
Government what is called a disclosure statement which would 
lay out the critical parts of the accounting system that the 
contractor would use, that the bidder would use, if the 
contract were awarded.
    Now in this case, again, unfortunately, it was clear that 
it was required, but HHS did not adequately address those 
issues. It allowed in this case Ogilvy to come forward, get the 
contract, before it had adequate assurance that the contractor 
had an adequate accounting system and without requiring the 
disclosure statement. There was an individual in HHS who was 
charged with the responsibility of looking at the accounting 
system of Ogilvy on behalf of the contracting officer. 
Unfortunately, he did not do a good job. He basically fell down 
on the job, in our opinion.
    Second, with respect to the disclosure statement, it 
clearly should have been required, but the HHS contracting 
officer just didn't enforce that requirement. It came up a 
couple of times during the course of the contract, and it still 
wasn't required. Had the accounting system been looked at 
appropriately initially, had the disclosure statement been 
filed timely, it's fairly obvious that some of these problems 
with Ogilvy's accounting system would have been identified--and 
noted now, it may not have prevented inappropriate billing 
intentionally, but at least other problems with the accounting 
system would and should have been identified.
    Mr. Cummings. We had a situation with Ogilvy where they 
said, ``OK, we didn't have an appropriate accounting system in 
place, but what we did was we decided--and our people were a 
little negligent. They did the work and they didn't put their 
time down, and when we went back, we went back and said, `Joe, 
you know we spent 15 hours on this thing and you only put 5 
because you were busy, and I understand that. Now let's correct 
that.' '' Are these the kind of allegations that you--I mean, 
is this the kind of stuff you found or did you find something 
else?
    Mr. Ungar. Mr. Cummings, we found that, plus something 
else. There were situations here on both sides. On the one 
hand, there were employees at Ogilvy who said, ``Yeah, we 
aren't very fastidious, meticulous about our time,'' because 
most of their contracts were not cost reimbursement contracts. 
So they had a situation where they really weren't accustomed to 
keeping time meticulously. They didn't have good procedures for 
that and policies/procedures at the time at Ogilvy. They did 
have employees who came and said, ``Yes, I forgot. I did work 
some time I didn't charge, and so we need to go back and do 
that.'' But they also had a situation----
    Mr. Cummings. Would that have bothered you a lot, that what 
you just said? Would that have bothered you as far as your 
investigation is concerned? Would that have been of great 
concern?
    Mr. Ungar. I think the problem here is that the company got 
a fairly hefty Government contract without having an adequate 
time and attendance system in place which it should have had. 
On either side of the coin, whether it be undercharging for 
time or overcharging, I think the Government wants to fairly 
reimburse the contractor for the costs that the contractor is 
entitled to.
    What this situation did is create additional work for 
everybody--the auditors, the managers--because now somebody's 
going to have to go through like DCAA is and go through each 
and every invoice and try to decipher from the T&A records and 
the other records what an appropriate amount to pay Ogilvy is.
    Mr. Cummings. You said there is something else, but I'll 
get to that when I come back. Please make a note. I want to get 
back to that.
    Mr. Ungar. Sure.
    Mr. Cummings. Time has run out.
    Mr. Souder. Mr. Gilman.
    Mr. Gilman. Thank you, Mr. Chairman. I regret we have had 
another hearing in our International Relations Committee at the 
same time.
    I want to welcome our panelists, and I want to thank you, 
Chairman Souder, for holding today's hearing to further 
evaluate the effectiveness of our National Youth Anti-Drug 
Media Campaign.
    National Youth Anti-Drug Media Campaign serves as an 
important component of a key pillar in our war against drugs. 
For years we have heard from the supply source countries that 
America needs to do its part in reducing demand and providing 
drug education prevention programs to meet our goals.
    The National Media Campaign proposal was born during the 
Reagan administration, which was fighting a wave of drug use 
among adolescents and an unforgivably tolerant attitude toward 
drug use from the entertainment industry. The resulting 
creation of a Partnership for a Drug-Free America in 1987 
helped to usher in a longstanding series of anti-drug ads which 
proved to be effective at no cost to the taxpayer. That, in 
part, helped lead to a steady decline in adolescent drug use 
from 1987 to 1993.
    While the original anti-drug media campaign relied on 
donated air time from the three primary TV networks, increased 
competition from deregulation of the industry led to sharp 
cutbacks in that area. Since 1997, the anti-drug media campaign 
has relied on a combination of congressional funding and 
private sector donations of air time and print space.
    The drug abuse environment facing today's teenagers, 
though, has changed drastically from that of a decade ago. 
Drugs today are much cheaper with a higher purity, more readily 
available than ever before. Furthermore, unlike a decade ago, 
the media today doesn't emphatically communicate the dangers of 
drug use. This situation presents a greater challenge to the 
organizers of the drug media campaign than that faced by the 
predecessor. They are fighting an uphill battle, but it is a 
battle that we cannot afford to lose.
    Far too much attention is being paid today to create a 
culture of tolerance for drug use. More emphasis is needed to 
convey the point that the road to hell is paved with good 
intentions and that the culture of tolerance is sowing the 
seeds for a greater social problem down the road.
    However, let's get to an important part of this hearing. 
During our last oversight hearing, held by this committee in 
October of last year, on the Anti-Drug Media Campaign, we 
learned of the possibility of excessive and irregular 
contractor costs resulting from improper billing practices 
conducted by the campaign's advertising agency, Ogilvy and 
Mather.
    I am interested in learning today from our witnesses on the 
progress of the audits being conducted on this contract and 
whether additional remedies are warranted. I am interested also 
in where we are going on the future advertising campaign.
    Let me ask a question of the GAO people. Is the audit 
completed at this point?
    Mr. Ungar. Sir, our audit is. The audit, though, by the 
DCAA is still ongoing.
    Mr. Gilman. What is the difference between your audit and 
the DCAA audit?
    Mr. Ungar. Sir, we look specifically at whether or not the 
contractor overbilled and we looked at the Government's 
management of the award and administration of the contract----
    Mr. Gilman. Could you put the mic a little closer to you? 
You are fading away from me.
    Mr. Ungar. Yes, sir. We did not look at the actual total 
cost charged and the allowability of those costs to the 
contract. We focused our review on some fairly narrow issues, 
but we did not do a comprehensive audit.
    Mr. Gilman. Well, what did you find?
    Mr. Ungar. Well, sir, we found, as I had indicated, that, 
one, there was overbilling by the contractor for labor hours 
not worked. In other words, the Government was billed for----
    Mr. Gilman. By how much?
    Mr. Ungar. The full amount, sir, is not clear at this 
point.
    Mr. Gilman. Well, roughly, what was it?
    Mr. Ungar. Well, the contractor, Ogilvy, estimates $850,000 
at the max.
    Mr. Gilman. What did you estimate?
    Mr. Ungar. Well, we didn't come up with the total dollars, 
sir. We identified a sample of people who we questioned----
    Mr. Gilman. Well, I understand. You audited this and you 
don't know what the total of overbilling is?
    Mr. Ungar. No, sir, we didn't look at the total cost. All 
we were focused on was to determine whether or not overbilling 
took place. In this particular situation, because of the 
problems with the accounting system of the contractor and the 
problems with the billings and the problems with the time and 
attendance records, we really would not have had the time to 
complete our major focus in a reasonable amount of time had we 
focused on the entire issue----
    Mr. Gilman. Are you going to continue with your auditing?
    Mr. Ungar. No, sir. Actually, DCAA is going to do that. 
That's more of its role than our role. There's a defense 
contract----
    Mr. Gilman. OK. Let me turn to DCAA. What are you doing on 
the additional billing?
    Mr. Ungar. Excuse me?
    Mr. Gilman. What is DCAA doing on a further audit of the 
billing?
    Mr. Ungar. Right.
    Mr. Gilman. Can I ask the DCAA----
    Mr. Ungar. They're doing what they would typically do, sir, 
in the course of a contract audit, making sure that the bills 
are appropriately----
    Mr. Gilman. Is there someone here from DCAA?
    Mr. Ungar. No, sir, but the Navy is here and maybe he would 
like----
    Mr. Gilman. Well, Captain Westin, you are doing the 
investigation, I take it?
    Captain Westin. Sir, I am at the Navy Contracting Office.
    Mr. Gilman. I realize that.
    Captain Westin. DCAA is working for us.
    Mr. Gilman. They contracted you to pursue it? Is that 
right? Are you fulfilling the investigation now?
    Captain Westin. Our office has asked DCAA to conduct the 
investigations for us as the contracting officer. DCAA 
completed just yesterday a 3-month investigation of the 
accounting system and certified it as adequate.
    Mr. Gilman. Could you put the mic a little closer, please?
    Captain Westin. Sure. The DCAA completed just yesterday a 
3-month audit of the accounting system to indicate that it was 
compliant with cost accounting standards for this type of 
contract. They are looking at the billing system now and expect 
to complete that shortly.
    Mr. Gilman. Well, Captain, what is taking so long? We had a 
hearing in October of last year, and here it is we're in August 
already and still the audit isn't completed. Why is that?
    Captain Westin. The Navy first took over the administration 
of these contracts in December, and we asked the DCAA to 
conduct a number of audits, including this one.
    Mr. Gilman. All right, from December until now, what is 
that, 8 months, 9 months? Why aren't we complete?
    Captain Westin. They completed audits of this accounting 
system as well as the other contractors. However, in November 
the accounting system or ONDC--excuse me, Ogilvy and Mather 
hired PricewaterhouseCoopers to construct a Government-
compliant accounting system, and they didn't complete that 
until March.
    Mr. Gilman. I am not talking about internal construction. I 
am asking about the audit to find out were there some 
overcharges or weren't there some overcharges. Who's working on 
that? I notice the Navy turned this over for criminal 
investigation, from your remarks.
    Captain Westin. Sir, the criminal investigation was to 
coordinate with the office of the Justice Department for us. 
The accounting system review began in March because Ogilvy and 
Mather had to construct a compliant accounting system before it 
could be audited. They didn't have one at the beginning.
    Mr. Gilman. Well, tell me specifically now, when will we 
have a final audit of all of this?
    Captain Westin. I don't have that date, sir. However, they 
are proceeding with--now that they have completed the audit of 
the accounting system, they're going right to the billing 
system and beginning to look at the----
    Mr. Gilman. Well, how long do you expect it to take to 
complete all of this?
    Captain Westin. I don't have----
    Mr. Gilman. It's now taken 10 months. Is it going to take 
another 10 months?
    Captain Westin. I don't believe it will take 10 months for 
them to complete their audit. However, it may take longer than 
that for the Department of Justice to complete their work, but 
we're not----
    Mr. Gilman. Mr. Jurith, you are about to engage in another 
renewal of the contract, are you not?
    Mr. Jurith. That's correct, sir.
    Mr. Gilman. Are you going to do that before these audits 
are completed?
    Mr. Jurith. Absolutely. Mr. Gilman, what we're doing right 
now is looking at under--we have the obligation right now 
between ONDCP and Navy to exercise an option before December. 
Under the Federal Acquisition Regulation, what we're doing 
right now is looking at whether or not it makes sense for the 
Government to continue with Ogilvy. That's based upon whether 
or not Ogilvy can give us the best value for the dollar, based 
upon market research. Navy and ONDCP is engaging----
    Mr. Gilman. Let me interrupt. Despite the fact that they 
may have overbilled or may have not----
    Mr. Jurith. Mr. Gilman, under the law right now, that's a 
separate issue. That goes to the issue of whether or not their 
past performance was not acceptable. Whether or not----
    Mr. Gilman. Do you consider the performance acceptable if 
they overbill the Government?
    Mr. Jurith. The question is whether or not to exercise the 
option or whether or not it makes sense for the Government to 
do that, OK, but whether or not past performance goes to the 
assessability of that corporation; it goes to true to 
performance. In terms of whether or not we should exercise the 
option goes to the issue of whether or not they can perform the 
service to the Government.
    Mr. Gilman. Well, I am not too sure I understand your 
delineation between the overbilling and whether they can 
provide the services.
    Mr. Jurith. Sure, yes, sir.
    Mr. Souder. Mr. Gilman, we're going to have additional 
rounds, and we all share that concern right now.
    Mr. Gilman. Thank you, Mr. Chairman.
    Mr. Souder. Mr. Barr.
    Mr. Barr. The FBI is investigating Ogilvy/Mather, is that 
correct, Mr. Hast?
    Mr. Hast. Yes, it is.
    Mr. Barr. The U.S. Attorney's Office is investigating, is 
that correct?
    Mr. Hast. Yes, that is correct.
    Mr. Barr. When was the most recent check written to Ogilvy/
Mather by the U.S. Government? Anybody know?
    Mr. Ungar. Sir, for labor charges Ogilvy has not billed the 
Government since, I believe it was, July of last year because 
of the problems with its accounting system. It now does have an 
accounting system that has passed muster. So I presume they 
will begin billing. Now for media buys, I believe they have 
been billing and being paid.
    Mr. Barr. And when was the most recent check cut to them?
    Mr. Ungar. That I don't know, sir.
    Mr. Barr. Does anybody know?
    Captain Westin. No, sir.
    Mr. Barr. Is it unreasonable to expect somebody to know?
    Mr. Ungar. Well, probably we should, sir, but media buys 
haven't really been an issue that we're aware of with this 
particular contract. It's been the labor issue that's been in 
question, not the media buys, at least to our knowledge.
    Mr. Barr. So we can take a company that is under 
investigation by the FBI, under investigation by the U.S. 
Attorney's Office for the Southern District of New York for 
fraud, and we can say there is no problem giving them a great 
deal of money, simply because we compartmentalize that aspect 
of their work and they're doing just a fine, bang-up job on 
getting those ads out, while in another part of their work they 
may very well be or have defrauded the Government? And, Mr. 
Jurith, you apparently are perfectly happy with that? You're 
ready absolutely to go out and renew their contract?
    Mr. Jurith. No, no, Mr. Barr. We're looking at the exercise 
of the option under the FAR. Whether or not the FAR requires 
determination of costs and the issue of continuity of service, 
that's the test under the law.
    Mr. Barr. No, the test under the law is whether or not you 
believe that they've committed fraud.
    Mr. Jurith. No.
    Mr. Barr. If you believe, as a Government official, if any 
of you believe that this company has committed fraud, you can 
move to suspend that contract. You all are sitting there 
saying, not only have you not done that, but you are ready to 
just go out there and renew a contract with this company----
    Mr. Jurith. No, sir.
    Mr. Barr [continuing]. Even while they are being 
investigated by the FBI and the U.S. Attorney's Office.
    Mr. Jurith. No, as I understand it, sir, Justice is 
investigating the allegations. They have consistently updated 
ONDCP on the progress of their investigation, and they have not 
made any decision one way or the other. We're waiting to hear 
back.
    Mr. Barr. Why can't you--isn't it--aren't any of you 
indignant about what this company has done?
    Mr. Jurith. Sir, the----
    Mr. Barr. Doesn't it bother you, Mr. Jurith? You are a 
sworn official. You are upholding our criminal laws. Doesn't 
this bother you what this company has done? Don't you have any 
regard for the taxpayer moneys that have been given to this 
company?
    Mr. Jurith. That is under investigation by the Department 
of Justice, sir. The issue from OND----
    Mr. Barr. Well, why can't you move to suspend the contract?
    Mr. Jurith. The issue from ONDCP----
    Mr. Barr. There is clear evidence that they have committed 
fraud, isn't there?
    Mr. Jurith. I have not seen that.
    Mr. Barr. Oh, you haven't?
    Mr. Jurith. That's under investigation by the Department of 
Justice.
    Mr. Barr. How about this? Have you seen this report, Mr. 
Jurith?
    Mr. Jurith. Yes, sir.
    Mr. Barr. And you don't consider that evidence that they 
have committed fraud?
    Mr. Jurith. The issues in that report are under review by 
the Department of Justice. The issue is----
    Mr. Barr. What are you going to wait, for a final 
conviction upheld on appeal before you do something?
    Mr. Jurith. No. No, sir. We're in constant contact with 
DOJ, waiting for their report.
    Mr. Barr. And how long are you going to wait, Mr. Jurith? 
How many more millions of dollars of taxpayer money are going 
to go out before you do something?
    Mr. Jurith. Sir, in terms of exercising the option, the 
issues under the FAR are very clear: Are the funds available? 
Is there a continuing need?
    Mr. Barr. It is very clear that if there is evidence of 
fraud you can suspend it. Why haven't you done that?
    Mr. Jurith. That's a decision to be made by the Department 
of Justice. Neither GAO----
    Mr. Barr. What have you recommended to them? You are with 
the Department--excuse me----
    Mr. Jurith. No, I'm not, sir.
    Mr. Barr. Why haven't you recommended that take place?
    Mr. Jurith. I'll defer to the Navy on that issue.
    Mr. Barr. No, I'm asking you. Why have you, based on what 
you have before you, which is clear evidence of fraud, why 
haven't you at least recommended to the Department of Justice 
that they move to suspend the contract?
    Mr. Jurith. I'm not going to--because the Department of 
Justice is still looking at that matter, sir.
    Mr. Barr. OK. When will there be sufficient evidence of 
fraud to satisfy the high burden that you set for yourself as a 
Government official?
    Mr. Jurith. It's not a question of a high burden. It's a 
question of what is the burden.
    Mr. Barr. You have apparently set a very high one.
    Mr. Jurith. There's a process in the Department of the 
Navy, as our contracting officers, that they're looking at in 
that regard. Captain Westin----
    Captain Westin. If I may, sir, I'd like to----
    Mr. Barr. No, I'm not finished. I'm not finished with you, 
Mr. Jurith.
    Mr. Jurith. Thank you.
    Mr. Barr. You reviewed a memo and made changes to it on 
April 12, 2000, correct, regarding the Ogilvy contract?
    Mr. Jurith. What memo is that, sir?
    Mr. Barr. Your memo?
    Mr. Jurith. Not my--what memo?
    Mr. Barr. You want to do some other things? OK, we will see 
you in a few minutes, Mr. Jurith.
    Mr. Jurith. Thank you.
    Mr. Souder. In starting a second round of questioning, I 
want to point out for the record, because I think we all find 
this troubling, that there are several questions here. One, 
this is not a question about the media campaign, but how we 
administer the media campaign, but it does potentially put the 
whole media campaign at risk when the taxpayers and 
representatives of the taxpayers have doubts, and that is why 
it is important to do this.
    A second point is that Ogilvy is one of the most 
distinguished advertising firms in the United States and has 
been for years. They obviously have many other contracts. 
Whatever caused this, possibly lack of oversight combined with 
a contract proposal that wasn't reasonable, there may be 
pressures that resulted in misbilling, but the fact is that it 
is not in dispute whether there was misbilling. Ogilvy admits 
to at least $850,000. We don't really have to wait for the 
Justice Department to find that out because Ogilvy has already 
admitted, and we have in the record today--and I don't think 
anybody is disputing--that they admit that they overbilled, 
based on Government contracts, $850,000.
    We also know from this committee and this subcommittee, and 
we sit on other subcommittees here, that this is not the only 
case that this has happened in the Government. I know in 
Medicaid/Medicare oversight that we have had similar problems 
in Medicaid with companies billing and overbilling, and that, 
in fact, sometimes we suspend contracts and sometimes we don't, 
and that the variables that have been stated here, which are 
continuation of contract, costs--for example, we sat in one 
miserable hearing where the Department of Justice wanted the 
contract suspended because there had been $1 billion of fraud, 
but we didn't know what to do with the senior citizens if their 
homes closed down. So there can be extenuating circumstances.
    But, generally speaking--and if I may ask Mr. Ungar this--
in your experience in GAO, if there was an admitted case of 
$850,000 in overbilling, which may be more, would it not be 
typical for the Government to at least show uncommon restraint 
before they would allow that company to continue? In other 
words, it would be a factor?
    Mr. Ungar. Yes, sir, it would be a factor. In this 
particular case, there's no question that the company 
overbilled. It acknowledges that. Now it does not say it was 
fraud. I mean, it doesn't say that it was intentional 
overbilling. Nonetheless, it does acknowledge that. In this 
particular case, we're saying in our report that we think that 
the ONDCP and the Navy really do need to look at this option 
and whether it ought to be extended, to consider both the 
technical performance and the administrative performance, 
including the issue of whether it feels comfortable that this 
company has really cleaned up its act and is in a position to 
do the work in the future in an appropriate manner, including 
the billings.
    Mr. Souder. Captain Westin, if the Defense Department in 
other areas in contract billing had contractors who came forth 
and said, ``We admit to at least $850,000 errors,'' which in 
the labor portion of this--let me ask Mr. Ungar first. The 
$850,000 is roughly what percent that they overbilled?
    Mr. Ungar. I believe the labor charges----
    Mr. Souder. And that's the low number.
    Mr. Ungar. Yes. I think the labor charges were somewhere 
around $24 million for the period that we were looking at.
    Mr. Souder. At least 4 percent that they were----
    Mr. Ungar. So it's a small percent.
    Mr. Souder. But that is 4 or 5 percent.
    Mr. Ungar. Yes. I think to be fair, sir, to Ogilvy, if one 
wants to be, I think what Ogilvy did is they took a look at the 
information that we reported to them and extrapolated from 
that, and then they took a number of other cases which they 
felt would be questionable and erred, in their view, on the 
side of upping the amount of money. So, in their view, the 
$800,000 would be more than probably they would say was 
definitively overcharged.
    Mr. Souder. OK.
    Mr. Ungar. Our view of that is we're not really sure of 
that, sir.
    Mr. Souder. So there could be a range. Captain Westin, if 
somebody admitted, or at least attempted to try to establish 
that number, and they were 5 percent off, would the Navy 
continue that contract if there were alternatives?
    Captain Westin. Sir, the continuation of the contract would 
be OK under the FAR. What we have the responsibility to do, if 
we get information similar to the GAO report here, is that we 
would refer that to the suspension and debarment officials 
within the Department of Defense. In the Navy in this case it's 
at the Office of the General Counsel. In fact, we have done 
that in this case. We referred this GAO report through our 
chain of command to what's called the Office of Procurement 
Integrity within the Navy.
    Mr. Souder. And if this goes on in a weapons procurement 
case, for example, and for 2 years somebody has admitted that 
they had billing errors, how long would you wait until you did 
something?
    Captain Westin. Well, those decisions as to whether to 
suspend or debar are made by those procurement officials. 
However, the purpose of suspension and debarment is to protect 
the Government and the issuance of future contracts. In this 
case the DCAA's mission is to take a look at the billings and 
the accounting system and determine what the correct amount 
that the Government should be paying, and whether that's 
$850,000 or some larger amount or some smaller amount, that's 
what they're going to try to do, and then they'll let us know, 
authorize the right amount of payments.
    Mr. Souder. This is an important thing because in our drug-
free communities bill that we just passed through last week, I 
mean the $850,000 is 8\1/2\ communities' programs for a whole 
year. It is not an insignificant sum.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Ungar, I listened to Mr. Barr and his questions. I 
guess it goes--the question becomes, when you made the 
determinations that you made with regard to overbilling, you in 
answering an oral question of mine, you said you saw one type 
of overbilling where they had said, well, you know, the 
employee said, ``Well, maybe I did something, just forgot to 
put it down.'' The other type of overbilling was what? What was 
that?
    Mr. Ungar. There were two situations, sir. One set of 
circumstances was such that there were some employees who said 
they were instructed by their supervisors to increase the time, 
go back and adjust the time that they charged to the contract. 
In fact, they did not work--some of those employees had not 
worked those hours. So we have some employees being instructed 
to add time to this account, the ONDCP account, that they did 
not actually work. That's one set of circumstances.
    Another set of circumstances is there is another group of 
employees whose timecards were changed after they prepared them 
initially and time was added to the ONDCP account by people 
other than the employees. We don't know the full extent of 
that, but we know that it did happen. So that's one of the 
issues that, hopefully, DCAA may try to get a handle on.
    So you have two different situations: employees being 
instructed to change their timecards to add time and employees 
whose timecards were changed by somebody else to add time to 
this account that was not worked.
    Mr. Cummings. In your judgment, were you left with 
questions as to whether or not--and this is just your opinion--
whether or not criminal activity took place? Did you have 
questions or did you feel----
    Mr. Ungar. Yes, sir.
    Mr. Cummings. You are a professional.
    Mr. Ungar. Yes.
    Mr. Cummings. You know what a crime is.
    Mr. Ungar. Yes, sir.
    Mr. Cummings. I mean, so----
    Mr. Ungar. In our view, charging the Government, in effect, 
falsifying time records and charging the Government for time 
not worked is fraud in our view. And that is why we did refer 
this to the Department of Justice for further followup and 
action.
    Mr. Cummings. Then when we go to Mr. Jurith and this whole 
discussion here, this discussion of whether to suspend the 
contract and all of that kind of thing, does GAO make 
recommendations? Let's say you are in the middle of an 
investigation and you say, ``My God, what has happened here?'' 
I mean, is there ever any time you go and you say, ``Look, red 
flags, we've got to stop this right now''? I mean, does that 
ever happen? I'm sorry, I'm talking to you, Mr. Ungar. I 
apologize.
    Mr. Ungar. Oh, yes, sir. Actually, we did recommend that 
ONDCP should work with the Navy to--actually, we said, don't 
award this next option, first, unless the contractor cleans up 
its accounting system and has an adequate accounting system and 
takes appropriate action. Then, second, we said, in making its 
decision, ONDCP needs to take into consideration both the 
technical performance, which it's been very pleased about, and 
the contractor's administrative performance, which is the 
billing practices, in deciding whether or not to recompete this 
contract.
    So we certainly think that this is an issue that ONDCP 
needs to deal with, and it does have discretion. It is not 
under any obligation under the FAR to award this option.
    Mr. Cummings. I am running out of time. Did you read the 
report, this report that just came out yesterday? Did you read 
it? The report that just--oh, you did it?
    Mr. Ungar. No--which--yesterday?
    Mr. Cummings. The report that somebody said was completed 
yesterday.
    Captain Westin. DCAA.
    Mr. Cummings. Yes, the DCAA, have you seen that report?
    Mr. Ungar. No, sir, I have not seen that.
    Mr. Cummings. OK. All right. Well, they say that they have 
cleaned up their act, Ogilvy has cleaned up their act. You are 
saying that is not enough to say, OK, guys--you know, as I am 
sitting here, I am thinking about, as a lawyer, if I screwed up 
as a lawyer, let me tell you something, if I overbilled as a 
lawyer, I am disbarred for the rest of my life. I mean that is 
deep.
    Mr. Ungar. Right.
    Mr. Cummings. If I screw up on one client one time--I can 
be the greatest lawyer in the world--I am disbarred.
    Mr. Ungar. Right, sir.
    Mr. Cummings. So I am just wondering, the cleanup factor, 
how much does that play? If I am caught and then I clean up, 
the Bar Association is going to say, ``Sorry.''
    Mr. Ungar. There's a couple of different issues here, maybe 
more than a couple, sir. One is these formal suspensions, the 
debarment proceedings which were talked about, that's a formal 
process that has to take place. The other issue is whether to 
recompete this contract. Unless the contractor is suspended or 
proposed for debarment, if that happens, then ONDCP could not 
recompete the contract--or excuse me, exercise the option. But 
if that doesn't happen, then ONDCP does have discretion as to 
what to do when this contract expires at the end of the year.
    There's a number of things that ONDCP needs to take into 
consideration. One is this accounting system, because obviously 
if the contractor didn't fix the accounting system, it would be 
impossible to tell how much it was appropriately paid. The 
contractor has done that, according to the Navy and DCAA. So 
that's taken care of.
    Now the other issue is, that we talked about is, the 
situation of the overbilling. The contractor has taken action 
to fix its time and attendance system, put in a new system. It 
has provided, through contractual help, training to its 
employees. It has certainly taken corrective action. It also, 
as has been indicated, came forward to the Justice Department 
and acknowledged that it overbilled and said, ``Yes, we did 
make mistakes.''
    The one issue that still remains for us in this case I 
think that we think as a very minimum needs to be considered: 
What was the real start of this process? We know that the 
overbilling came after a discussion that the president of the 
company had with certain employees saying he was disappointed 
with the revenue.
    Mr. Cummings. Can we pick up on that?
    Mr. Ungar. OK, sure.
    Mr. Cummings. I mean, we are running out of time, 
unfortunately. I hope you won't forget that though.
    Mr. Souder. The subcommittee now stands in recess.
    [Recess.]
    Mr. Souder. I call the subcommittee back to order and would 
now yield to Mr. Gilman for further questioning.
    Mr. Gilman. Thank you, Mr. Chairman.
    Let me ask GAO, was Ogilvy cooperative and helpful to your 
team in collecting information for your report?
    Mr. Ungar. Sir, during our review, generally, it was 
cooperative. We had a few wrinkles along the way, but I'd say 
overall it was cooperative and it did provide us the 
information that we had asked for for the most part.
    Mr. Gilman. Does GAO have any recommendations? Considering 
your findings of the improper billing by Ogilvy, what should 
ONDCP do now regarding the remaining 2 years of the campaign 
contract?
    Mr. Ungar. We think that the most urgent action that ONDCP 
needs to take is to decide whether or not to recompete this 
contract, and, of course, in doing so, it needs to consider all 
the factors that have been brought forward in terms of the 
performance of the contract, both technically and 
administrative-wise, including the overbilling. It needs to 
take into consideration the corrective action that has been 
taken, the situation with respect to what's in the best 
interest of the Government, both cost-wise and program-wise.
    It also needs to work with the Navy to resolve the billing 
questions that are outstanding. There's been somewhere between 
$6 and $7 million disallowed of the contractor's billings so 
far, and there needs to be determination of what was an 
appropriate amount to have been disallowed. So it certainly 
needs to do that.
    It needs to make sure that there is a continued effective 
relationship between its folks, the Contracting Officer's 
Technical Representatives, and the Navy contracting officers, 
to make sure that there's not a repeat of the problem that 
existed when HHS had the contract.
    Mr. Gilman. Has Ogilvy undertaken any corrective actions, 
do you know, regarding this contract?
    Mr. Ungar. Yes, sir. It had retained consultant help to 
come up with, develop, an accounting system for it that would 
meet the Government standards. That's been done. It also got 
contractual help to look at its time and attendance system and 
develop a new system and help train its employees. It certainly 
did come forth to the Justice Department on its own earlier and 
acknowledged that there were problems with its accounting 
system and its billings.
    Mr. Gilman. And to what extent were the improprieties--how 
much did that add up to?
    Mr. Ungar. Sir, Ogilvy and its representatives suggest 
$850,000 be disallowed as a result of the problems with the 
time charges. We are not in a position to determine whether or 
not that's an appropriate amount. We think that's really up to 
the Defense Contract Audit Agency to look at in its audit.
    Mr. Gilman. Well, Captain Westin, you are the contract 
agency, right?
    Captain Westin. Yes, sir.
    Mr. Gilman. What did you find to be the amount that was 
overcharged?
    Captain Westin. Again, we received that $850,000 number and 
did not feel that we had enough information to make that 
judgment and referred that to the Defense Contract Audit 
Agency. They are looking--they received from Ogilvy just on 
July 11th incurred cost reports for 2000 and--or 1999 and 2000, 
the timeframe of these billings, alleged billing 
irregularities, and they are auditing those to determine 
appropriate overhead rates. Then they'll use that information 
to figure out what the right number is.
    Mr. Gilman. Well, Captain Westin, when did the Defense 
agency become involved in this? At what date?
    Captain Westin. We asked them--they became involved almost 
immediately when we took over the contract administration on 
the first of December. Their initial task was to look at the 
accounting system of the other contractors who already had 
accounting systems, and immediately upon Pricewaterhouse 
completing work on Ogilvy's accounting system so that it could 
be audited, they undertook that work and completed that just 
yesterday. They've also been looking at 100 percent audit of 
all billings that were presented. Because of the lack of an 
adequate accounting system, they did extra auditing to ensure 
that any money that was paid to them, which has been only non-
labor charges or media buys primarily, were proper for payment. 
As soon as Ogilvy begins to rebill using an adequate accounting 
system for labor charges, then they will audit those as well to 
ensure that then the Government only pays for supportable 
labor.
    Mr. Gilman. Did you state that it was just a few weeks ago 
that some important documents were turned over to the Defense 
agency?
    Captain Westin. Ogilvy and Mather, it was previously stated 
by GAO that they stopped billing for labor in, I think it was 
July 2000. They also did not present any cost reports until 
July 11th here.
    Mr. Gilman. This July?
    Captain Westin. Yes, sir, just a couple of weeks ago. Those 
are the documents which are used to establish appropriate 
overhead rates to apply to direct labor amounts.
    Mr. Gilman. Well, what took so long between December and 
July of this year for them to bring the information to the 
attention of the Defense agency?
    Captain Westin. I don't know, sir, exactly, but my 
suspicion is because they didn't have an adequate accounting 
system to, in their own mind, be able to certify their labor--
incurred cost reports. In other words, they have, before DCAA 
can audit them, they have to be certified by the company 
themselves as an accurate representation of their labor.
    Mr. Gilman. Well, Captain Westin, it was my impression this 
is one of the largest and one of the older advertising agencies 
in the country, is that right?
    Captain Westin. It's my understanding one of the world's 
largest, yes, sir.
    Mr. Gilman. Is there some question in your mind about why 
they haven't got an accounting system that could tell them what 
is wrong with their oversight or their overpayments?
    Captain Westin. Yes, sir, it was a surprise.
    Mr. Gilman. Well, I am concerned that we still, 10 months 
later, don't have any answers to all of this, and at this point 
ONDCP is unwilling to cancel the contract apparently and is 
considering the possibility of a further renewal. Is that 
right, Mr. Jurith?
    Mr. Jurith. Mr. Gilman, these matters are under inquiry 
right now by DCAA, by the Department of Justice. We have a very 
technical issue to examine right now: whether or not that 
option is in the best interest of the Government, and the law 
spells out whether or not we should do that. Are the funds 
available? Is there continuing need for the service? And is 
exercising that option in the best interest of the Government? 
Now you balance that which is overriding and true about whether 
or not there is wrongdoing here, which is in the purview of DOJ 
and DCAA. But, they are two--unfortunately, Mr. Gilman, they're 
two--not unfortunately--the fact is, under the law, they are 
two separate inquiries.
    Now we're going on two tracks. I've told Navy I want to do 
market research as long as I'm the Acting Director, pending the 
confirmation of the President's nominee. I want to do market 
research to make a determination whether or not we should 
continue with Ogilvy, whether it's in the best interest of the 
Government to carry out the terms and objectives under the 
contract. That's my responsibility.
    The issue of whether or not there's wrongdoing, that's in 
DOJ, and I'm willing to be bound by that decision. And the Navy 
is going forward with their recommendation based on the DOJ 
report as to what should be done. But, again, Mr. Gilman, I 
think you've got to segregate the two decision processes that 
are ongoing right now, and that's what we're doing.
    Mr. Gilman. Mr. Jurith, do you feel that you have any 
responsibility, once an agency of this nature has been charged 
with the fact that they have overcharged and there's a criminal 
investigation pending in the Department of Justice, do you 
think you have any responsibility--please listen to me.
    Mr. Jurith. Sure.
    Mr. Gilman. Do you think you have any responsibility of 
terminating that contract?
    Mr. Jurith. Termination is a dramatic response, is a 
dramatic action by the Government. You're saying, then, to the 
contractor, ``We no longer need your services.'' DCAA has found 
out that Ogilvy----
    Mr. Gilman. Could you put the mic a little closer to you?
    Mr. Jurith. I'm sorry, Mr. Gilman. DCAA has found out a 
contractor--it's the only given contractor who we have. The 
contractor--yesterday's report by DCAA has found that the 
contractor had developed excellent ethics, timekeeping, and 
training program. Training was presented to its employees in 
the first half of 2001. Ogilvy had also provided training to 
all new hires. Now that's current.
    If you're going to use debarment and suspension, it goes to 
whether or not in the future the Government can rely on the 
credibility of that contractor. It's a future determination. 
There are 10 points laid out in the FAR that Government 
agencies need to look to whether or not that vendor is capable 
of fulfilling those requirements. We're not there. We haven't 
found out about----
    Mr. Gilman. But, Mr. Jurith, if I might interrupt----
    Mr. Jurith. Yes, sir.
    Mr. Gilman [continuing]. You have the responsibility now of 
determining, are you going to rehire this company or are you 
going to suspend their contract? How do you--and you say it 
might be in the best interest of Government to continue working 
with this company, but how would it be in the best interest of 
working with a company that has defrauded the Government?
    Mr. Jurith. There's been no finding of defrauding the 
Government. That's a matter----
    Mr. Gilman. Well, they're being charged with it in a 
criminal investigation by the Department of Justice.
    Mr. Jurith. It's a different----
    Mr. Gilman. Does that lead you to have some reservations?
    Mr. Jurith. There's a matter going on within the Civil 
Division of the Department of Justice that my staff is in 
constant communication on. We're being monitored. Whether or 
not----
    Mr. Gilman. Wait a second. Captain Westin said----
    Mr. Souder. Mr. Gilman----
    Mr. Gilman. Captain Westin said there's a criminal 
investigation pending.
    Mr. Souder. Mr. Gilman----
    Mr. Jurith. Well, they referred it up to the----
    Mr. Gilman. Is that right, Captain Westin? Is there a 
criminal investigation pending?
    Captain Westin. I, sir, don't know whether--I know it's in 
the hands of the Department of Justice. I think I mentioned 
that the Navy Criminal Investigative Service is what the Navy 
uses to coordinate investigations, our side of any 
investigation with the Department of Justice.
    Mr. Gilman. Well, in your testimony----
    Mr. Souder. Mr. Gilman----
    Mr. Gilman [continuing]. Didn't you say, Captain Westin----
    Mr. Souder. Mr. Gilman----
    Mr. Gilman [continuing]. That in March 2001 that Ogilvy 
made a disclosure to the Navy, the DCAA, ONDCP, the Department 
of Justice regarding costs they couldn't certify, and due to 
the disclosure, the Navy contracting officer referred the 
matter to the Navy Criminal Investigative Service to coordinate 
with the Department of Justice and the investigative arm of 
DCAA. Is that correct?
    Captain Westin. Yes, sir.
    Mr. Souder. Mr. Gilman, we need to go to Mr. Barr. We have 
gone over.
    Mr. Gilman. My time has run. Thank you, Mr. Chairman.
    Mr. Souder. Mr. Barr.
    Mr. Gilman. Could you just respond to that? Is that 
correct, that it has been turned over to that investigative 
agent service?
    Captain Westin. For a contracting officer, that 
organization is what we use to coordinate with investigations 
going on----
    Mr. Gilman. Could you put the mic a little closer?
    Captain Westin. Our contracting officers use that 
organization to coordinate in this case with the Department of 
Justice and any input that we----
    Mr. Gilman. So is it now before the Navy Criminal 
Investigative Service? Is this matter now before them?
    Captain Westin. The Department of Justice, as I understand 
it, has taken jurisdiction over this.
    Mr. Gilman. Thank you.
    Mr. Souder. Mr. Barr.
    Mr. Barr. It is my understanding, Mr. Chairman, that this 
matter is being handled as a criminal matter by the U.S. 
Attorney's Office and by the FBI. There may be a civil 
component to it, but if there is an effort to characterize this 
more benignly as simply a civil matter, that is not my 
understanding. I believe that there is a criminal--that this is 
being handled as a criminal matter. Is that your understanding, 
Mr. Hast?
    Mr. Hast. Yes, that is correct. This is being handled as a 
criminal matter in the Southern District of New York.
    Mr. Barr. OK. You all may want to communicate that to 
ONDCP, please.
    Are any of you all familiar with the provisions of the CFR 
that relate to suspension of Government contracts and payments?
    Mr. Ungar. Some familiarity, sir.
    Mr. Barr. Apparently, more familiar than some of the other 
people at the table. The fact of the matter is, is it not, Mr. 
Ungar, that the U.S. Government, if they believe that there is 
evidence of fraud, it can suspend a contract and suspend 
payments under that contract? Is that correct?
    Mr. Ungar. I believe so, sir. There is a process, a formal 
process, for that which would be within the Navy's purview 
right now, and I believe that's, you know, underway.
    Captain Westin. Yes, sir, we forwarded the allegations and 
the GAO report to Navy's Office of Procurement Integrity, and 
they are the ones charged with determining whether a suspension 
or debarment is warranted.
    Mr. Barr. What was the recommendation? What was the 
conclusion?
    Captain Westin. Our contracting officer's recommendation 
was, because of there are about 10 factors in the Federal 
Acquisition Regulation that they should use to make a 
recommendation for suspension and debarment, that because 
Ogilvy has substantially cooperated with the Government, had 
taken corrective actions, and that we had not--they had 
suspended billing the Government back in July, that we had 
sufficiently protected the Government. So the contracting 
officer thought that, unless something changes--and that might 
include, for example, an indictment or other information coming 
out of the investigation that DOJ is conducting--unless 
something changed, that he felt the Government was adequately 
protected. But it is, again, just the contracting officer's 
recommendation, and it is the Navy Procurement Integrity Office 
that makes that determination.
    Mr. Barr. I am just flabbergasted that, except for GAO, you 
all are just so willing to just sit back and let this process 
continue. It does not require an indictment. It does not 
require a conviction. It simply requires, ``substantial 
evidence.'' And substantial evidence means simply, 
``information sufficient to support the reasonable belief that 
a particular act or omission has occurred.'' That's from CFR.
    Would you all's attitude regarding Ogilvy/Mather be the 
same if it was your personal money at stake? Would you just sit 
back for month after month after month after month after month 
and let them walk away, pocketing additional money, in the face 
of what everybody here, I think, could not argue with a 
straight face is anything other than very serious 
irregularities, if not fraud? That is what dumbfounds me, just 
this silence.
    Captain Westin. Well, speaking for the Navy, we did follow 
the appropriate procedure and refer it to the appropriate 
officials, and they will----
    Mr. Barr. But how long does this take? Have long have you 
all been--you all have been working on this since last year. We 
had a hearing in October of last year, and as far as I can 
tell, other than churning a bunch more paper, nobody has done 
anything except GAO.
    Captain Westin. Well, since our involvement, sir, we have 
followed our----
    Mr. Barr. When did your involvement begin?
    Captain Westin. In January, sir. I mean, excuse me, 
December 1st.
    Mr. Barr. So since last year, 8 months, and going on 9 
months, have gone by. Why is there no sense of urgency? Why is 
there no sense of anything other than, well, gee, you know, 
this thing will take its course; we've sent the paperwork 
forward. And then Mr. Jurith says, in response to a question, 
``Are you all going to send this forward,'' ``Absolutely,'' to 
renew the contract. That is a phenomenal attitude.
    Captain Westin. Well, sir, the GAO report came out on June 
25th, and that was a clear statement of their findings in this 
investigation.
    Mr. Barr. Weren't there pretty clear statements from GAO 
before that? Wasn't there pretty clear evidence before that? 
That is why you all are involved.
    Captain Westin. Yes, sir, but the actual allegations 
concerning the fraudulent----
    Mr. Barr. And Mr. Jurith knew about this back in October--
in April. He knew there were serious problems in April 2000, 
well over a year ago, right?
    Mr. Jurith. Mr. Barr, I mean, clearly----
    Mr. Barr. Or are you going to dispute that?
    Mr. Jurith. Sir, under the law--and I know it's something 
that you're always mindful of, all agencies about--debarment 
and suspension are remedial actions. OK?
    Mr. Barr. No kidding?
    Mr. Jurith. OK, they're used to punish the contractor. 
They're forward-looking. If a contractor has taken steps to 
correct those actions, notwithstanding the past irregularities, 
as I've been advised by our counsel----
    Mr. Barr. Oh, come on, are you saying that----
    Mr. Jurith. Sir, that's the law.
    Mr. Barr. You might want to get another lawyer for ONDCP. 
Maybe that is why we are having these sorts of problems. You 
are telling me that, if somebody comes to you with substantial 
evidence that a company has committed fraud, that as long as 
from the moment they come to you from that point forward, as 
long as they clean up their act and promise not to do it 
again--and, by the way, I don't know that Ogilvy has even 
promised that--that you think there is nothing the Government 
can do to suspend their contract or debar them?
    Mr. Jurith. Sir, what I'm saying to you--no, what I'm 
saying, sir, in the present context, it's gone into the Civil 
Division. They're looking at all of those allegations and will 
make a recommendation to us. Thus far, they haven't done it.
    I have an obligation right now to decide whether or not we 
should exercise the option. OK? And we're going to do that in 
the context of all these issues: whether or not it's in the 
best interest of the Government to do so. I feel confident that 
we're on the right path to make sure----
    Mr. Barr. You feel confident you are on the right path?
    Mr. Jurith. Absolutely.
    Mr. Barr. I think you may be the only one here.
    Mr. Jurith. Well, and I have that decisionmaking authority 
right now, so I'm prepared to exercise it.
    Mr. Barr. To exercise what?
    Mr. Jurith. That decision, whether or not we should 
exercise that option or not.
    Mr. Barr. When did you first become aware of irregularities 
in Ogilvy's billing?
    Mr. Jurith. In the allegation made in April 2000, sir.
    Mr. Barr. And this is despite the fact that you had told 
GAO, when they questioned you, that you were not, that you had 
not been aware of it then, right?
    Mr. Jurith. That's not--that's not--I don't believe I was 
ever asked that by GAO.
    Mr. Barr. I'm sorry, what?
    Mr. Jurith. I don't believe I was ever asked that by GAO.
    Mr. Barr. That you were what?
    Mr. Jurith. I don't believe I was ever asked that question 
by GAO, sir.
    Mr. Barr. Well, maybe we will talk about that.
    Mr. Souder. We are going to do one more round here, and I 
am going to be a little more generous with the clock so that we 
can try to finish up with this round.
    I want to start with just a comment of: It is not an 
acceptable position of this committee and of the Congress that 
overbilling admissions, whether or not a conviction is found, 
is not part of an evaluation, and that I understand that at 
times in a military contract that, to use our earlier debate, 
that if there is a weapons system and you've invested so much 
and you're partway through, and, in fact, then you clean up the 
accounting procedures, just as I mentioned in the nursing home 
area, that at times you continue the contract.
    But the burden of proof switches, because in this case we 
have a GAO audit; we have an admission of overbilling by the 
company. So the burden of proof now would have to go that, to 
continue with this company, that it would be a problem to 
switch the contract. And, in fact, in advertising, since we 
have NIDA's research, since purchasing is not--that Ogilvy is a 
tremendous agency but there are other tremendous agencies as 
well, it is going to be a fairly difficult argument to maintain 
that the experience in purchasing time, that the experience in 
using research, given the fact that we've contracted out the 
research portion, is compelling over the question of not 
whether there has been overbilling, but whether that was 
fraudulent and criminal overbilling or something less than 
that, which would be something we don't fully understand here.
    But I actually want to make sure that Ms. David gets asked 
some questions here because we also want to look where we are 
headed next in the campaign, and I have some questions about 
the media campaign and your research with that.
    Have you noticed significant trends in drug use by the 
youth who have been targeted by the ads? You mentioned a few 
things such as the marijuana. Do you feel that in some of those 
trends, which are small but, nevertheless, significant--every 
change is significant--did they respond in general about ads or 
to these ads specifically?
    Ms. David. They appeared to respond to the ads, but we 
can't tell yet whether they were the specific ads. They have 
been exposed to a lot of anti-drug advertising. Their attitudes 
are generally negative, which is a good thing. But we aren't 
yet able to tie together the exposure to the ads and 
significant change. And what we mean by that is, while there 
were significant changes, we couldn't see among those who were 
the most exposed the most change, and that's the kind of 
connection we make. We haven't seen that yet. We believe that's 
because we need more time for the evaluation period.
    Mr. Souder. Now I understand that whenever you are in 
social policy, it is a little bit different than retail 
marketing, but that was part of my earlier life, and including 
contracting market research studies. Quite frankly, my 
division, it would not have been acceptable to go into 
management after a market research study and say, well, sales 
in this category went up, but it had nothing to do with your 
ad. Do you know why that wasn't a component in the first round, 
to try to find whether the response was directed to the ad?
    Ms. David. Well, we asked the questions, but we don't have 
enough people yet in the sample, which we expect--I mean we 
have people in the sample, but not tied directly to this 
exposure measure to find that connection yet, but we expect 
that in the fall when we report, and absolutely by the spring, 
we will have more data. So it's going to take a little more 
time.
    Mr. Souder. Because one of the questions you said that the 
group that's exposed the most has not had necessarily as much 
response, and that could be because they are higher risk and 
more difficult. It could be several different variables, but 
that certainly is a warning sign.
    For example, I remember years ago in my other life as a 
staff person, there was a research study in Minnesota on the 
effectiveness of birth control clinics in the schools and 
whether or not they reduced incidents of teen pregnancy. In 
fact, teen pregnancy went down in the schools with the clinics, 
but in all the adjacent districts it went down by farther, 
which doesn't prove either direction because there were 
obviously variables going on besides the clinics.
    Do you have any sort of a control group that you are 
measuring to see whether their usage is going down? It is a 
little difficult in mass media advertising, but certainly you 
are doing regional advertising as well.
    Ms. David. Well, what we've done in this is a national 
sample. As you know, the ad campaign runs and everyone has the 
potential for exposure. So we didn't have control groups, but 
what we're trying to do is to look at those who admit they've 
seen the ads. We show them on a computer. They identify those 
ads, yes, we've seen them in the last couple of month, and 
those who most see these ads have the greatest change in 
attitudes and behavior as a method of analyzing that, yes, they 
saw the ads; yes, there is change. When those two things come 
together, we should be able to discern that there was exposure 
and there is change, but you're right, there were other 
influences that we have to set aside and understand those.
    Mr. Souder. In your charge in the analysis, do you make any 
recommendations or do any analysis? Generally speaking, what 
they tell us, because all of us in politics become somewhat 
media experts because we buy a lot of time, that it takes 1,000 
points to get your ad through. Roughly, what kind of intensity 
are the individuals in this target being exposed? Because by 
trying to cover every drug or at least many of them and many 
different markets, I assume that this media buy is not getting 
out 1,000 points in a week to any target.
    Ms. David. Well, I'd say that I would defer to----
    Mr. Souder. I would guess you are looking at more like 100 
to 200.
    Ms. David [continuing]. To ONDCP for those specifics. They 
report to us, and we look at those in the survey. But, 
actually, what we report is what the people in our survey say.
    Mr. Souder. So you are not looking at reaching frequency?
    Ms. David. Well, no, that's not our primary. We take it 
into consideration, but that is reported directly to us from 
ONDCP and the campaign. They tell us what the reaching 
frequency is, and we look at that along with our own data.
    Mr. Souder. Mr. Ungar, did you look at any of these kind of 
questions in your analysis?
    Mr. Ungar. No, sir, we did not in our most recent review.
    Mr. Souder. Mr. Jurith, in the targets--I know in our 
discussion as well--we talked about the problems with ecstacy. 
Do you believe that the media campaign, given the fact that the 
greatest threats to different subgroups change almost every 6 
to 12 months, and what we just heard from the research is that, 
even after a fairly long monitoring period, we can't get a 
subgroup large enough to get a good handle on whether this ad 
campaign is actually effective or whether there are other 
variables, how can we have enough flexibility to deal with the 
problems and yet have the research catch up?
    Mr. Jurith. Mr. Chairman, it's a challenge, but I think the 
campaign does work. Remember, this is a primary prevention 
campaign. So, granted, we have a whole host of new challenges: 
ecstacy, oxycontin, a whole range of issues that have cropped 
up since this campaign was developed. But at the end of the 
day, it's a primary prevention campaign, and we know from our 
experts that we deal with routinely--Allen Libben and his team 
run the campaign in terms of we know that, if you send a clear 
and consistent message to young people about the dangers of 
drug use, how to respond to peer pressure, sending good 
parenting skills to parents, whether it's ecstacy, marijuana, 
cocaine, heroin, you'll be able to inoculate children to the 
dangers of drug use. So we shouldn't be so much blindsided by 
the fact that there's a new drug out there because at the heart 
of it is the primary prevention campaign.
    In terms of ecstacy specifically, you're right, it's a real 
challenge out there now. There's a notion out there that 
somehow in popular media that this is a safe drug to use--
patently absurd. I mean there was a New York Times magazine 
article back in January in the Sunday Times magazine exulting 
the benefits of ecstacy. Fortunately, we got through on the 
media campaign an effective letter back, not myself, but Dr. 
Alan Leshner from the National Institute of Drug Abuse, 
refuting that notion. We need to do a better job.
    One thing the media campaign is doing, in addition to a $5 
million media buy, specifically targeted at ecstacy through the 
Internet or radio and print ads, we're sitting down through our 
media outreach, we've done two roundtables for producers and 
writers in Hollywood and New York to talk about this issue, to 
make sure that when they put ecstacy in the script, it's 
portrayed accurately based on the science.
    On Monday Dr. Don Vereen, my Deputy, testified before the 
Senate Governmental Affairs Committee on just this issue. We 
need to get that accurate information out there. The media 
campaign is doing it.
    Mr. Souder. Thank you. It suggests to me that one of the 
things that I wanted to followup with and will be doing through 
our oversight is to see whether a wide number of dollars, with 
the kind of research we're approaching, and it's relatively 
generic, can actually have a direct impact or whether targeted 
subcampaigns to supplement your other efforts that can get 
relatively rapid turnaround in the market research, like is 
required in other sectors of the business world, and we'll 
continue to look at that question with you.
    Mr. Jurith. You know, prior to the Media Campaign, I don't 
know any of the drug prevention campaigns in the 20 years I've 
been doing this business--I started in this business working 
for Ben Gilman 20 years ago and Charlie Rangel--I don't know 
any other prevention campaign that requires that every 6th 
month we give to the Congress a report.
    Mr. Souder. But the fact is, as we have just heard----
    Mr. Jurith. And we're doing that.
    Mr. Souder. But we just heard from the report that we can't 
find that it was accurately measured.
    Mr. Jurith. Not yet. Not yet.
    Mr. Souder. So it doesn't do us any good to get one every 6 
months if it doesn't measure the specific ads as opposed to a 
general societal track.
    Mr. Jurith. But we're heading in that direction. It takes 
us a bit of a time to get that. We're working on that and 
providing those reports to the Congress. I think that's very 
unique in this campaign. It's the first time it's ever been 
done that I know in the history of drug abuse prevention.
    Mr. Souder. Thank you. Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    I am just curious about something. Just picking up where 
the chairman left off, Mr. Ungar, do you think if we had a 
report every 6 months that included the financial end of things 
also, that would be helpful? In other words, we now talk about 
the effectiveness, but I'm just wondering.
    Mr. Ungar. I don't know if the straight financial numbers 
would be helpful, sir, but I think it might be helpful to get 
progress reports periodically on the actions being taken to 
address the problems that did exist and periodically receive at 
least a summary of the results of DCAA audits of the billings.
    Mr. Cummings. You know, as I sat up here, I first was a 
little bit confused about where the Acting Director was coming 
from, Mr. Jurith was coming from, but now I get it because I 
have now had an opportunity to read, and I see where Mr. Barr 
was coming from, but I also see why the responses are what they 
are. If I could kind of summarize what I think has happened 
here.
    I think what happened is that GAO found some problems, some 
major problems, and what appears to be fraud, and two types of 
situations with regard to employees and time being submitted 
for work that wasn't done. We are at a point now where the Navy 
can--reports have been done. Mr. Jurith is in a position where 
he is sitting there trying to defend, first of all, a decision 
that he hasn't even made yet that's within his discretion. It 
is interesting when we look at--and then when we are talking 
about this debarment and I listened to Mr. Barr, my good 
friend, and I listened to his basically asking why certain 
things have not been done. When we look at the regulations, the 
contracting regulations, I now understand what position you 
find yourself in, Mr. Jurith. It is very interesting.
    First of all, it is my understanding that debarment or 
suspension cannot be imposed for penal purposes, which is very 
significant. You can't do that. You can't do that, and that is 
according to the Federal Acquisition Regulation.
    Now let's just take it a step further. If we want to talk 
about debarment, I guess the question is, well, what factors--
we keep hearing this factors thing. You talked about it, 
Captain Westin. When I began to look at the factors, I 
understand why we are where we are. Because I will just read 
the 10 factors and all credit due to you, Mr. Ungar, and your 
agency, you have done--you see what you see, and you come to 
certain conclusions, but then you have this debarment law, Mr. 
Jurith, that says, ``before arriving''--and I am citing section 
9406-1 of the Federal Acquisition Regulation. It says, ``before 
arriving at any debarment decision, the debarring officials 
should consider factors such as the following.'' Let me just 
give you a few of them.
    Listen to this one: No. 5, it says, ``whether the 
contractor has paid or has agreed to pay all criminal, civil, 
and administrative liability for the improper activity, 
including any investigative or administrative costs incurred by 
the Government and has made or agreed to make full 
restitution.''
    Well, that is interesting because what that implies is that 
there could have been criminal activity. It is our judgment up 
here, and I feel pretty strongly, that if somebody defrauds the 
U.S. Government, that perhaps they should not be participating 
in contracts, but here we have these regulations and we still 
don't know whether they are, in fact, guilty of anything. 
Although they have admitted certain things, the reasons for 
their admissions may be a whole other thing.
    But let's just look at some of the other things that they 
say, because that was probably the one that surprised me the 
most. But when I look at the items, it says, for example, No. 
6: ``whether the contractor has taken appropriate disciplinary 
action against the individuals responsible for the activity 
which constitutes cause for disbarment.''
    No. 7: ``whether the contractor has implemented or agreed 
to implement remedial measures, including any identified by the 
Government.''
    No. 8: ``whether the contractor has instituted or agreed to 
institute new or revised review and control procedures and 
ethics training programs.''
    No. 9: ``whether the contractor has had adequate time to 
eliminate the circumstances within the contractor's 
organization that led to the cause of debarment.''
    No. 10: ``whether the contractor's management recognizes 
and understands the seriousness of the misconduct giving rise 
to the cause of debarment and has implemented programs to 
prevent recurrence.''
    And I have left out one through four, but they are 
basically the same kinds of things.
    No. 4: ``whether the contractor cooperated fully with the 
Government agencies during the investigation in any court or 
administrative action.''
    No. 3: ``whether the contractor has fully investigated the 
circumstances around the cause for debarment and, if so, made 
the result of the investigation available to the debarring 
official.''
    No. 2: ``whether the contractor who brought the activity 
cited as a cause for debarment to the attention of the 
appropriate Government agency in a timely manner.''
    No. 1: ``whether the contractor had effective standards of 
conduct and internal control systems in place at the time of 
the activity which constitutes cause for debarment or had 
adopted such procedures prior to any Government investigation 
of the activities cited as a cause for the debarment.''
    The problem is that when we look at these things--we say, 
on the one hand, Mr. Jurith, why haven't you gotten rid of or 
suspended, but we have some problems. One, nobody has been 
found guilty of anything. This is still the United States of 
America, innocent until proven guilty. Problem.
    Two, you have a situation here where you have got, even 
when you look at one of the worse things that could happen, 
which is debarment, and it already says, the regulation says, 
debarment is not punishment; it is basically to protect the 
Government, but then it tells you the factors that you have to 
take into consideration. And based on the testimony of 
everybody up here today, I would venture to guess that, just 
from what I have heard this afternoon, that it would be kind of 
hard, based on these factors, to debar this company.
    I must tell you that while these are the--he said he was 
going to be liberal with our time, and he was quite liberal 
with his own. I see you reaching for your mic.
    Mr. Barr [assuming Chair]. But we will have some more time. 
Does the gentleman have an estimate of how much longer he 
needs?
    Mr. Cummings. I need the same amount of time that he took, 
which is about 5 minutes more.
    Mr. Barr. The gentleman is recognized for an additional 2 
minutes.
    Mr. Cummings. Mr. Chairman, I think that is unfair, but 
that is OK.
    Mr. Barr. No, there will be additional time, Mr. Cummings.
    Mr. Cummings. No, I just have a few more.
    Mr. Barr. There will be plenty of time. Don't get upset 
over this.
    Mr. Cummings. No, I just want fairness; that's all I want. 
I want fairness.
    Mr. Barr. You shall have it.
    Mr. Cummings. All right, thank you.
    Mr. Barr. The gentleman is recognized for 2 minutes.
    Mr. Cummings. As I was saying, I understand the situation. 
I think what is incumbent--and I don't think that--I think we 
have several problems, too. As you said, Mr. Ungar, from the 
very beginning this thing was put on the wrong track. HHS was 
not doing what it was supposed to do. Ogilvy I think could have 
been a lot fairer to the Government by admitting that or at 
least trying to put into place--I mean, I have seen clients; 
they look at the RFP; if they don't have it, then they scramble 
to try to put it together, to put something in place that fits 
the contract. I don't think that basically happened here.
    Then when we got into the contract, we had a situation 
where perhaps ONDCP didn't do all it was supposed to do. So we 
have, it just seems like, a series of errors. Now the question 
becomes, and now this is sort of why I can understand Mr. 
Barr's concerns, the question is, going back to the reasons for 
debarment, and that is to protect the Government. So the 
question is: Is the Government--I am not so much worried about 
a decision, Mr. Jurith, that you haven't made yet. I am more 
concerned about what is happening right now and whether the 
Government is, whether our funds are being protected, whether 
they are being spent properly. That is what I am concerned 
about because my taxpayers want to know that their tax dollars 
are being spent effectively and efficiently. The last thing I 
want to be able to report to them is that they are not going to 
where they are supposed to be going and spent properly.
    So I would ask you, Mr. Jurith, and I would ask you, Mr. 
Ungar, and you, Captain Westin, I mean, are we in pretty good 
shape right now with regard to what I just said?
    Mr. Jurith. Mr. Cummings, I think we are. I think Ogilvy, 
in response to the 10 facts that you pointed out, I think 
Ogilvy----
    Mr. Cummings. The chairman has only given me 2 minutes. So 
I am about down to about 35 seconds.
    Mr. Jurith. They responded. They have responded in time. 
That decision I referred to will be a joint decision between us 
and Navy as to whether or not we assert that option.
    Mr. Ungar. Mr. Cummings, I think the taxpayers can sleep 
tonight at least in one respect, and that is that, fortunately 
in this case, the Government disallowed several million, 
between $6 and $7 million it has not paid Ogilvy for the time. 
So the Government has the money. So it just needs to be 
determined how that is going to be resolved.
    In terms of the other issues, the one issue on suspension 
and debarment, in our mind, that is still open is disciplinary 
action against the appropriate people and whether any of those 
people who are responsible for the overbilling will still be 
working on the contract.
    Third, there needs to be a separation, at least to some 
extent, between the suspension and the debarment, which is one 
process, and the decision that Ed Jurith has to make on the 
other about whether to recompete the contract, because they are 
related but not necessarily totally dependent upon one another.
    Mr. Cummings. Captain Westin.
    Captain Westin. Yes, sir, I think since the Navy has become 
involved, we have taken every step we felt we could under the 
rules of the Federal Acquisition Regulation to protect the 
Government. We referred the allegations to the appropriate 
official to look at suspension and debarment. We are also 
working closely with ONDCP to review the requirements of their 
statement of work and look at the possibility of alternate 
contracting methods, should he decide it is in the best 
interest of the program and the Government to resolicit.
    Mr. Cummings. Mr. Chairman, I thank you very much for 
giving me that extra 3\1/2\ minutes.
    Mr. Barr. According to the official timekeeper, it was 
almost 12 minutes total, but we are more than happy to extend 
the additional time.
    Mr. Hast, has OSI developed any additional information 
regarding this case since you last testified before this 
subcommittee in October of last year?
    Mr. Hast. Yes, Mr. Barr. At your request, we interviewed 
Bill Gray, the president of Ogilvy. We also received 
information that was troubling to us from Richard Plethner, 
ONDCP's contracting officer, who testified at the last hearing. 
He informed us that he has filed a formal notice for 
whistleblower protection because he believes he's being 
retaliated against because of his cooperation with this 
investigation.
    Finally, in concert with Mr. Ungar's people, who conducted 
the audit of the media contract, we met with the U.S. Attorney 
for the Southern District of New York and the Federal Bureau of 
Investigation in New York and referred evidence of possible 
criminal conduct.
    Mr. Barr. Could you summarize for us very briefly what Mr. 
Gray told you, told your special agents?
    Mr. Hast. Yes. Mr. Gray told us that he had no knowledge of 
any accusations of contract fraud prior to GAO conducting this 
investigation. He also stated that he never told anyone to 
falsify timesheets or otherwise commit fraud in conjunction 
with the media campaign. Also, contrary to what General 
McCaffrey told us, Mr. Gray stated that the general never 
brought up the question of overbilling to him at a meeting.
    Mr. Barr. Can you explain, can you expand maybe, on your 
agents' subsequent contact with Mr. Plethner, just briefly?
    Mr. Hast. Yes. Mr. Plethner expressed that he had deep 
concern about what he described as retaliation directed against 
him by ONDCP management once he announced he was claiming 
whistleblower status. He said that he was basically effectively 
relieved of all of his duties.
    He also told us that, based on our testimony, he wanted to 
give us a copy of an April 13th memo. It's the same one that we 
had on a posterboard that General McCaffrey had made a number 
of comments on. He stated that on an earlier version of that he 
had handwritten notes from Mr. Jurith prior to it going to 
General McCaffrey, and of course the one for General McCaffrey 
had Mr. Jurith's initials on it. Mr. Jurith had told us, when 
we interviewed him, that although he was--last August--although 
he was aware of billing, possible billing concerns, that he had 
no knowledge of memorandums that were presented to him or to 
General McCaffrey alleging contract fraud.
    Mr. Barr. Do you consider this information significant?
    Mr. Hast. Yes. I believe that, in response to the direct 
questions, Mr. Jurith told us that there were no memorandums, 
although he had corrected the memorandum that we had given--had 
received from Mr. Plethner and his initials were on another 
memorandum. Had Mr. Plethner not come forward, I doubt that we 
would be here discussing this. He is the individual that 
brought it to the attention of ONDCP, and then when he found he 
was getting no results, came to us during the very first audit 
that was done by GAO, and told them that there were 
irregularities. Our interview of him resulted in the 
investigation that we conducted both at ONDCP and at Ogilvy.
    Mr. Barr. I am looking at these various memos here and 
trying to reflect on the prior testimony as well. So are you 
saying that, in response to a direct question, Mr. Jurith told 
your agents that no memoranda or e-mails had ever been 
presented to him or to General McCaffrey alleging overbilling?
    Mr. Hast. To the best of his knowledge and recollection, 
yes.
    Mr. Barr. Does that now appear to be the case?
    Mr. Hast. Well----
    Mr. Barr. Looking at all the evidence and looking at the 
memos?
    Mr. Hast. I'm sure that's not what happened. I mean, I 
can't comment on his memory.
    Mr. Barr. The final version of the memo, does it have 
Edward Jurith's initials on it?
    Mr. Hast. It does.
    Mr. Barr. And that is the memo dated April 13th?
    Mr. Hast. Yes, sir.
    Mr. Barr. OK. And is Mr. John Cooney here today?
    Mr. Hast. He is.
    Mr. Barr. OK. Do you have anything to add to this 
discussion, Mr. Cooney? I know you have been very much involved 
in the investigation as well.
    Mr. Cooney. Congressman, no, I believe Mr. Hast has 
answered all of your questions correctly, the way I would have.
    Mr. Barr. OK. Thank you all very much.
    The Chair recognizes the distinguished gentleman from New 
York, Mr. Gilman.
    Mr. Gilman. Thank you, Chairman Barr.
    Mr. Jurith, at this moment what is your intention with 
regard to the Ogilvy contract? What do you plan to do?
    Mr. Jurith. Mr. Gilman, at this point I think we're going 
to follow what the law requires. OK? I think we have an option 
to exercise, and the law requires that in exercising that 
option we look at whether or not it's in the best interest of 
the Government from a fiscal and programmatic point of view to 
exercise that option, which I think is up in December or early 
January.
    Mr. Gilman. Let's see, when does it expire?
    Mr. Jurith. I believe it's January 2, 2002.
    Mr. Gilman. Are they still under contract at the present 
time?
    Mr. Jurith. Yes, sir, they are.
    Mr. Gilman. How much has been paid to Ogilvy to date?
    Mr. Jurith. A total, I don't have that figure in front of 
me, but we can supply it for the record.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 81309.056
    
    Mr. Gilman. Approximately.
    Mr. Jurith. About $224 million, that's what my staff 
informs me.
    Mr. Gilman. I can't hear you.
    Mr. Jurith. About $224 million.
    Mr. Gilman. All together over the entire period of the 
contract?
    Mr. Jurith. Correct, sir.
    Mr. Gilman. $200 and----
    Mr. Jurith. $24 million.
    Mr. Gilman. And how much is due for the balance of the 
contract?
    Mr. Jurith. It depends on their billables, sir.
    Mr. Gilman. It depends on?
    Mr. Jurith. It depends on the billables under the contract, 
which are a mix of direct costs and labor costs.
    Mr. Gilman. Well, what does your contract provide? What 
does your contract provide for the remainder of their billable 
period?
    Mr. Jurith. It involves the direct payments by the company 
to put on the advertising plus their costs incurred. So I don't 
have an exact number in front of me. Roughly, total thus far 
would be about $484 million, as provided to me by staff.
    Mr. Gilman. Hold it just a moment. $484 million for the 
balance of this year?
    Mr. Jurith. That's what I'm informed. I mean total under 
the contract.
    Mr. Gilman. And they received so far $285 million, is that 
right? I am talking about the total contract now.
    Mr. Jurith. $224 million, sir.
    Mr. Gilman. Pardon?
    Mr. Jurith. $224 million.
    Mr. Gilman. $224 paid to date.
    Mr. Jurith. Correct.
    Mr. Gilman. The balance of this year is $600-and----
    Mr. Jurith. $484 million. Mr. Gilman, if I could, if you 
will, let me provide the committee with the exact numbers.
    Mr. Gilman. If you would just give us right now an 
approximate amount that is due this year.
    Mr. Jurith. Mr. Gilman, it's a little bit difficult only 
because there's a question between what is actually billed in 
invoices, and so forth. I would hate to be locked into any 
specific figure----
    Mr. Gilman. Well, you prepared a budget for your committee, 
for your agency.
    Mr. Jurith. No question, sir----
    Mr. Gilman. You must have taken this into account.
    Mr. Jurith. We have. We have, sir.
    Mr. Gilman. So what are you providing for in your budget?
    Mr. Jurith. The budget right now for this year, for 2001, 
under the present media plan calls for about $135.1 million in 
media buy, and only about 7 percent of that, about $11.2 
million in total out of a media plan of $160.3 million is in 
labor costs.
    Mr. Gilman. Well, how did you get that $600 million figure 
you just rattled off?
    Mr. Jurith. I'm sorry, if you would allow me to have staff 
put together a complete breakout for the subcommittee?
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 81309.057
    
    Mr. Jurith. We average about $162 million per year to 
Ogilvy. What I want to do, sir----
    Mr. Gilman. What do you plan to do with that?
    Mr. Jurith. Here's what I plan to do: I've directed both my 
staff in conjunction with the Navy to follow the FAR. We have 
to exercise an option. What do you do? Are the funds available? 
Is there a continuing need for the service? Clearly, the funds 
are available. Congress has appropriated it. There's a clear, 
continuing need for the service, and is that in the best 
interest of the Government? Maybe--and ONDCP needs to be doing 
market research. We're going out to the market; we're asking 
whether or not it makes sense to continue the contract the way 
it is right now.
    One of the things I was told, I was told the----
    Mr. Gilman. Well, does that survey include whether the 
provider of the service is under criminal investigation?
    Mr. Jurith. Mr. Gilman, that's a separate issue. I mean 
that's what Mr. Cummings was getting to. That's a separate 
inquiry under the law.
    Mr. Gilman. It seems to me that's all part of the issue.
    Mr. Jurith. Well, Mr. Gilman I can't invent what the law 
is. The law says, if you're going to debar----
    Mr. Gilman. Chairman Barr pointed out to you that there is 
a bar for any contractor that is under criminal investigation.
    Mr. Jurith. Incorrect. If they've not taken steps to cure 
the problems. Clearly, I think in both our view and in the 
Navy's view, they've done that.
    Mr. Barr. Would the gentleman yield?
    Mr. Gilman. I would be pleased to yield to the chairman.
    Mr. Barr. Thank you. Again, I am not asking you a question 
because I don't want to get in another conversation. We don't 
seem to get anywhere that way.
    The Code of Federal Regulations provides very clear 
authority for a Government agency, when there is substantial 
evidence of fraud, to suspend a contract, and it would be 
absurd to argue otherwise, and I can't believe that you're 
sitting there with a straight face trying to tell us there's 
nothing the Government can do except go out and conduct market 
research. The market doesn't know about the fraud.
    I yield back.
    Mr. Gilman. I thank the chairman.
    Will you consider suspension of the Ogilvy contract based 
on this provision?
    Mr. Jurith. At this point, as Captain Westin has indicated, 
both in looking at the factors under the law, under the FAR, in 
terms of the steps taken by the agency, that remedy at this 
point is not available. Now, remember, Mr. Gilman, the 
Department of Justice is still looking at this issue. At this 
point they haven't told us a definitive answer one way or the 
other. We're waiting for that decision.
    Mr. Gilman. You admit that they are under a criminal 
investigation. That has been brought to your attention, isn't 
that correct?
    Mr. Jurith. As I understand it, this review has been taken, 
from what we understand, by the Civil Division of the 
Department of Justice. I understand that there's been a 
referral to the Naval Investigations Service for the Navy. 
They've referred up to their chain of command through their 
contracting processes. I found out today that there's been a 
referral to the Southern District of New York. I did not know 
that until today.
    Mr. Gilman. To the Criminal Division.
    Mr. Jurith. I just found out that at this hearing.
    Mr. Gilman. Now you know that there is both a Navy criminal 
investigation and a Southern District Department investigation 
in New York. Are you aware of both of those now?
    Mr. Jurith. I am, Mr. Gilman, but, again, I'm bound by the 
FAR, and what the FAR, the Federal Acquisition Regulation, 
tells me what I can and can't do. I need to follow that. I need 
to follow the law, and I'm going to follow that.
    Mr. Gilman. Well, what about the law that says, if there is 
a criminal investigation underway, that you can suspend the 
contract? What about that law?
    Mr. Jurith. It doesn't say that. It says, has the agency 
taken steps to cure the problem? Because, remember, the issue 
is whether or not they're not reliable to the Government. 
That's the test under the law, as I understand. I have been 
advised by my staff----
    Mr. Gilman. Chairman Barr, would you read that section 
again for us?
    Mr. Barr. The section that I believe is operative is 
section 32.006 of 48 CFR, Chapter 1, and it provides that 
payments may be suspended or reduced to a contractor--in this 
case Ogilvy/Mather--when the agency determines there is 
substantial evidence that the contractor's request for advanced 
partial or progress payments is based on fraud. And it defines, 
Mr. Gilman, substantial evidence to mean not a criminal 
indictment, not a conviction, not conviction affirmed on 
appeal, but information sufficient to support the reasonable 
belief that a particular act or omission has occurred.
    Mr. Jurith. Mr. Gilman, in response to that----
    Mr. Gilman. Is there any question about your interpretation 
of that law?
    Mr. Jurith. No question about it, but I think in terms of 
what we've seen at ONDCP, and I think the Navy will concur, 
that we've not seen evidence rising that would--rise concluding 
that conduct to the corporation--that's what we're talking 
about, OK, whether or not that corporation in the future or 
right now is not a reliable vendor to the Government. That's 
the issue.
    Mr. Gilman. In your opinion, are they a reliable vendor?
    Mr. Jurith. At this point I have not seen any evidence to 
say that they're not.
    Mr. Gilman. Well, do you know whether Ogilvy has made any 
remedial changes in their accounting practices?
    Mr. Jurith. They have made quite a few. As a matter of 
fact, yesterday DCCA has signed----
    Mr. Gilman. Do you know that to be on your own personal----
    Mr. Jurith. Yes.
    Mr. Gilman [continuing]. Review of this, that these changes 
have made, or just a report that they have----
    Mr. Jurith. Based upon the information provided to me by 
DCAA.
    Mr. Gilman. By who?
    Mr. Jurith. The Defense Contract Audit Agency. They have 
signed off information that we received yesterday from them.
    Mr. Gilman. What is the date of that report?
    Mr. Jurith. It's dated--it's just says, Mr. Gilman, dated 
July 31, 2001.
    Mr. Gilman. And who submitted that report?
    Mr. Jurith. By the Defense Contract Audit Agency.
    Mr. Gilman. And what did they say?
    Mr. Jurith. They have said----
    Mr. Gilman. What are their findings?
    Mr. Jurith. That the current accounting system and internal 
control policies and procedures of Ogilvy are adequate. Finding 
by the Government--in addition, there's been a finding by DCAA 
that the contractor had developed excellent ethics, 
timekeeping, and FAR Part 31 training programs.
    Mr. Gilman. Now what do they say about the overpayment?
    Mr. Jurith. That wasn't an issue that DCAA was looking at. 
In addition, Mr. Gilman----
    Mr. Gilman. Wait. Hold it. They didn't review the 
overpayment?
    Mr. Jurith. That's the matter that's under review by the 
Department of Justice.
    Mr. Gilman. And this review was not part of the 
overpayment?
    Mr. Jurith. Mr. Gilman, there are two things going on. 
There's the review of the past billing issues that's under 
review by a combination of the Department of Justice and DCAA, 
and there was a prospective requirement to make sure, because 
it wasn't done in the initial award of this contract, to make 
sure that the accounting system was up to standard.
    In addition, OK, Ogilvy has taken a number of steps in 
addition to that. They have replaced their Government contracts 
manager. OK? The financial manager in New York that had 
oversight of this contract has been replaced, and 
PricewaterhouseCoopers has revised Ogilvy's accounting systems 
to meet Government requirements. That's been certified to by 
DCAA.
    So the company has taken a number of steps. So, based upon 
all of that, I can't tell you right now today, pending an 
outcome of the DOJ inquiry, whether or not debarment is 
applicable or not. I think the Navy concurs in that opinion.
    Mr. Barr. Will the gentleman from New York yield for a 
moment?
    Mr. Gilman. I would be pleased to yield to the chairman.
    Mr. Barr. Mr. Hast, maybe I could pose to you the same 
question that the gentleman posed to Mr. Jurith. Let me preface 
it by referring to the memo that Mr. Jurith signed off on dated 
April 13th, the very title of which I would think would raise 
some question about whether the company in question is a 
reliable vendor. The title is ``Irregularities with Ogilvy 
Billing.'' It says there are excessive billing irregularities, 
growing uncertainties with Ogilvy's management practices, 
timesheets were altered, people were charged who had not worked 
on the contract or in the billing period, the labor mix is top-
heavy, staffing levels are extremely excessive, salaries are 
extraordinarily high, etc.
    Are these to you, coupled with the other evidence that you 
all found in your report, indices of a reliable vendor?
    Mr. Hast. No.
    Mr. Barr. Is this the standard or is the standard that Mr. 
Jurith indicates that, in spite of all this, they are a 
reliable vendor? Is that view held by other officials in other 
agencies, do you know?
    Mr. Hast. Not being a contracting expert, I wouldn't know, 
but, as Mr. Cummings said before, it all comes down to how you 
spend your own money. I certainly would not spend my money on a 
company that I felt was doing these types of things.
    Mr. Barr. Thank you. I yield back. Thank you, Mr. Gilman.
    Mr. Gilman. Just one more question, Mr. Chairman.
    Mr. Jurith, as I understand it, despite an admission by 
Ogilvy that they committed overpayment, a fraud, do you intend 
to not act until you receive the Department of Justice report? 
Is that correct?
    Mr. Jurith. Mr. Gilman, I don't know of any statement where 
Ogilvy admitted fraud. What I'm doing now is what's required 
under the FAR. We have to exercise this option. We're going 
through a process where we are now to make sure that if we 
exercise either the option to Ogilvy or rebidding this 
contract, that it's in the best interest of the Government. 
We're working on that through the Navy, doing the market 
research, making sure we've got the right processes and the 
control.
    Whether or not there's a finding to debar in Justice, 
that's a separate issue. We'll take that into account down the 
line.
    Mr. Gilman. If the Department of Justice issues a criminal 
charge against Ogilvy, is that going to affect your thinking?
    Mr. Jurith. Mr. Gilman, at this point we've had no 
indication to that effect from the Department of Justice, and 
my staff is in contact weekly with DOJ on that issue.
    Mr. Gilman. I have asked you, if the Department of Justice 
issues an indictment against this company for some criminal 
conduct, will that affect the way you are going to handle this 
contract?
    Mr. Jurith. Absolutely, but we have no indication that 
that's happening.
    Mr. Gilman. Assume, hypothetically, assume that they do 
issue an indictment. What will be your recourse then?
    Mr. Jurith. Mr. Gilman, my job at this point, I have to 
make a decision in conjunction with the Navy in the next few 
weeks if we're going to start a procurement process over the 
next few months that may require a new vendor for this 
contract. We're going to start that process. What DOD does in 
their inquiry, obviously, we're going to be cognizant of as 
that goes forward. My job is to make sure that I have an ad 
campaign not only for ONDCP, but for the incoming Director when 
he gets confirmed, hopefully, by the Senate----
    Mr. Gilman. The job is to have a good campaign with a 
reliable vendor?
    Mr. Jurith. Absolutely, Mr. Gilman.
    Mr. Gilman. And if you find that the vendor is not reliable 
or has some criminal indictment pending, I assume you will then 
cancel the contract?
    Mr. Jurith. That's a fact. Absolutely.
    Mr. Gilman. Is that correct?
    Mr. Jurith. That's correct. That's the fact, but I don't 
want to speculate on what DOJ may or may not do.
    Mr. Gilman. Thank you, Mr. Chairman.
    Mr. Jurith. Thank you, Mr. Gilman.
    Mr. Barr. I thank the gentleman from New York. The 
gentleman from Maryland is recognized.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Jurith, I have always, since I have been on this 
committee for 5 years, I have always whenever anyone was 
accused of anything and they were sitting here, I gave them an 
opportunity to defend themselves, because I think that if I 
were in that position, I would hope that somebody would do that 
for me. I just want to go back very briefly to Mr. Hast's 
statement with regard to--and he didn't have to make it; it is 
all in the record now, but some earlier statements that you 
made that you didn't know of any memos, and now we have the 
memo here. What do you have to say about that? What do you have 
to say about that?
    Mr. Jurith. Could you repeat the question, Mr. Cummings?
    Mr. Cummings. Sure. Mr. Hast made some statements, and what 
he said was that you had made some earlier statements or 
statement that you had not known of any memos--and correct me 
if I am wrong, Mr. Hast--warning of some possible improprieties 
with regard to Ogilvy. I was just asking--then the memos show 
up, and I was just wondering if you had a response to that.
    Mr. Jurith. Thank you, Mr. Cummings.
    Mr. Cummings. I know it was based upon your memory, or lack 
thereof, but go ahead.
    Mr. Jurith. I spoke to Mr. Hast's personnel, Mr. Cooney and 
Ms. Sullivan, twice, I believe in August of last year. The 
first time they spoke to me, they did not question me about 
this memo. It never came up, nor did I ever see my comments on 
an earlier draft.
    When I did see the memorandum was about a week or so after 
that initial interview when they questioned General McCaffrey 
about this memorandum. At that inquiry the question was 
directed to General McCaffrey and not me.
    Mr. Cummings. OK. Let me, just two things: One of the 
things that Mr. Barr said--and if we really listened to what he 
said very carefully when he was reading from the Code about 
suspension of payment or reduction of payments, I think what 
happened in this case, and I hate to be the interpreter, but 
the more I listen I see what happened. It sounds like what 
happened is Ogilvy kind of suspended itself. It says, 
suspending payments. So in a way I guess Ogilvy suspended 
itself until it could get itself straightened out, changing its 
accounting procedures. So they kind of did it themselves.
    Let me just go back to one other point.
    Mr. Jurith. Mr. Cummings.
    Mr. Cummings. Yes, please.
    Mr. Jurith. If I could reflect, GAO never at any point with 
the OSI or Mr. Ungar's investigation ever questioned me 
specifically about this document. I want the record to reflect 
that.
    Mr. Cummings. I understand, and I want the record to 
reflect that also.
    As far as the president, Mr Hast or Mr. Ungar, the 
president of the corporation, what is his name? Of Ogilvy?
    Mr. Hast. Bill Gray.
    Mr. Cummings. Gray. Apparently, he has been very 
cooperative, is that right? Do you feel he has been very 
cooperative, Mr. Ungar?
    Mr. Ungar. Excuse me, sir. We did not deal with him, but 
Mr. Hast did.
    Mr. Cummings. Yes, I'm sorry, Mr. Hast?
    Mr. Hast. We requested an interview through his attorneys, 
and he was willing to be interviewed and was willing--answered 
all the questions we had to ask.
    Mr. Cummings. All right, just this last thing, Mr. Jurith, 
and I think this will help all of us up here. Mr. Gilman has 
gone, but I think this is very crucial.
    You know, if I were a lawyer representing a competitor of 
Ogilvy, first of all, I would have somebody sitting in this 
room right now. Second of all, I would be on the sidelines 
jumping up and down saying, ``Bid this contract.'' I mean, that 
is what I would be doing. OK, so hang in with me now because I 
have a point I am trying to get to, so that you can help us 
understand your process.
    And what I would be saying, if I were a competitor, is, 
``Look, I'm clean. I haven't done anything. Nobody's 
investigating me. I've done a great job, and I can do just as 
good a job. At least give me a chance to compete.''
    And my question is simply this: What kind of considerations 
go into--I mean, what do you say to that person? In other 
words, he is saying, you know, let Ogilvy be a part of the 
bidding process, but let me in, too. And I wouldn't be 
surprised if there aren't people doing that. There is probably 
somebody sitting in here right now. I don't know who they are, 
but there probably are. And I am just saying: What do you say 
to that person? Because we in this Government, we are trying to 
be fair. I mean, even when I look at all the arguments, 
everything that has been said, and I understand it completely, 
what is happening here.
    Mr. Gilman spent a phenomenal amount of time trying to 
figure out what goes into that decision process, and I 
understand the decision process of whether you continue with 
the contract is separate from debarment, but let me ask you 
this. Hang with me now. Is there some advantage of keeping 
Ogilvy on? I am not asking you for your decision. In other 
words, because they are already on the job, does that reduce 
our cost? Is there a familiarity thing? I am just trying to 
figure out, is there anything that being in place already 
becomes a part of the consideration for maintaining an Ogilvy 
as opposed to that guy who is sitting out, or that lady who is 
sitting out there saying, ``I'm just as good and I want an 
opportunity''?
    Mr. Jurith. Mr. Cummings, clearly, that's one of the issues 
that the market research will surface. I mean, we're heading 
into the last year of the current authorization of this 
program. One of the things the ONDCP and Navy team is going to 
look at is, does it make sense to the Government to change the 
contractor? Obviously, I think that's an issue on the table.
    Mr. Cummings. Last, I just want to thank all of you for 
your testimony. I know it has been a long afternoon. We really 
do appreciate it. I have said it many times: I think so often 
people who work in Government don't get the credit that you are 
due, and I really do appreciate what you all are doing to try 
to address these problems.
    Are you in Government, too?
    Ms. David. Yes.
    Mr. Cummings. I don't have your name. Yes? I just wanted to 
make sure that everybody was covered by my statement. 
[Laughter.]
    But we really do appreciate what you do, and I thank you.
    Mr. Souder [resuming Chair]. I just may have a couple of 
questions, but I want to make a couple of closing comments. One 
is that I don't think it is quite technically correct to say 
that Ogilvy suspended itself because they suspended themselves 
after the GAO report, but they certainly suspended themselves 
before a criminal investigation started, is that correct, Mr. 
Ungar?
    Mr. Ungar. Yes.
    Mr. Souder. In other words, the payments that came in? But 
they certainly knew the report was there and they certainly 
knew there was going to be an investigation. So it is to their 
credit they suspended, but they had, in effect, their hand in 
the cookie jar at the time they suspended. And in the example 
of disbarment and outside things, that wouldn't be quite 
voluntary. It is partly voluntary and partly under pressure.
    I think it is also true that there certainly have to be 
benefits from a contract continuation, but it is also true that 
there are other people who do advertising in the Government, 
and the Partnership for a Drug-Free America has worked with 
this for a long time, and there probably are other people in 
that coalition who have worked with it. We want to make sure, 
Mr. Jurith, as you go through the process that all that is 
given due consideration, because it is--while until you are 
told by law that you can't contract with somebody, you have the 
flexibility, a certain part of the consideration, even if they 
have taken what appears to be protective changes, like Captain 
Westin was referring to, whether or not they will follow 
through with that, given the past performance, and that is a 
factor in the mix of whether you are comfortable with that 
contractor.
    It is important here in Congress that those of us who are 
not numerous--in Indiana we have an expression, ``You can count 
them on one hand and have enough fingers left to bowl''--who 
take an aggressive interest in the drug areas, and we want to 
be supportive of these efforts, it is important that the people 
who are most supportive of prevention efforts understand and 
have confidence as we go out to sell it. That is not precluding 
that Ogilvy isn't the person, but let's just say you can hear 
there's deep concerns and hope that these type of things don't 
happen in the future.
    I am also interested--and, Mr. Ungar, maybe you can tell me 
off the top of your head whether you know this--have we looked 
at other ad campaigns that the Government does in any generic 
or comparative way compared to what is being done in this 
campaign? Or do you know of any GAO audits that look across the 
board of how we deal with advertising?
    Mr. Ungar. Not off the top of my head, sir. We would have 
to look at some of--I know we've looked at advertising 
contracts for the Government. I'm not quite sure we have done 
it as comprehensively as you're suggesting. I would have to 
look into that.
    Mr. Souder. And I don't know whether that would be worth 
the effort to do that, but I would appreciate it if you could 
see what is there. Clearly, it would be recruiting campaigns in 
the military. Clearly, there are multiple things in HHS. We 
have all sorts of research on different ad campaigns. But to 
kind of look at how we do this--it almost appears like we 
charged in as if this was a new concept for the Government, and 
I want to see that doesn't happen in the future, that we look 
at the research measurements.
    I want to thank you for spending your afternoon with us. I 
would repeat what Congressman Cummings says: It is not easy 
being in the public servant's spot because the fishbowl is 
different than in the private sector, and Ogilvy has learned 
that the fishbowl in advertising is different. What we need to 
do is we need to enforce the standards of the Government that 
are rigid, but the fact is that we don't want to discourage 
private sector people from getting involved, but it definitely 
is--there are many more guidelines, and when there are errors, 
you are in a national fishbowl. It is our job as an oversight 
committee to make sure that those guidelines are followed.
    With that, our subcommittee stands adjourned.
    [Whereupon, at 5:07 p.m., the subcommittee was adjourned.]

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