[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
___________
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
81-309
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402�090001
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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