[Senate Hearing 109-246]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 109-246
 
             THE DEFENSE TRAVEL SYSTEM: BOON OR BOONDOGGLE?

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

                                HEARING

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           SEPTEMBER 29, 2005

                               ----------                              



       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs



                                                        S. Hrg. 109-246

             THE DEFENSE TRAVEL SYSTEM: BOON OR BOONDOGGLE?

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

                                HEARING

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 29, 2005

                               __________



       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs




                    U.S. GOVERNMENT PRINTING OFFICE
24-241                      WASHINGTON : 2006
_____________________________________________________________________________
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                      Trina D. Tyrer, Chief Clerk


                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   NORM COLEMAN, Minnesota, Chairman
TED STEVENS, Alaska                  CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 DANIEL K. AKAKA, Hawaii
LINCOLN D. CHAFEE, Rhode Island      THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico         FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia             MARK PRYOR, Arkansas

       Raymond V. Shepherd, III, Staff Director and Chief Counsel
                  C. Jay Jennings, Senior Investigator
        Elise J. Bean, Minority Staff Director and Chief Counsel
                     Mary D. Robertson, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Coleman..............................................     1
    Senator Coburn...............................................     5
    Senator Levin................................................    18
    Senator Carper...............................................    19

                               WITNESSES
                      Thursday, September 29, 2005

Hon. Charles Grassley, a U.S. Senator from the State of Iowa.....     3
Thomas A. Schatz, President, Citizens Against Government Waste...     8
Robert Langsfeld, Partner, The Corporate Solutions Group, Menlo 
  Park, California...............................................     9
Thomas F. Gimble, Acting Inspector General, U.S. Department of 
  Defense........................................................    25
Scott A. Comes, Director, Strategic and Information Programs 
  Division, Program Analysis and Evaluation, U.S. Department of 
  Defense........................................................    27
McCoy Williams, Director, Financial Management and Assurance, 
  U.S. Government Accountability Office..........................    28
Zack E. Gaddy, Director, Defense Finance and Accounting Service, 
  U.S. Department of Defense.....................................    29

                     Alphabetical List of Witnesses

Comes, Scott A.:
    Testimony....................................................    27
Gaddy, Zack E.:
    Testimony....................................................    29
    Prepared statement...........................................    93
Gimble, Thomas F.:
    Testimony....................................................    25
    Prepared statement...........................................    60
Grassley, Hon. Charles:
    Testimony....................................................     3
Langsfeld, Robert:
    Testimony....................................................     9
    Prepared statement with attachments..........................    49
Schatz, Thomas A:
    Testimony....................................................     8
    Prepared statement...........................................    41
Williams, McCoy:
    Testimony....................................................    28
    Prepared statement...........................................    65

                                EXHIBITS

 1. GThrough the Looking Glass, a Citizens Against Government 
  Waste Special Report: Defense Travel System: The Twilight Zone 
  of Travel, September 28, 2004..................................   100
 2. GReport of The Corporate Solutions Group, eTravel/DTS Fare 
  Audit, Task ``A,'' Report and Findings, Executive Summary, 
  Revision III, May 5, 2005......................................   115
 3. GReport of The Corporate Solutions Group, eTravel/DTS Fare 
  Audit, Task ``A,'' Report and Findings, Revision IV, May 5, 
  2005...........................................................   121
 4. GReport of The Corporate Solutions Group, eTravel/DTS Fare 
  Audit, Task ``B,'' Report and Findings, Revision I, April 18, 
  2005...........................................................   246
 5. GDepartment of Defense Inspector General Report, Allegations 
  to the Defense Hotline on the Management of the Defense Travel 
  System, July 1, 2002...........................................   307
 6. GDepartment of Defense Program Analysis and Evaluation (PA&E) 
  Division Report, Defense Travel System Cost Effectiveness 
  Review, December 2002..........................................   356
 7. GDepartment of Defense Project Management Office rebuttal to 
  DOD PA&E'S December 2002 Report, Defense Travel System Cost 
  Effectiveness Review...........................................   373
 8. GCorrespondence from David S. C. Chu, Under Secretary of 
  Defense, to The Honorable Norm Coleman, Chairman, Permanent 
  Subcommittee on Investigations, dated September 29, 2005, 
  regarding Defense Travel System................................   375
 9. GResponses to supplemental questions for the record submitted 
  to Thomas Schatz, President, Citizens Against Government Waste.   376
10. GResponses to supplemental questions for the record submitted 
  to Robert Langsfeld, Partner, The Corporate Solutions Group....   377
11. GResponses to supplemental questions for the record submitted 
  to Thomas F. Gimble, Acting Inspector General, U.S. Department 
  of Defense.....................................................   381
12. GResponses to supplemental questions for the record submitted 
  to McCoy Williams, Director, Financial Management and 
  Assurance, Government Accountability Office....................   386
13. GResponses to supplemental questions for the record submitted 
  to Dr. Scott A. Comes, Director, Strategic and Information 
  Programs Division, Program Analysis and Evaluation, U.S. 
  Department of Defense..........................................   391

 
             THE DEFENSE TRAVEL SYSTEM: BOON OR BOONDOGGLE?

                              ----------                              


                      THURSDAY, SEPTEMBER 29, 2005

                                     U.S. Senate,  
              Permanent Subcommittee on Investigations,    
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 342, Dirksen Senate Office Building, Hon. Norm Coleman, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coleman, Coburn, Levin, and Carper.
    Staff Present: Raymond V. Shepherd, III, Staff Director and 
Chief Counsel; C. Jay Jennings, Senior Investigator; Leland 
Erickson, Counsel; Mary D. Robertson, Chief Clerk; Melissa 
Stalder, Intern; Melissa Audick, Intern; and Peter Levine 
(Senator Levin/Armed Services Committee).

             OPENING STATEMENT OF CHAIRMAN COLEMAN

    Senator Coleman. This hearing of the Permanent Subcommittee 
on Investigations is called to order.
    Our first witness will be Senator Grassley. What I am going 
to do is begin my opening statement, but when my colleague 
comes, we always defer to the Chairman of the Finance Committee 
and we will have him give his statement and then move on to the 
other panels.
    I should also note that we have a vote at 11--I will have 
to leave at 11:15. We need to be in our seats by 11:20 and then 
a vote on the Roberts nomination at 11:30, so I will adjourn 
the hearing and after that vote, we will reconvene and finish 
up the testimony. So we will be adjourning at 11:15.
    Good morning and thank you for attending today's hearing. 
Nobel Prize winning economist Milton Friedman once stated, 
``Governments never learn, only people learn.'' I disagree. My 
job as Chairman of the Permanent Subcommittee on Investigations 
is to ensure that our government learns as well. Simply put, 
that is why we are having this hearing, ``The Defense Travel 
System: Boon or Boondoggle?'' It follows from other 
investigations this Subcommittee has held on Defense Department 
waste, fraud, and abuse.
    In November 2003, this Subcommittee conducted a hearing on 
the Department of Defense's use of first and business class 
airline travel. At the hearing, it was determined that DOD had 
not properly authorized or justified 73 percent of the first 
and business class travel undertaken in the fiscal years 2001 
and 2002. DOD spent $124 million on over 68,000 tickets during 
these 2 years. The improper authorization and justification of 
these tickets resulted in the improper expenditure of over $60 
million in 2 years.
    On February 12, 2004, the Subcommittee held a hearing on 
``DOD Contractors Who Cheat on Their Taxes.'' The hearing 
examined the failure to collect unpaid taxes owed by 
contractors doing business with the Department of Defense and 
getting paid with taxpayer dollars. The Subcommittee determined 
that 27,000 DOD contractors owed $3 billion in unpaid taxes. 
The taxes were not collected because DOD was not validating 
contractors' taxpayer numbers and was not referring contractor 
payments to the Financial Management Service to identify unpaid 
tax debt.
    This hearing is designed to determine if DTS is the 
windfall to DOD travel that it was promised to be or simply a 
waste of taxpayers' money. I have repeatedly asked DOD about 
DTS because there are credible allegations that DTS has very 
serious problems. Specifically, I have heard that DTS is 4 
years behind schedule; is deployed to barely half of the 11,000 
DOD travel sites; has grown in cost from $273 million to $500 
million--and even for government that is a lot of money--it 
does not identify the lowest available airline fares; it does 
not identify all available lodging facilities that offer 
government rates; and has not generated the projected cost 
savings for travel agent services and voucher processing.
    I am particularly concerned with DOD's failure to realize 
the projected cost savings for travel agent services. This has 
occurred because DOD has made the use of DTS voluntary rather 
than mandatory at those sites where it has been deployed. The 
current utilization rate for DTS at those sites is about 5 
percent. DOD pays travel agents about $5 for DTS transaction as 
compared to about $25 for a traditional transaction. Thus, 95 
percent of DOD's travel transactions are costing DOD $20 more 
for each transaction. This translates into millions of dollars 
that DOD is wasting in realized cost savings.
    On three separate occasions over the past 2 years, I have 
asked DOD to respond to these allegations. DOD has been 
unresponsive. For example, I asked DOD if DTS always finds the 
lowest available airfare. DOD begged the question by stating 
that DTS displays GSA contracted city pair flights without 
stating that these are always the lowest cost fairs.
    Finally, on August 11, I sent a Chairman's letter to the 
Secretary of Defense in which I laid out my concerns with DOD's 
failure to respond to allegations about DTS. Further, I 
requested that the Secretary suspend further implementation of 
DTS until the questions about the system have been fully 
addressed and resolved.
    Let me be specific about that. One year and one day from 
today, the DTS contract will expire. Before DOD renews the DTS 
contract, the substantive problems and cost and benefit 
questions about DTS need to be fully resolved. To ensure that 
DTS is comprehensively and objectively reviewed, I have asked 
the Government Accountability Office and the DOD Inspector 
General to evaluate and report on DTS. I asked GAO to identify 
the problems that need to be addressed and I have asked the 
Inspector General to conduct a cost benefit analysis and 
determine if DTS will address DOD's travel needs. Those 
evaluations and reports are to be concluded before the DTS 
contract is renewed and will provide the Secretary with the 
answers he needs to ensure that hundreds of millions of 
taxpayer dollars are not wasted on an inefficient travel 
system.
    That is a perfect entree to our first witness before this 
Subcommittee. I would like to welcome the Chairman of the 
Senate Finance Committee, Senator Charles Grassley. Senator 
Grassley testified at our November 2003 hearing on DOD's 
improper use of first and business class airline travel. This 
was the first in a series of Subcommittee hearings that focused 
on waste, fraud, and abuse in the Department of Defense.
    Senator Grassley, I welcome you back to this Subcommittee. 
I know that you have a great interest and expertise in the 
subject matter of this hearing. You have worked aggressively 
over the years to expose waste, fraud, and abuse in government 
and I thank you for that focus and for that service and I thank 
you for your participation in today's hearing and look forward 
to hearing your testimony.
    Senator Grassley, you may proceed.

  TESTIMONY OF HON. CHARLES GRASSLEY, A U.S. SENATOR FROM THE 
                         STATE OF IOWA

    Senator Grassley. I want to thank you, too. You are doing a 
very fine job in the leadership of this Subcommittee in this 
area and in a lot of other areas, as well. I want to thank you 
for doing that. Your Subcommittee is a premier committee for 
getting to the bottom of a lot of problems that we have in 
government and bringing them to light and finding solutions for 
them, and I am sure the same end result will come as a result 
of what we are doing here.
    Although, as your statement probably made clear, as well as 
my statement will make clear, it is kind of frustrating that we 
think we make progress 2 or 3 years ago and then review it now 
and you wonder whether you have made any progress.
    As you said, I have been looking into waste, fraud, and 
abuse in the Department of Defense travel for several years. I 
started with charge cards, travel cards, and purchase cards. I 
think we are all very familiar now with the stories of 
inappropriate purchases made with government charge cards. That 
led to concerns about other aspects of Department of Defense 
travel.
    Mr. Chairman, you and I and others asked the Government 
Accountability Office to look into improper premium class air 
travel and I testified at a hearing before this Subcommittee in 
November 2003. We also asked the GAO to issue reports on unused 
airline tickets going to waste as well as fraudulent travel 
claims. I also testified at a hearing before the full 
Governmental Affairs Committee on those issues in June 2004. At 
both of those hearings, representatives of the Department of 
Defense came in here with very embarrassing testimony, 
promising to do better. They said that there was this new 
computer system called the Defense Travel System that will fix 
all the problems.
    It happens that by that time, DTS already had problems that 
we were probably unaware of at that time, but we are now very 
aware of. It was originally supposed to be fully implemented by 
2002. As this deadline approached, the Department of Defense 
restructured the contract and I assume they were doing it 
because they saw problems with it at that particular time. But 
anyway, it was stalled through the restructuring of the 
contract. The taxpayers, of course, are now paying most of the 
development costs and the new deadline to have DTS fully 
implemented, it is my understanding, is going to be at the end 
of the year 2006.
    In July 2003, the Inspector General of Defense issued a 
report criticizing DTS for being behind schedule and over the 
projected cost. In 2003, the Department of Defense Program 
Analysis and Evaluation Division completed a report questioning 
whether DTS was the most cost-effective solution to these 
problems that you and I have brought forward, but it still 
survived.
    Despite all its problems, we then have lots of taxpayers' 
money being sunk into DTS. I want to know, as a result of all 
these expenditures, and I don't ask questions like this just of 
the Department of Defense but recently I asked them of the 
Department of Justice and FBI on one of their computer systems, 
that we need to know what the taxpayers are getting for their 
money. Is there any end to getting to the bottom of the 
problems of this program? And will we have something 
functioning and getting our taxpayers' money's worth, or was it 
a big mistake right from the very beginning? In the case of the 
FBI, they started all over again.
    I think we need to ask of DTS, really, is it a silver 
bullet that will solve all of the DOD's travel problems? Will 
it prevent improper premium-class travel? Will it catch unused 
airline tickets so that refunds can be obtained? Will it 
prevent fraudulent travel claims from being processed?
    These are all questions that you and I have asked before, 
Mr. Chairman, and we still don't have a system in place that is 
going to answer these, and that is why we have the problems 
brought to our attention and the waste of taxpayers' money.
    I understand now that the Government Accountability Office 
is going to testify that DTS can be helpful in some of these 
areas, although it is clearly not a cure-all as it was 
advertised to be. Now, maybe the testimony will say something 
different, but that is what I understand will be the gist of 
it.
    Moreover, I understand that DTS currently cannot be relied 
on to find the lowest available airfare consistent with the 
travel requirements of the Department of Defense. Now, that is 
really, when you get right down to it, if you are going to have 
a new control system in place, that is a pretty basic function 
that we ought to expect from a travel system.
    Since taxpayers' money went into the development of DTS, I 
think we should also know what we purchased. Usually, when the 
government pays to have something developed, it owns the final 
product. That doesn't appear to be the case as you read the DTS 
contract. So what exactly did the government buy with all of 
this money?
    Finally, we have to ask, is DTS the most cost-effective 
option for DOD travel at this point?
    So, Mr. Chairman, I, of course, commend you for holding 
this hearing. I know that as a result of this hearing, you will 
get answers to these questions and hopefully enough has been 
learned from the mistakes of the past that whatever we are told 
today and the deadlines that are in place to accomplish the 
goals that we want to accomplish will be met. It will take your 
watchdogging, as you have done, to make sure that happens. I 
know you know that you have to be ever vigilant when you are 
doing oversight, and I thank you for being that way.
    I have said everything I can say at this point. I might 
have something to say after I heard other testimony, but I 
won't be able to come back.
    Senator Coleman. Senator Grassley, first, again, I want to 
thank you. You certainly inspired me in the work that we are 
doing here from your efforts, and you have laid out the 
questions that I hope we get some answers to today, or at least 
begin a process.
    My concern on this, you talked about taxpayers paying for 
development costs. I don't think that was the original intent 
when this system was contracted out. You indicate that we hear 
now, as I have reviewed the testimony and the reports, that it 
may be helpful, but if you are spending $500 million on 
something that originally was a $263 million program, it better 
be more than helpful. It should be delivering what you think it 
should deliver.
    You have laid out the questions. What about premium-class 
travel? Does it deal with unused tickets? Does it stop 
fraudulent travel? Does it provide the lowest-available 
airfare? And then, ultimately, your last comment, is it most 
cost effective?
    I am hopeful that we are engaged in a process now that will 
help us get responses to that and determine whether our 
taxpayer dollars are being used wisely. If they are not, then 
we have to do something about it.
    Again, I thank you for your leadership in this area and I 
look forward to working with you. I say this in my opening 
statement. This is part of a process. This is not simply a 
hearing and we are done. We will have some responses, but we 
will continue to look at this issue and move forward on it. So 
again, I thank you for your leadership and then for your 
testimony today.
    Senator Grassley. And if need be, I have a couple of good 
staff people. If your staff needs any help, I would be glad to 
have them involved, but I know you have very good staff, too.
    Senator Coleman. I look forward to working with you on this 
issue, Mr. Chairman. Thank you so much, Senator Grassley.
    Senator Grassley. Thank you.
    Senator Coleman. Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Senator, I appreciate you holding this 
hearing. The second week I was a U.S. Senator, I became 
involved in this. I won't be able to stay for the hearing and I 
don't have a formal opening statement other than to say I am 
highly concerned about procurement methods, transparency, and 
accountability in our government. Our Subcommittee has been 
holding hearings. We have had 14 thus far in terms of 
oversight, and we will probably have 10 more before the year is 
out on oversight.
    I would just ask unanimous consent to submit five pages of 
questions for the witnesses today that I would like to submit 
and have answers back within 2 weeks.
    Senator Coleman. Without objection, that will be done.
    Senator Coburn. I thank the Chairman and I thank him for 
holding this hearing.
    Senator Coleman. Thank you, Senator Coburn. I am surrounded 
by Chairman Grassley and Senator Coburn, who both have been 
dogged in their determination to protect taxpayer dollars and 
deal with fraud, waste, and abuse, and so I greatly appreciate 
your interest, your participation, and the leadership that you 
are providing with your Subcommittees. So I look forward to 
working with you and we will get those questions to the 
witnesses and make sure that we have answers. Thank you.
    I am going to just finish with the rest of my opening 
statement and then we will call the first panel.
    DTS was expected to be a boon to DOD travel needs by 
cutting costs and red tape for DOD's travelers. However, by 
2001, the commercial off-the-shelf travel software that DOD had 
planned to use failed its operational tests, and it became 
clear that DOD would not be able to translate its concept into 
reality.
    Rather than terminating and rebidding the project, however, 
DOD restructured the DTS contract to develop a web-based travel 
system. This restructuring increased the projected costs of 
DTS, as I noted before, from $263 to $492 million.
    During this time, the DOD Inspector General began receiving 
complaints of DTS fraud and waste on its hotline. After 
numerous complaints, the IG initiated an audit of DTS. Of the 
nine complaints the Inspector General received, it was able to 
substantiate four of them. More importantly, the report 
concluded there was a substantial risk that DTS would not 
deliver a viable, integrated travel management system and 
initially recommended that funding for the development and 
deployment of DTS be suspended until a determination was made 
as to whether DTS was the most cost-effective solution to DOD 
travel needs.
    In response to the Inspector General's report, the 
Controller tasked the Program Analysis and Evaluation Division 
(PA&E) with conducting a cost-benefit study and further agreed 
to abide by its findings. The study concluded that it could not 
verify that DTS provides the most cost-effective solution to 
DOD's travel needs because there could be alternative solutions 
that are less expensive. Despite these findings, DOD decided to 
push ahead with DTS on October 20, 2003.
    While DOD claims it has fully considered the Inspector 
General's and PA&E's concerns as part of its top-level 
management decision to go forward with DTS, I have seen no 
studies or reports that clearly address and resolve those 
concerns. Instead, I continue to see reports that question DTS' 
effectiveness or hear allegations that the IG's and the Program 
Analysis and Evaluation Division's concerns have not been fully 
addressed.
    For example, the PA&E's study raised the question about who 
owns the DTS, the contractor or the DOD. The ownership of DTS 
has both cost and competitive implications for DOD. Seven 
months after DOD's decision to move forward, the Department of 
Justice informed Judge George W. Miller of the U.S. Court of 
Federal Claims that DTS belonged to the contractor and not to 
DOD, and that concern was raised by my colleague, Senator 
Grassley. This clearly is an issue that needs to be resolved. I 
expect to get some responsive answers from DOD on that issue.
    Today, we will hear testimony from some of the individuals 
and organizations that help to administer DTS or who have 
raised concerns about DTS' costs and performance. They will 
share with us their concerns about DTS.
    We will also hear from representatives of the GAO, the DOD 
Inspector General, and the PA&E, who will testify about reports 
or studies they wrote that have questioned the costs and 
benefits that DTS offers DOD.
    Finally, we will hear from the Controller and Director of 
the Defense Finance and Accounting Service, who are the 
principal officials responsible for DTS.
    Before hundreds of millions of additional taxpayer dollars 
are unnecessarily wasted, it is imperative that DOD adequately 
address the many questions that have been raised regarding the 
cost effectiveness of DTS. I expect DOD to provide answers to 
these questions during today's hearing. My colleague, Senator 
Coburn, and others also have that same expectation.
    With that, we will call our first panel and welcome our 
first witnesses today. Actually, it is technically our second 
panel since Senator Grassley was a panel in and of himself.
    I would like to welcome Thomas Schatz, the President of the 
Citizens Against Government Waste located here in Washington, 
DC, and Robert Langsfeld, Partner of the Corporate Solutions 
Group of Menlo Park, California. I appreciate your attendance, 
gentlemen, at today's hearing and look forward to your 
testimony and assessment of the Defense Travel System.
    Before we begin, pursuant to Rule 6, all witnesses who 
testify before the Subcommittee are required to be sworn in. At 
this time, I would ask you to rise and raise your right hand.
    Do you swear that the testimony you are about to give 
before the Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Schatz. I do.
    Mr. Langsfeld. I do.
    Senator Coleman. Thank you, gentlemen. We will have a time 
system here. A minute before you should be done, before the red 
light comes on, you will see the light change from green to 
yellow. If you desire, we will certainly have your full written 
testimony entered into the record, but we urge you to try to 
stay within the time limits. As I said, we have a vote and we 
will have to adjourn at a set time today.
    Mr. Schatz, why don't you go first, followed by Mr. 
Langsfeld, and then after we have heard the testimony, we will 
turn to questions. Mr. Schatz, you may proceed.

 TESTIMONY OF THOMAS A. SCHATZ,\1\ PRESIDENT, CITIZENS AGAINST 
                        GOVERNMENT WASTE

    Mr. Schatz. Thank you very much, Mr. Chairman. I 
congratulate you and your staff and certainly Senator Coburn 
and his staff for helping to bring this to this level of a 
hearing.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Schatz appears in the Appendix on 
page 41.
---------------------------------------------------------------------------
    We issued a report 1 year and 1 day ago,\2\ September 28 of 
last year, on the Defense Travel System, so we very much 
appreciate the effort that has been made and the information 
that you have provided. You provided an excellent summary of 
what has occurred and why we are where we are today, so I want 
to take just a minute or two to talk about our organization, 
what we have done, and what we would like answers to, as well, 
because the answers do lie with the people that are in charge 
of the system, and that would be the Department of Defense, the 
Inspector General, PA&E, and others that are the ones that 
should be providing the information. We are certainly 
disappointed that we have not gotten, or you have not gotten a 
more prompt response to your questions. Perhaps that might have 
avoided the ongoing issues that surround DTS.
---------------------------------------------------------------------------
    \2\ See Exhibit No. 1, which appears in the Appendix on page 100.
---------------------------------------------------------------------------
    Citizens Against Government Waste was created 21 years ago 
following the Grace Commission report. Much of what the Grace 
Commission and, in turn, CAGW looked at is waste, 
mismanagement, and inefficiency, in particular in the 
Department of Defense and in procurement. We have been 
following these issues for many years and we know that you and 
your Subcommittee are quite interested, as well.
    The original rational for DTS actually was something the 
Grace Commission recommended, a more cost-effective way to 
manage travel at the Department of Defense. But on the way to 
this web-based travel system, there were several bumps in the 
road.
    You have already described the original contract, which was 
supposed to provide an end-to-end web-based travel system. That 
means a system that could track authorization, produce tickets 
and vouchers, track expenses, and reimburse travelers. We know 
that parts of that are being done, but not all of that 
apparently is being done. And, of course, the effort to take 
the commercial off-the-shelf system and modify it did not work.
    The other part that we find questionable from a taxpayer 
standpoint is the original intent to have Northrop Grumman be 
paid following full deployment of the system, meaning 
installation, but not necessarily usage, at 11,000 DOD 
facilities. Then they would be paid only if a transaction was 
completed. That cost was supposed to be $263 million, and 
development was supposed to be paid for by the contractor.
    Instead, following the restructuring, which the U.S. Court 
of Claims said violated the Competition in Contracting Act, 
everything was changed so that DOD paid Northrop for 
development. Some have suggested that DOD may end up paying the 
same amount, $263 million, but there is a difference between 
development and a per-transaction reimbursement after 
development. In other words, there is no guarantee that 
Northrop ever would have been paid that full amount because 
that would have required full usage, and we know from what you 
have said and from what we have heard and certainly other 
studies that usage is, first of all, not required or mandated, 
and second of all, many who are using it don't necessarily like 
using it.
    That is one of the things that we would like an answer to, 
is why was this written in a way that didn't require full 
usage. Why would you spend hundreds of millions of dollars on a 
system and then not require the Department of Defense to 
utilize it?
    We have certainly examined and heard of many other problems 
with software development at the Federal level. Senator 
Grassley mentioned the Virtual Casefile at the FBI. Eventually, 
they pulled the plug on that. That is at least a question to 
consider here, or certainly what we might do going forward.
    The other question, one that you asked, is who owns it? The 
question may be why the GSA is paying the contractor and not 
paying DOD and what is going to go on once it is fully 
developed. There are also some questions which haven't been 
addressed about who was involved in the decisionmaking process, 
some individuals at DOD. We are not suggesting anything, but we 
hope that is part of your investigation, as to who was involved 
in the final decision and when that occurred.
    Senator Coburn is considering an amendment to move this 
from the DTS over to the e-travel system at GSA, another 
question that should be examined by the Subcommittee.
    The most recent GAO report, issued in March, and I know 
they are going to comment, said that the full cost would be 
$4.3 billion, or $4.39 billion, so there are lots of numbers 
being thrown around. We would like to know which is which. That 
report also said the National Guard is having major problems in 
terms of mobilization vouchers and authorizations, so that also 
should be further examined by the Subcommittee.
    Mr. Chairman, the bottom line is whether taxpayers will 
ever know what they are getting for their money and whether or 
not we did waste or didn't waste hundreds of millions of 
dollars now and in the future.
    Thank you. I will be happy to answer any questions.
    Senator Coleman. Thank you very much, Mr. Schatz. Mr. 
Langsfeld, you may proceed.

   TESTIMONY OF ROBERT LANGSFELD,\1\ PARTNER, THE CORPORATE 
            SOLUTIONS GROUP, MENLO PARK, CALIFORNIA

    Mr. Langsfeld. Good morning, Mr. Chairman. Thank you for 
having me here today. I am the founding partner of The 
Corporate Solutions Group. We are a consulting firm providing 
services to the government and corporate organizations. I also 
request that a full copy of the presentation be placed into the 
record, sir.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Langsfeld appears in the Appendix 
on page 49.
---------------------------------------------------------------------------
    Senator Coleman. Without objection.
    Mr. Langsfeld. Thank you. I am here today because we were 
awarded a task order by GSA to perform an audit and study the 
Contract City Pair Program, the DTS program, and the three ETS 
programs. We were asked to determine, among other things, 
whether DTS actually displayed the best policy-compliant fares 
that are available at the time of the booking. The study was 
intended to provide an accurate, independent assessment of fare 
presentations for each of the tested systems.
    First, our team was asked to perform an initial review of 
the inventory platform. That is, we were asked to make sure 
that all the Government's City Pairs are in the booking 
systems. We have prepared a slide that shows how the City Pairs 
make their way into the database, and as you can see from the 
slide, the GSA conducts procurement and then awards the City 
Pair contracts to the winning airlines. The rates are then sent 
to a processing group, the Airline Tariff Publishing Company, 
and then loaded into the respective global distribution 
systems, such as Sabre, Galileo, Worldspan, and Amadeus. Once 
the fares are in the GDS, the DTS and ETS web-based travel 
systems access that information, process it, and display it to 
the Federal traveler.
    During our review of this inventory, we found that 7 to 8 
percent of all these fares either were not loaded correctly or 
were not loaded at all into the GDS. Therefore, they were not 
available for DTS to capture and display and for the DTS 
traveler to select.
    When this anomaly was disclosed to GSA, they responded that 
they considered this to be totally acceptable, at 8 percent. 
GSA also refused to provide our company with the source 
documentation to verify the fares and who was responsible for 
those issues. We were told to look at the websites, the GSA 
website to find the fares, and without that, we were not able 
to provide an opinion without source documentation.
    The next review was a review of the domestic 25 City Pairs, 
and we found a variety of errors and omissions and issues. 
However, once these problems were reported to DTS and GSA, the 
project management personnel continued to change and reduce our 
review and the performance scope of our contract significantly. 
These changes to our original assignment had the effect of 
significantly reducing our ability to report variances on 
available airfares, commercially available airfares, and 
competitive airfares that might be lower than the City Pair 
Program.
    What is worse, the GSA and DTS project management officials 
would not allow our auditors to access the systems to be 
tested, so therefore, all we could look at would be the 
displays of the systems, not how they functioned or why.
    I direct your attention to the charts we have included in 
our report, and in this first chart over here, of the top 25 
domestic City Pairs, the YCA code is used to designate 
unrestricted coach class fares, which are the CPP program, and 
the dash-CAs, as they call them, are used for capacity control 
for the City Pair Program.
    Table 1 shows that the four government systems displayed 
between 35 and 90 percent of all applicable CPP fares in the 25 
markets. Specifically in the case of DTS, only 61 of 187 fares, 
or 33 percent, were listed by DTS. Other systems showed between 
35 and 90 percent of the fares displayed. DTS only displayed, 
therefore, one-third of the itineraries that were available to 
the Federal traveler, or put another way, two-thirds of the 
time, the applicable City Pair fares were not displayed, which 
is a major operational deficiency in our perspective.
    Also, all available fares, including the rest of the CPP 
fares and lower-cost fares, are simply not being displayed on a 
consistent basis, i.e., that is, all available fares are not 
listed, all CPP fares are not listed, and the lowest-cost 
airfares are not listed.
    We were very surprised to find that, when we presented, the 
DTS and GSA sought to downplay the issues and the results. We 
were asked to change some of our findings to give a better 
result. We refused to do that and they proceeded to terminate 
our contract on that review.
    The overriding concern I have is that when DTS deficiencies 
were identified, the government chose to change, suppress, or 
modify the results in order to downplay the severity of the 
issues and to disclaim responsibility. You will undoubtedly 
hear government personnel try to make excuses for the findings, 
but it was their settings. They set the conditions for the 
audit and they determined how best to do it.
    Our opinion is the government needs to have a continuing 
quality control audit in place for these programs and systems. 
It is painfully apparent that such reviews need to be on 
independent and objective areas outside of the GSA and DTS 
office. And in these times of budgetary concerns, the 
constraints on the performance of the system such as these are 
paramount. We hope that this Subcommittee and these hearings 
may result in the viable and reliable process for the use of 
the government, and in this case, the government traveler.
    Thank you for allowing me to participate in this hearing. I 
am prepared to answer your questions.
    Senator Coleman. Thank you very much, Mr. Langsfeld. I will 
mirror what you said about in times of budgetary concerns, and 
these are clearly times of budgetary concerns. I voted for $62 
billion in appropriations for funding Katrina relief, which is 
clearly the greatest natural disaster in the history of this 
country. We'll see how that money is spent and we need to track 
that very carefully.
    But we're in the midst of a war. There are great 
challenges, deficits rising, and the economy impacted by 
disasters. So I think we have a special responsibility in these 
times to do what we're doing. I appreciate your work here.
    I want to step back, first. Can you explain the City Pair, 
what that means?
    Mr. Langsfeld. Yes, sir. I'd be glad to.
    City Pair is a program administered by the General Service 
Administration. That is to have contracts established between 
the airlines and the U.S. Government for going from point A to 
point B, such as National to Pittsburgh, Dulles to Atlanta, and 
so forth. Those would be considered City Pairs or one-way 
fares. There are about 4,000 of those negotiated on an ongoing 
basis annually, with the airlines by GSA. And therefore, the 
government traveler has access to those fares.
    Senator Coleman. You're getting access to--you know how 
much it costs, you've got to get a set amount to a particular 
city and then you can either use that----
    Mr. Langsfeld. As a baseline.
    Senator Coleman. As a baseline.
    Mr. Langsfeld. Yes, sir.
    Senator Coleman. What I'm hearing from your testimony is 
that in at least 8 percent of the cases, the city pairs weren't 
even loaded into the program, so there's no baseline.
    Mr. Langsfeld. There's no baseline. That is correct, sir.
    Senator Coleman. So there's no way to----
    Mr. Langsfeld. There's no way to get to it.
    Senator Coleman. Your other testimony is that you're 
talking about all fares not displayed and not listed. Why? 
What's missing here?
    Mr. Langsfeld. There is something missing, sir, but we 
weren't permitted access to find out those answers. Our scope 
was limited to only taking an audit of those City Pair 
Programs, those CPP program rates, those 4,000 we just 
discussed, and to say were they displayed to the travelers 
through the various systems, in this case DTS, or not. If there 
were other lower fares they might not be displayed.
    For example, to clarify and answer your question 
specifically, in the case of let's say Albuquerque to Los 
Angeles, we found a City Pair that is $153 one way between 
Albuquerque and Los Angeles. That's the negotiated City Pair, 
as we discussed it.
    The DTS system found prices anywhere between $120 and $300. 
And the GovTrip system pretty much similar, which is another 
Northrop system provided under GSA contract.
    Under the E2 solutions provided by Carlson, they found an 
$87 comparative rates and unrestricted walk-up fares.
    So in essence, 50 percent less and it wasn't displayed.
    Senator Coleman. The other thing I want to understand is 
you indicate 7 or 8 percent of all fares are not fully loaded 
in the City Pair Program, but then your Table 1\1\ indicates 
that only one-third of available government fares are listed. 
Can you help me understand the difference between the one-third 
figure versus the 7 to 8 percent?
---------------------------------------------------------------------------
    \1\ See Table 1 attached to prepared remarks of Robert Langsfeld, 
which appears in the Appendix on page 54 and 59.
---------------------------------------------------------------------------
    Mr. Langsfeld. Yes, sir.
    First of all, the 7 to 8 percent means that even out of the 
100 percent, if you may, that they could possibly look at, they 
won't find, based on our sample, 7 to 8 percent of those 
regardless. So that means that the traveler, if they're going 
from Point A to Point B, will be paying commercial fare rather 
than negotiated fare that's established. That would reduce by 
definition even the amount of fares that these different 
systems can find. Their population is essentially 92 percent of 
whatever is out there.
    The second part of your question, sir, is that of 187 on 
that chart, as you can note, out of the 187 possible City Pairs 
that were found between Point A and Point B, that only one-
third of them were ever displayed by the DTS system and the 
other system somewhere between 35 percent and 90 percent of 
them were displayed.
    So there is something other there that's editing that 
result that we weren't permitted to find.
    Senator Coleman. I'm trying to get to a solution on that. 
What I'm hearing is that the reaction you're getting from the 
government folks was it didn't seem like there was a lot of 
concern.
    Mr. Langsfeld. That would be a correct statement.
    Senator Coleman. Your testimony is very strong when you use 
words like change, suppress, down play. Those are very serious 
concerns. Do you have any reason to qualify that at all?
    Mr. Langsfeld. I have no reason to qualify that statement, 
sir.
    Senator Coleman. DOD has very optimistic projected cost 
savings on this program. Can you respond to that issue? Can you 
give me some information? I don't have the numbers in front of 
me but I know they have some very optimistic cost savings. What 
I'm trying to figure out, as I listen to the testimony, is how 
do you get cost savings in a system in which you've got 33 
percent of total fares displayed being used? How do you get 
there? What's the basis for that?
    Mr. Langsfeld. If I may be permitted, I'll answer that in 
two parts, sir. The first would be a reverse question for you, 
or a rhetorical question, of course. And that is how can you 
display 100 percent when you only have 33 percent in front of 
you? So you'll never be able to achieve those results 
regardless of any steps that you take, given the current 
condition of the system.
    The second part of it is all of the assumptions that I've 
seen on the DTS system and the ETS systems are anywhere between 
an 80 and 95 percent adoption. Therefore, that's 85 to 90 
percent of all the Federal travelers using that system.
    As you provided in your opening statements, 4 or 5 percent 
are where they are today. To get from Point A to Point B, in 
the condition that the systems are in, I think is an 
unrealistic goal. And therefore, your return on investment and 
your analysis has to be adjusted and possibly significantly.
    Senator Coleman. That leads into my question to Mr. Schatz. 
One of my concerns that I'm struggling with here, on the one 
hand it's clear that we're not having full utilization. Mr. 
Schatz, you talked about that.
    But the next question is even if we have full utilization 
in a system that's fundamentally flawed, are we going to get 
the cost savings we're talking about? Mr. Schatz, you talked 
about the system being underutilized. Do you have any sense 
that if it was fully utilized that we'd be achieving the cost 
savings that have been projected?
    Mr. Schatz. Certainly not based on what Mr. Langsfeld just 
said. There's a lot that remains to be done in order to get to 
where they originally intended to be. Of course, that intention 
meant that this system would have been completed about 4 years 
ago. So we're behind schedule, we don't have full utilization, 
there's no requirement for full utilization. And even if you 
had, apparently from the study, you don't even have all of the 
available information to get the best fare and the greatest 
amount of information.
    The other point to recall is that this was supposed to be 
an end-to-end system. Authorizations and vouchers may be what 
they're doing now but it's supposed to do a lot more.
    So you've got cost overruns, lack of information, lack of 
usage, all adding up to some number. As I said, GAO in March 
said it could be $4.39 billion. We've seen $470 million, $491 
million, $559 million. I'd like an answer. I know you'd like an 
answer as to what the cost is, how do we get greater usage if 
the system, in fact, is the right system and does perform 
everything it's supposed to?
    And then we might be able to determine how much it's really 
going to cost or save, if anything.
    Senator Coleman. When we say end-to-end system, it's lowest 
cost air fare, lodging facilities, some of the concerns that 
Senator Grassley raised, tracking unused tickets. There's more 
than just the lowest cost fare is involved in this; is this 
correct?
    Mr. Schatz. That's correct. It would be something that you 
would have if you were a company trying to come up with a 
system that you, as an organization, could produce and track 
and require your employees to use.
    In fact, it wouldn't be surprising if, and I'm sure it's 
true, the companies involved in this have their own systems 
that do that. Like many other efforts to get the government up 
to speed in software systems, they need to do more.
    Senator Coleman. I would appreciate it if you could help me 
a little with the history here. The report, ``Through the 
Looking Glass,''\1\ that was one that was commissioned or 
developed by Citizens Against Government Waste?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 1, which appears in the Appendix on page 100.
---------------------------------------------------------------------------
    Mr. Schatz. Right.
    Senator Coleman. You can go through a little history of 
this thing. When it was first developed, was it intended to be 
an end-to-end system, that $263 million figure?
    Mr. Schatz. It's our understanding that is correct; yes.
    Senator Coleman. At that time, was the question of 
ownership at issue?
    Mr. Schatz. I'm not certain about that. The ownership issue 
came up in the court case, as you mentioned. The Department of 
Justice said it's owned by the contractor. We have heard 
differing views on that. We have not seen anything that 
confirms it one way or another.
    Senator Coleman. I believe as I reflected on the court 
decision, in part it seemed to me that one of the reasons the 
judge didn't just pull the plug on this system was his belief 
that, in fact, it was owned by Northrop. And in doing so, the 
government would have had to start from scratch?
    Did you have a chance to read the decision?
    Mr. Schatz. Yes, that is our understanding. That was one of 
the reasons that even though he found that it violated the 
Competition in Contracting Act, he said it would cost another 
$500 million to develop another system, which we would argue is 
not quite the case based on systems produced by other companies 
that would be available.
    Senator Coleman. And yet development costs are now, as I 
understand it, the Federal Government is paying for the 
development costs of creating this end-to-end system. Is that a 
correct statement?
    Let me raise the issue of cost to deploy. The judge 
obviously concluded that because the system was not owned by 
the government, that there would be significant costs--my 
question was when the contract was first developed, where was 
the responsibility for development costs?
    Mr. Schatz. Development costs were with the contractor, not 
with the government.
    Senator Coleman. So the development costs were not intended 
initially to be government development costs?
    Mr. Schatz. That's correct. That's why the taxpayers are 
ending up paying more than they probably would have, given the 
fact that we don't have full usage and it was supposed to be a 
transaction-based fee, not a development fee.
    Senator Coleman. One of the things that you've done, which 
some people I know have contested, but you actually--your 
organization gave an estimate of costs per transaction, very 
significant costs. I believe it was about $33,000.
    We can debate that, but can you explain the process by 
which you come to that figure?
    Mr. Schatz. It was based on the amount of money paid by the 
government and the usage by travelers. That number, I'm sure, 
has changed because there is more usage, authorizations, 
vouchers being processed. That number would have to be updated. 
We'd certainly like to see what the actual number is, and then 
you can say all right, we have spent $200 million or whatever 
it might be. It's processed this many transactions. Therefore 
this is the cost per transaction to date. That will change in 
the future.
    Senator Coleman. With greater utilization.
    Mr. Schatz. Right. But again, full utilization is what they 
were looking for. I think to get from $33,000 to zero in your 
savings is a long way to go.
    Senator Coleman. The question, Mr. Langsfeld, about the 
ability to get the lowest cost, available cost out there, that 
has a significant impact on total cost; is that correct? So for 
instance, I believe that testing showed that flights booked by 
DTS could cost as much as $1,200 more per ticket. Is this 
something that your group looked at?
    Mr. Schatz. Yes. We've heard since then that this is still 
the case. Even in the last week or so we've received some 
information that indicated----
    Senator Coleman. Again, speak very loud so folks in the 
back can hear. Can folks in the back hear? The microphone is 
not functioning.
    Mr. Carper. What did you say? [Laughter.]
    Mr. Schatz. Yes. There are some indications that some of 
these tickets are being provided at a substantial cost over 
what other systems can find. That's something else we would 
certainly urge the Inspector General, DFAS and others to look 
into, so that we can see whether or not this is still the case. 
We have heard that it is. We would like independent 
verification of that from people that are in charge of 
monitoring the system.
    Senator Coleman. Mr. Langsfeld, did your study touch at all 
on that? You've looked at some other systems and cost savings. 
Were these systems in place in other government agencies?
    Mr. Langsfeld. Your question being?
    Senator Coleman. The question being the incidence of 
overpaying, of not paying the lowest available fare. How 
significant that is, and whether there are other systems that 
simply do a better job of correcting that or identifying that?
    Mr. Langsfeld. I think even some background would help. In 
our experience, we've worked with hundreds of private sector 
companies, some very large and some very small. But the bottom 
line is it's always a challenge to find the lowest fare. Just 
focusing on finding the City Pair Programs, as we talked about, 
is not effective. It's a very good baseline, but it's only 
that.
    We found that carriers that have City Pair fares, let's say 
United Airlines, from Point A to Point B, they'll even have 
fares that are lower than the City Pair Program. But in the 
case of most of these systems, we didn't find that being 
displayed for whatever reason.
    We also find that there are significant other comparable 
fares that government travelers could take, that are totally 
compliant with your terms and conditions, that would 
significantly save money to the U.S. taxpayer and to the U.S. 
Government.
    Senator Coleman. Is the airline pricing system so 
complicated that we do not have the computer capacity available 
to actually identify at a touch of a button the lowest 
available fare? Is it that complicated?
    Mr. Langsfeld. It's certainly complex. On the average, 
about 100,000 to 150,000 changes to the system a day are made. 
So you have to have a computer system, if you may, to keep up 
with the computer systems. In this case, these systems just 
want to go against each other. They're only as good as their 
resource and their source data.
    Senator Coleman. What I'm trying to understand is again, we 
are spending hundreds of millions of dollars here. Do we have 
the capacity? Was the money well spent? If we identify here's 
what we want to get, this is the end-to-end system, and among 
the end-to-end pieces of that system, one of them is going to 
be lowest available fare. Do we have the technical capacity? Is 
that there, in order to identify lowest available fare?
    Mr. Langsfeld. At this point in time, it has not been 
demonstrated to be available.
    Senator Coleman. I'm not talking about in this system, but 
in any system?
    Mr. Langsfeld. Yes, it is available.
    Senator Coleman. It would be available?
    Mr. Langsfeld. Yes, and you can get it.
    Senator Coleman. Your point is we're not getting it in this 
system, but it's available?
    Mr. Langsfeld. Yes, sir.
    Senator Coleman. Mr. Schatz, let me just talk to you about 
the cost of pulling the plug. I'm not saying that to speak out, 
but I think you have to put that on the table. When I was Mayor 
of St. Paul, we went through a change in our computer systems. 
And at a certain point in time I looked at literally millions 
that was spent and then had to make a decision as to whether to 
keep spending. I made a decision to pull the plug.
    Some people, you're mayor, you've already spent over $1 
million. But as I looked at the ongoing costs and what we were 
getting, and the problem is that we weren't getting what we 
contracted for. So I made the decision to cut our losses.
    It appears to me that along the way there have been some 
discussions in some of these reports, and maybe you can refresh 
my memory, where a decision was made to say hey, at this point 
it may be best to pull the plug.
    I'm going to ask you to kind of walk me through that, but 
then I want to look to the future. I believe this system is up 
for bid again next year. Is that correct?
    Mr. Schatz. Yes, certain aspects of it. Yes, the operation 
and maintenance and other aspects of it, yes.
    Senator Coleman. Can you give your best assessment now? Or 
first of all, along the way, would there have been a time to 
pull the plug, based on your review of this? And what would you 
recommend as we move forward?
    Mr. Schatz. Mr. Chairman, there were two opportunities, we 
think, earlier on. July 2002, the Inspector General estimated 
the cost had grown from $263.7 million to $491.9 million, 87 
percent higher than the original contract. The IG also said 
that DTS, and this is a quote, ``remains a program at high risk 
of not being an effective solution in streamlining DOD travel 
management process.''
    That certainly would have an opportunity then, based on the 
IG's recommendations, to take a good hard look and possibly 
pull the plug and do something else.
    In December 2002, the Program Analysis and Evaluation 
Office followed up on the IG's findings and recommended that 
DOD consider commercial e-travel systems that were now 
available but were not available at the time of the original 
contract awarded to Northrop.
    So despite these two reports from their own internal 
offices, DOD--and I guess in this case, the Program Management 
Office for DTS--decided to move forward anyway.
    As to whether it's cost-effective now to pull the plug, I 
honestly could not give you an answer to that. Perhaps your 
next witnesses can. Because now we're many years into this 
arrangement and we have certainly seen this occur with Virtual 
Case File and others, where it was just such a mess that they 
decided it was not worth the additional cost to complete it 
because they could either do something better or possibly 
something more effective.
    Senator Coleman. Last question in follow-up, are there 
alternative off-the-shelf systems? Either to you, Mr. Schatz or 
Mr. Langsfeld. Are there private side off-the-shelf systems 
that would be more user friendly, more effective, more cost 
efficient?
    Mr. Schatz. There certainly has been a discussion about 
having DOD use the GSA e-Travel systems. There's questions 
about the interfaces that have already been established. So 
that is, I think, something that the Subcommittee and its 
experts in DOD should take a good look at.
    But certainly based on what we've seen, there are systems 
that can provide lower fares.
    Mr. Langsfeld. In response to your question, Mr. Chairman, 
I believe that there are alternative systems out there. I 
believe that the design of the DTS system and also the design 
of the other government systems, where one of their base points 
was to go off-the-shelf, Commercial off-the-shelf, COTS 
programs. They are available. They've been proven in the public 
marketplace. And the idiosyncrasies or the uniqueness of the 
government travel can readily be adapted to be responsive to 
the government needs.
    So yes, there are ways to get to it. And I think there 
should be better ways to get and access that information.
    Senator Coleman. Thank you, gentlemen. My Ranking Member is 
here. I know he's in a full Armed Services Committee meeting, 
where he's also the ranking member. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Mr. Chairman, thank you and thanks to 
Senator Carper for allowing me to jump in here out of turn. I 
will be very brief because I have to return to the Armed 
Services Committee.
    First, I want to commend you, Mr. Chairman, for digging 
into this issue with your usual determination and thoroughness. 
It is a very important issue. You are not only bringing to 
light the deficiencies in a particular system, but this Defense 
Travel System is, I am afraid, too typical of the Department of 
Defense's efforts to acquire major new business systems. It has 
been plagued by poor planning, schedule delays, increasing 
costs, and performance deficiencies. So you are not only going 
to hopefully address the problems in a particular system, but 
you are also through this effort of yours providing some real 
insight into the problems with the acquisition system overall 
inside of the Department of Defense.
    I think my entire statement has been made part of the 
record. If it has not been, I would ask that it be made part of 
the record.
    Senator Coleman. Without objection.
    [The prepared statement of Senator Levin follows:]

                  PREPARED STATEMENT OF SENATOR LEVIN

    Mr. Chairman, thank you for convening this important hearing and 
for the oversight that you are providing in a critical area of DOD 
operations. Every year, the Department of Defense spends roughly $20 
billion to develop new information systems and to operate and maintain 
existing information systems. Like so many other DOD programs, the 
Department's IT programs are troubled by cost overruns, schedule 
delays, and performance deficiencies.
    The Defense Travel System (DTS) is no exception. When DTS was first 
conceived in the mid-1990's, the DOD travel system was a complete mess. 
Individual components of the Department entered their own arrangements 
with different travel companies, each of which had its own processes, 
systems and procedures. The travel process was paper intensive, with 
written travel orders required before the trip and written requests for 
reimbursement filed at the end of the trip. The travel process was 
separate from the voucher and payment process, which was itself 
separate from the financial accounting process. Management controls 
were lacking, and financial records were inaccurate and incomplete.
    DTS was conceived as an easy way to address these problems by 
taking advantage of commercial-off-the-shelf (COTS) technology. Rather 
than developing its own unique travel system, the Department would pay 
a contractor to use a commercially-available system on a transaction-
by-transaction basis. DOD was so confident in this approach that it 
originally envisioned that system would be up and running within 120 
days of the effective date of the contract.
    It was a good idea. Unfortunately, it ran up against reality. The 
Department of Defense has its own unique travel rules, and individual 
components of the Department have their own unique requirements and 
practices. Before DOD could use COTS technology, it would have to 
reengineer its travel practices--and the COTS technology itself would 
have to be modified--so that the two would match. Moreover, DOD wanted 
more than just a travel system. It wanted an ``end-to-end'' system that 
would be integrated with the voucher and payment process and with DOD 
financial accounting and management systems. The requirement for an 
end-to-end system meant that DTS would have to interface with dozens of 
unique DOD accounting and management systems. While these are laudable 
objectives, consistent with congressional policy, these interfaces 
would also require extensive modifications to the COTS system.
    As we have seen over and over again, once DOD starts to modify COTS 
technology, it is not really ``off-the-shelf'' at all. As a result, 
schedules start to drag out and costs start to escalate.
    That is exactly what happened with DTS. More than 7 years after the 
initial DTS contract was awarded, the system still is not fully 
functional. The contract has been re-written to convert it from the 
original fixed-price, performance-based services contract to a 
development contract for the acquisition of a DOD-unique system. And, 
as is all too typical of DOD business system development programs, DTS 
appears to be deficient in meeting user requirements by providing the 
appropriate lowest cost fares for government travelers. DOD says that 
these problems can be fixed, but we do not know how much those fixes 
will cost or how effective they will be.
    It is my hope that the Department will learn from its experience 
with DTS, and from this hearing, that it must do a better job of 
planning its IT acquisitions at the outset. The Clinger-Cohen Act of 
1996 eliminated a cumbersome GSA review process, enabling DOD to 
purchase information technology (IT) products and services for itself, 
in a more efficient, streamlined manner. At the same time, the Clinger-
Cohen Act required the Department to institute its own measures for 
business process reengineering, analysis of alternatives, economic 
analysis, and performance measures for their systems. Congress also 
expected individual agencies to take the steps necessary to ensure that 
their IT systems would be secure and compatible with each other.
    Unfortunately, as shown by the DTS acquisition and so many others, 
DOD has failed to live up to its planning obligations under the 
Clinger-Cohen Act. I do not know whether DOD should pursue DTS to 
completion at this point, or whether we would be better off scrapping 
DTS and starting over from the beginning. The Department itself must do 
the cost-benefit analysis needed to make that decision. I do know that 
we can and we must do a better job of developing and fielding IT 
systems in the future.
    I look forward to the testimony of our witnesses.

    Senator Levin. Again, I want to thank you and commend you 
and your staff and our staffs for working on this together.
    Senator Coleman. Thank you, Senator Levin, and thank you 
for all the work you and your staff have done. I should 
compliment them. I think we have a good bipartisan relationship 
when it comes to dealing with fraud, abuse, and misuse of 
taxpayer dollars, so I thank you very much.
    Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Mr. Chairman, I just learned during the 
course of the early part of the hearing is the audio was coming 
in and out for our guests here today. This room has been 
revamped and this whole platform up here has been redone. It 
was out of commission here for several months. The folks who 
actually have been probably been working on this Defense Travel 
System actually worked on the audio. [Laughter.]
    I don't know what to make of that, but on a more serious 
note, I thank our witnesses for being here. I, too, have a 
statement and I would ask that it be made a part of the record, 
Mr. Chairman.
    Senator Coleman. Without objection.
    [The prepared statement of Senator Carper follows:]

                  PREPARED STATEMENT OF SENATOR CARPER

    Thank you, Mr. Chairman, for holding this hearing.
    Despite the heroic performance of the men and women in our armed 
forces on the battlefield over the years, DOD has had difficulty 
meeting basic standards for financial and organizational management. 
These failings have likely wasted billions of dollars that could have 
been used to improve the lives or better protect the health and safety 
of military personnel.
    This isn't a new problem. GAO has been warning us about some of 
these problems for more than a decade now. We're now at the point where 
14 of the 25 most severe management challenges in the Federal 
Government highlighted by GAO every 2 years in its high risk series are 
challenges currently facing DOD. Things have gotten so bad now that the 
department's efforts to address the management challenges that have 
been highlighted by GAO over the years are now on the high risk list 
themselves.
    Senator Coburn and I intend to look into the financial side of some 
of DOD's management problems in the very near future through our 
leadership roles on the Financial Management Subcommittee, and I thank 
him for his commitment to work with me on those issues. I'm pleased 
then, that we'll be using the resources on this subcommittee to get to 
the bottom of what's going on with the Defense Travel System.
    Like most of the murky areas at DOD, the Defense Travel System has 
been a much-studied question mark for some time now--about 10 years. 
There's a lot of conflicting information out there about how much the 
system will cost, how much it will save DOD, and how well it works. I 
think we'll even hear some conflicting testimony today on these points. 
But what's clear at least to me so far is that DOD hasn't been able to 
prove that the development of this system, as it's currently 
envisioned, is in the department's best interests.
    Mr. Chairman, I don't think I have enough information right now to 
be able to answer the question posed in the title of this hearing--
``boon or boondoggle?'' I know DOD is busy working out some of the 
kinks in the Defense Travel System and may have already addressed some 
of the concerns that have been raised by GAO and others. We owe it to 
the taxpayers, however, to make sure that the money DOD is spending on 
this system will pay off in real savings at some point.
    Thank you again for focusing on this issue.

    Senator Carper. I am sort of like you. In my old job, I was 
the governor of a State. I remember any number of technology 
projects and information projects we got into where we got to 
the point where we said, do we want to continue to put money 
down this deep, dark hole or to pull the plug or just do 
something else? I don't know if we are at that point for this 
one, but I am sure it is a question that needs to be asked.
    I hope that we will have an opportunity to hear from, and 
maybe it is later today, from folks within DOD who have been 
part of overseeing the development of this system who can tell 
us whether it is worth all the time and the money and the 
trouble that it is causing or if there is a better option.
    If you are in our shoes, a recovering mayor, recovering 
governor, what would you do?
    Mr. Schatz. Well, you are doing the first step that you 
need to take, which is to have the hearing. There have been 
reports, there have been, as I said a minute ago, opportunities 
to do something about this earlier, in 2002. So again, the 
question is, here we are 3 years later. Have we spent so much 
that we have to continue? What is in the contract? What are the 
penalties? We have canceled contracts, paid penalties, and 
moved forward. That is not unprecedented.
    But I think your next panel and the further investigations 
you have requested, also the questions that haven't been 
answered for the last year since Senator Coleman and Senator 
Coburn have been asking them, and I know you have been 
involved, as well, and we appreciate that very much.
    It is at a crucial point, I guess is the bottom line. 
Within the next year, in a sense, that is kind of it. So 
something, if it is going to be done, needs to be done soon, 
and sooner meaning in the next few months, not in the middle of 
next year.
    Senator Carper. All right. Mr. Langsfeld.
    Mr. Langsfeld. I agree with his comments. I think the 
process we are going through right now is important. The 
resolution of this, if you were in the commercial world, you 
would have been fired.
    In essence, what you are doing, this is recoverable, 
certainly, and I think there are some good issues and there is 
good product out of this. I think it is recoverable there. At a 
point in time, I think you need to get beyond the 
appropriations voucher and authorization side and get into the 
travel savings. To save $15 in transaction fee and to leave 
$1,000 for the airline ticket on the table is illogical to me 
and I can't find a resolution for that. So I think you need to 
get to a system that is going to be able to do that.
    I think DTS system, in my definition, is what I call closed 
architecture. Therefore, they have modified code in such a way 
that everything has to be changed when something--one thing is 
changed, they have to go in and change code. It is not a COTS 
drop-in system where you could just bring in a new module and 
put it in. I think those are some of the solutions that we 
found in the public sector to be very effective.
    Senator Carper. All right, good. Thank you very much for 
that.
    I am sure the Department of Defense didn't set out to have 
this kind of problem. They wanted to solve a problem and didn't 
want to create one, and I am sure they didn't want to spend all 
of this money. I am also certain that DOD isn't the first large 
organization, either public or private, that has attempted to 
find some paperless, more streamlined method of handling 
employee travel. Let me just ask what mistakes--you have spoken 
to this to some extent, but let me ask again. What mistakes has 
DOD made here that other departments or private sector 
businesses have avoided?
    Mr. Schatz. Do you want to answer that?
    Mr. Langsfeld. I will be glad to. I think, first of all, I 
mentioned the closed system, closed architecture. In this 
changing era, as Mr. Coburn has--Coleman has referenced----
    Senator Carper. Senator Coburn. A lot of people call him 
Coburn.
    Mr. Langsfeld. And I just got caught doing it myself. I 
apologize.
    Senator Carper. When they start calling me Coburn, we will 
really worry.
    Mr. Langsfeld. I think I will go back to ``sir.'' 
[Laughter.]
    The reference of what has been expended and where you have 
gotten to at this point in time, I think on the appropriations-
authorization side, the vouchering system in itself has been a 
good tool and I think there are some strong savings in there. 
What we have found in the private sector, for example, is--let 
us say for that City Pair Program that we talked about with 78 
percent variance, literally a travel manager of a, probably 
what I would consider the second-largest private employer in 
the world, at 1 percent, I would have called the person in on 
the carpet and disciplined them. At 2 percent, they would have 
been released.
    I think you need to go in and have some good oversight and 
what you need to do and what we have done in the private sector 
successfully is gone out and dropped in a new module when one 
module doesn't work. In this case, it is the booking system. 
There are commercially available products that can be adapted 
and integrated, and I think at a much lower cost than where 
some of your projections could be to correct the existing 
system.
    Mr. Schatz. Unfortunately, Senator, these problems have 
existed for some time and continue to exist. There were many 
Acts in the 1990's that were intended to streamline the 
procurement system and improve it. In this case, because of the 
way that the contract was changed, and it was called a cardinal 
change by the court, meaning that it did violate the 
Competition in Contracting Act, this is a little bit more than 
just a kind of questionable software system. There are issues 
with how this all occurred that really underlie the entire 
procurement system.
    So you have obviously a question, what do you do about 
this, and the other question is, how do you prevent that from 
occurring again, where we go from a system where the contractor 
was supposed to develop it at its cost and get paid per 
transaction to where they are getting paid for development and 
may end up having been paid more than they would have gotten 
based on the transactions. So that is something else to keep a 
very close eye on.
    In terms of the expertise of others as to the better 
systems, at least obviously Mr. Langsfeld feels that there is 
something else out there, and from what we have seen, there are 
systems that work better. As to whether you could just drop it 
into DOD, it is something for the DOD people to answer.
    Senator Carper. One more question. Is DOD travel, is it 
more complicated or expensive given the scope of their 
operations and flying around the country or around the world? 
Is it more complicated or expensive maybe through regulations 
that they have or mandates that maybe the Congress has put in 
place, or is it that the Department just hasn't done as good a 
job with this travel system that they could have?
    Mr. Langsfeld. I think it is more the latter than the 
former. There are complexities in U.S. Government travel that 
are unique--the Fly America Act, the City Pair Program to try 
to do it as efficiently as possible, other factors, other 
accounting issues that are in concern, that you have to 
appropriate and you have to escrow your monies for travel, and 
the vouchering system has unique FAR rules and DOD rules that 
are there. But I would say at the end of the day, travel is 
travel and finding the lowest rate and finding the lowest hotel 
and finding the lowest car rental is pretty much a very direct 
issue. It sits out there. All you are doing is looking at the 
inventory and selecting it.
    I think that is a very basic step to do, and the only thing 
you have to do in the government arena and the government 
sector is you have to apply a few more rules than you might 
have to the public sector. Other than that, I would facetiously 
say that probably half your travelers are looking at Orbitz 
when they call your travel agent at this current time. I do. I 
mean, these people know what is out there. They look at what is 
available. I think your travelers are savvy enough to be able 
to figure that out pretty easily.
    Senator Carper. Thank you.
    Mr. Schatz. Senator Carper, I did mention earlier that DOD 
is essentially at fault for all of this, for changing the 
nature of the contract, for not requiring the lowest fare, and 
in general for having so many incompatible financial systems, 
something that this Subcommittee and the full Committee has 
looked at for many years. That would help resolve a lot of 
these issues, again a broader one, but one that really gets to 
the basis for a lot of these problems that occur when software 
systems are introduced into the Federal Government.
    Senator Carper. Thanks. Chairman Coleman, back to you, sir.
    Senator Coleman. Thank you very much, Senator Carper.
    Just two quick observations. One is a comment you made, Mr. 
Langsfeld, that I think is pretty important here. This system 
does save money on transaction costs, $15, right, $5 web-based, 
$15 traditional.
    Mr. Langsfeld. Right.
    Senator Coleman. So it does save money on that, but I think 
your comment is important, that we are up front with saving the 
money on a transaction, but if you are going to be spending 
$1,000 more on a ticket if you don't have this end-user system, 
then something is wrong. Then we are not getting bang for the 
buck.
    The other comment about the 78 percent being acceptable, I 
get very frustrated. We make a joke about it is not bad for 
government work, but we really should expect the best for 
government work.
    Mr. Langsfeld. And you can achieve the best, sir.
    Senator Carper. It is funny you say that, Mr. Chairman, if 
I could. In our Administration, maybe in yours, as well, back 
in St. Paul, whenever people would say, ``That is good enough 
for government work,'' we would fire them, and we would hire 
replacement people whose motto was, ``If it isn't perfect, make 
it better.''
    Senator Coleman. And lastly, I just want to raise one thing 
that you made a comment on, and you didn't pursue it, but there 
was a concern raised at one point, without casting aspersions, 
but I just want to raise the issue about folks who worked for 
the Department of Defense, then went to work for the 
contractor, that kind of revolving door. That was a concern in 
this contract, is that fair to state?
    Mr. Schatz. Yes. There is a concern. There is--again, the 
questions, I think, have been asked but not answered. I don't 
have the answers, but we are certainly happy to ask the 
question. We did see that in other cases. We are not saying 
anything like that is occurring here, but we don't know, I 
guess is the bottom line. Certainly, the IG, at the very least, 
should be looking into that, and hopefully they will be 
conducting another investigation in regard to this contract.
    Senator Coleman. I just think this is the issue of 
individuals who are senior places in the Department of Defense 
and then go work for the contractor that gets the contract or 
modifications to the contract that are not very transparent. 
Actually, I think, there is an extra responsibility where you 
have that kind of revolving door to be acting in a way that 
doesn't even raise those issues. I think it undermines public 
confidence in the systems, and certainly those questions will 
be looked at and will have to be responded to.
    Gentlemen, I thank you. Your testimony has been very 
helpful and I am very appreciative. Thank you. This panel is 
excused.
    The third panel, what we are going to do is simply going to 
swear in the panel members, maybe have testimony from one 
person, and we are going to adjourn at 11:15. We are supposed 
to be in our seats by 11:20 for a very important, historic vote 
at----
    Senator Carper. What vote is that?
    Senator Coleman. I will tell you how to vote on the way 
out, Senator. [Laughter.]
    Senator Carper. You already have.
    Senator Coleman. I would now like to welcome our final 
panel of witnesses for today's hearing: Thomas F. Gimble, the 
Acting Inspector General at the Department of Defense; Dr. 
Scott Comes, the Director of DOD's Strategic and Program 
Analysis and Evaluation Division; McCoy Williams, the Director 
of the Government Accountability Office's Financial Management 
and Assurance Team; and finally, Zack Gaddy, the Director of 
DOD's Finance and Accounting Services. Gentlemen, I appreciate 
your appearance today and your testimony and your perspective 
on the Defense Travel System.
    I do have a letter from David Chu, the Under Secretary of 
Defense for Personnel and Readiness, and I will read the letter 
here, but do want to note that there has been certainly an 
increased level of response from the Department of Defense from 
the time that we put this hearing together, and I do appreciate 
that.\1\
---------------------------------------------------------------------------
    \1\ See Exhibit No. 8, which appears in the Appendix on page 375.
---------------------------------------------------------------------------
    Letter read by Senator Coleman follows:

    Dear Mr. Chairman, I want to thank you and members of the 
Subcommittee for your interest in the Defense Travel System. My office 
will soon assume a new and significant role for this system as part of 
our continued effort to strengthen management and oversight in a phased 
plan.
    As we assume functional oversight of the entire program, our first 
order of business is to assess the DTS program viability. Specifically, 
we will assess whether DTS is delivering increased efficiencies, 
improved services, and achieving cost savings. In doing so, we will 
study carefully the several reports and evaluations of the system 
before we take any action, including reviews of the Committees of 
Congress before we proceed.
    The Department clearly understands that we have many challenges 
ahead in making our travel program more efficient and cost effective. 
Indeed, the Defense Travel System represents a whole new way of doing 
business for government and we must ensure that promises and goals 
envisioned are achievable. We will take the necessary steps to resolve 
problems.
    I look forward to continuing to work with you and your Committee on 
this important program and will provide you with the conclusions of my 
analysis.
      Sincerely,
      David S. C. Chu,
      Under Secretary of Defense for Personnel and Readiness.

    So I am pleased that the Department of Defense has chosen 
to cooperate with the Subcommittee, work with us in resolving 
these concerns. Clearly, the Subcommittee, though, will 
continue its oversight to ensure that DOD's actions match its 
promises.
    Gentlemen, pursuant to Rule 6, all witnesses who testify 
before the Subcommittee are required to be sworn in. Will you 
please stand and raise your right hand.
    Do you swear the testimony you are about to give before 
this Subcommittee is the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Gimble. I do.
    Mr. Comes. I do.
    Mr. Williams. I do.
    Mr. Gaddy. I do.
    Senator Coleman. Thank you very much. I think you are aware 
of the timing system. Again, we will begin with the testimony, 
but we will break at 11:15. We will start with Mr. Gimble and 
then proceed across.
    Mr. Gimble, why don't you begin first.

  TESTIMONY OF THOMAS F. GIMBLE,\1\ ACTING INSPECTOR GENERAL, 
                   U.S. DEPARTMENT OF DEFENSE

    Mr. Gimble. Mr. Chairman and Members of the Permanent 
Subcommittee on Investigations, thank you for the opportunity 
to appear before the Subcommittee today to address the 
questions regarding our July 2002 audit report, ``Allegations 
to the Defense Hotline on the Management of the Defense Travel 
System.''
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gimble appears in the Appendix on 
page 60.
---------------------------------------------------------------------------
    We conducted the audit in response to allegations made to 
the Defense Hotline. In summary, we concluded that DOD should 
have managed the Defense Travel System Program as a major 
automated information system program and ensured that it met 
the requirements of the Clinger-Cohen Act, DOD acquisition 
policies, and security policies.
    Before I begin discussing the Defense Travel System, I 
would like to provide information on other acquisition efforts 
where we identified systemic problems pertaining to the 
information of technology acquisition during the period of 
October 1996 to March 2000. Those systemic problems included: 
Inadequate documentation and validation of system requirements, 
inaccurate life-cycle cost analysis or incomplete cost data, 
incomplete analysis of alternatives to assure that the programs 
were the most cost-effective solutions, improper categorization 
of systems for oversight purposes, and incomplete or 
nonexistent acquisition program baselines to record cost, 
schedule, and performance goals. Many of these issues were 
present in the Defense Travel System acquisition.
    Additionally, we believe that the Defense Travel System 
acquisition also faced significant challenges in using 
commercial off-the-shelf software that required substantial 
modifications. We reported similar challenges on the Standard 
Procurement System and the Defense Integrated Military Human 
Resources System.
    The Defense Travel System was envisioned as a general 
support system designed to make business travel quicker, 
easier, and more efficient by providing automated commercial 
and government travel support services to the DOD travelers. By 
early 1999, as indicated in our audit report, it became evident 
that the commercial off-the-shelf software required major 
development and modification in order to meet the DOD 
requirements. In February 2002, the Program Management Office 
requested approximately $377 million to manage and develop the 
program for fiscal year 2002 through 2007, of which $186.5 
million was for research, development, test, and evaluation.
    As stated in the 2002 audit report, the Defense Travel 
System was at high risk for not being an effective solution to 
streamlining the DOD travel management process. Further, the 
Defense Travel System experienced significant testing and 
deployment problems which were compounded by the need for 
significant but unplanned developmental efforts.
    The Program Management Office terminated the November 2000 
operational assessment because 72 discrepancies and substantial 
deployment problems were identified. In October 2001, the Joint 
Interoperability Test Command reported in the second 
operational assessment that it did not consider the Defense 
Travel System to be an operationally effective system for all 
DOD components. In FY 2002, DOD revised its deployment plan and 
reduced the number of deployment sites.
    The Clinger-Cohen Act of 1996 and the DOD acquisition 
policy provide an effective framework for the management of 
information technology investments. Information on cost, 
schedule, and performance required by the DOD acquisition 
policy would also be needed by the Chief Information Officer in 
performing the responsibilities under the 1996 Act. However, 
DOD had not viewed the Defense Travel System as subject to DOD 
acquisition policy for a program because its capabilities were 
based on commercial off-the-shelf software, and therefore cost, 
schedule, and performance information had not been obtained.
    In June 1997, the DOD CIO designated the Defense Travel 
System as a special interest initiative. DOD did not consider 
special interest initiatives subject to DOD acquisition policy.
    In January 2001, the Under Secretary of Defense for 
Acquisition, Technology, and Logistics and the DOD Comptroller 
recommended a reassessment of the system because of the 
deficiencies identified during acceptance tests. They required 
the Army to specify the actions needed on the contract based on 
the results of a functional and technical assessment of the 
system. In April 2001, the Army Communications-Electronics 
Command became responsible for the contract, to include 
contract restructuring. In July 2001, the Under Secretary of 
Defense for Acquisition, Technology, and Logistics and the DOD 
Comptroller approved proceeding with the Defense Travel System 
and identified that they would retain oversight responsibility 
of the program until the contract actions were completed.
    We had recommended the designation of the Defense Travel 
System as a major automated information system program and also 
that the DOD Comptroller complete the Program Analysis and 
Evaluation study by October 1, 2002. The DOD Comptroller had 
tasked the Director of Program Analysis and Evaluation to 
undertake a cost effectiveness study of the system that would 
be used to determine whether to continue or terminate the 
system. Additionally, we had recommended, among other things, 
that the Program Management Office comply with the Clinger-
Cohen Act. We had also asked that the Under Secretary for 
Acquisition, Technology, and Logistics and the DOD Comptroller 
and the DOD Chief Information Officer (CIO) review the progress 
made by the Program Management Office in developing appropriate 
acquisition information and determine whether the system should 
continue or be terminated.
    In response to our audit in May 2002, the CIO designated 
the Defense Travel System as a major automated information 
system subject to DOD acquisition policy with himself as the 
milestone decision authority. In response to our 
recommendation, the results of the Program Analysis and 
Evaluation study were briefed to the DOD Comptroller in 
December 2002.
    Senator Coleman. I am going to ask you, Mr. Gimble, if you 
can just summarize----
    Mr. Gimble. In December 2003, the CIO issued a Defense 
Travel System Acquisition Memorandum Decision moving the system 
forward. That concludes my statement.
    Senator Coleman. We will have your full statement entered 
into the record.
    Gentlemen, we are going to adjourn the hearing right now. 
We will reconvene when we get back, at sometime between 11:45 
and 12 o'clock. You are sworn in and we will just continue when 
we get back.
    At this point, this hearing is recessed.
    [Recess.]
    Senator Coleman. The hearing is called to order.
    Dr. Comes, please proceed.

     TESTIMONY OF SCOTT A. COMES, DIRECTOR, STRATEGIC AND 
INFORMATION PROGRAMS DIVISION, PROGRAM ANALYSIS AND EVALUATION, 
                   U.S. DEPARTMENT OF DEFENSE

    Mr. Comes. Good morning, Chairman Coleman. My name is Dr. 
Scott Comes. I am the Director for C4 and Information Programs 
in the Office of the Secretary of Defense, Program Analysis and 
Evaluation.
    The Office of Program Analysis and Evaluation conducts 
independent analysis for and provides independent pre-
decisional advice to the Secretary and Deputy Secretary of 
Defense. In this role, one of PA&E's principal responsibilities 
is to ensure that the cost effectiveness and capabilities of 
DOD programs are presented accurately and completely. My office 
has primary responsibility in PA&E for conducting such analyses 
in support of information technology programs, such as the 
Defense Travel System.
    In July 2002, PA&E was asked by the USD Comptroller to 
conduct a cost effectiveness review of the Defense Travel 
System. We conducted that analysis and documented our results 
in a report entitled, ``DTS Cost Effectiveness Review'' in 
December 2002. I am here today to answer your questions 
regarding that report. Thank you.
    Senator Coleman. Thank you, Dr. Comes. Mr. Williams.

TESTIMONY OF McCOY WILLIAMS,\1\ DIRECTOR, FINANCIAL MANAGEMENT 
      AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Williams. Thank you, Mr. Chairman. Thank you for the 
opportunity to discuss our preliminary audit results related to 
DOD's efforts to develop and implement a standard end-to-end 
travel system which DOD has been working on for the last 10 
years. This Subcommittee has been at the forefront in 
addressing issues related to DOD's travel management practices, 
with the hearing today being another example of its oversight 
efforts.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Williams appears in the Appendix 
on page 65.
---------------------------------------------------------------------------
    Our testimony is based on the preliminary results of our 
audit and focuses on the following three questions: Has DOD 
effectively tested key functionality in DTS related to flight 
and air fare information? Will DTS correct the problems related 
to DOD travel previously identified by GAO and others? What 
challenges remain in ensuring that DTS achieves its goal as 
DOD's standard travel system?
    In addition, our statement for the record provides a 
description of DOD property rights in DTS, as you requested.
    Subsequent to this testimony, we plan to issue a report 
that will include recommendations to the Secretary of Defense 
aimed at improving the Department's implementation of DTS.
    Mr. Chairman, DTS' development and implementation have been 
problematic, especially in the area of testing key 
functionality to ensure that the system will perform as 
intended. Consequently, critical flaws have been identified 
after deployment, resulting in significant schedule delays. Our 
recent analysis of selected requirements disclosed that system 
testing was ineffective in ensuring that promised capability 
has been delivered as intended.
    For example, we found that DOD did not have reasonable 
assurance that DTS properly displayed flight and airfare 
information. This problem was not detected prior to deployment 
since DOD failed to properly test system interfaces. DTS 
officials have indicated that this problem was fixed in the 
most recent system upgrade. We are in the process of verifying 
the effectiveness of these corrective actions.
    DTS has corrected some of the previously reported travel 
problems, but others remain. Specifically, DTS has resolved the 
problem related to duplicate payment for airline tickets 
purchased with the centrally billed accounts. However, problems 
remain related to improper premium class travel, unused tickets 
that are not refunded, and accuracy of travelers' claims. These 
remaining problems cannot be resolved solely within DTS and 
will take department-wide action to address.
    Mr. Chairman, we have identified two key challenges facing 
DTS in becoming DOD's standard travel system: One, developing 
needed interfaces; and two, underutilization of DTS at sites 
where it has been deployed.
    While DTS has developed 32 interfaces with various DOD 
business systems, it will have to develop interfaces with at 
least 17 additional systems and this is not a trivial task.
    Furthermore, the continued use of existing legacy travel 
systems results in underutilization of DTS and affects the 
savings that DTS was planned to achieve. Components incur 
additional costs by operating both DTS and legacy systems which 
have the same functionality, and by paying higher processing 
fees for manual travel vouchers as opposed to processing the 
travel vouchers electronically through DTS.
    Mr. Chairman, overhauling DOD's financial management and 
business operations, one of the largest and most complex 
organizations in the world, represents a daunting challenge. 
DTS, intended to be the Department's end-to-end travel system, 
is a case study of some of the obstacles that must be overcome 
by DOD's array of transformation efforts. Successful 
implementation of standard business systems such as DTS will be 
the key to achieving billions of dollars of annual savings 
through DOD transformation. Eliminating stovepiped legacy 
systems and using cheaper electronic processing are critical to 
realizing the anticipated savings.
    Again, I commend the Subcommittee for holding this hearing 
as a catalyst for improving the Department's travel management 
practices.
    Mr. Chairman, this concludes my statement. I will be 
pleased to respond to any questions you may have.
    Senator Coleman. Thank you very much, Mr. Williams.
    Mr. Gaddy, you may proceed.

 TESTIMONY OF ZACK E. GADDY,\1\ DIRECTOR, DEFENSE FINANCE AND 
         ACCOUNTING SERVICE, U.S. DEPARTMENT OF DEFENSE

    Mr. Gaddy. Mr. Chairman, distinguished Members of the 
Subcommittee, it is a pleasure to be here to discuss the 
Defense Travel System. I am Zack Gaddy, Director of the Defense 
Finance and Accounting Service. I am providing detailed 
information on DTS and the scope of the Department's travel 
operations in a statement for the record. What I want to do now 
is give you an overview of the current status of DTS and how we 
got to where we are today.
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    \1\ The prepared statement of Mr. Gaddy appears in the Appendix on 
page 93.
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    The Department of Defense launched DTS in 1995. The goal 
was to streamline and improve how the Department managed travel 
of DOD personnel and to replace dozens of independent and 
inefficient existing travel systems. Initial progress was 
slower than expected, and the goal of integrated incompatible 
systems turned out to be more complex than originally 
envisioned. After several reviews and reports, the time frame 
for full usage of DTS by everyone in the Department, originally 
scheduled to be completed in fiscal year 2003, was adjusted to 
a more realistic time frame of FY 2009.
    In recent years, the Department has made important changes 
to better manage DTS and achieve the ambitious goals for 
improving travel administration. As a result, today, we believe 
that DTS is proving to be a cost-effective solution to our 
travel needs. DTS is enabling us to make our DTS-related 
processes faster, less costly, and better for DOD personnel. It 
is strengthening accountability and internal controls, making 
our data management more accurate and less costly, reducing the 
likelihood of fraud and waste, and achieving other benefits.
    In fiscal year 2006, we expect that DTS will save the 
Department over $35 million. Once fully deployed, DTS will have 
replaced 31 primary travel systems and eliminated travel 
processing in another 12 systems where travel is a secondary 
function of the system.
    The management of DTS has been criticized in several 
reviews and reports over the past few years. In May 2002, the 
Department designated DTS as a Major Automated Information 
System to get the program on track. This meant that DTS' 
progress and problems would be subjected to greater scrutiny by 
the Department's senior leaders. This designation resulted in a 
comprehensive review of the scope of the program and a thorough 
analysis as part of the Department's acquisition process and 
its program budget review. Under rigorous scrutiny, the DTS 
program has met the cost, performance, and schedule goals set 
for it under its approved program baseline. Still, we continue 
to assess how to strengthen the program and hasten progress.
    To that end, later this fall, we look forward to hearing 
from the Government Accountability Office, which is expected to 
complete its DTS program review, as a source of additional 
ideas for improvements. We know that we need to continue to 
monitor the DTS program carefully and to make adjustments. 
Still, we are beginning to see the benefits of the new system. 
For example, DTS speeds up the travel process and facilitates 
better customer service, maintains accountability throughout 
the travel process, meets our requirements for safeguarding 
information, and allows DOD organizations to monitor their 
travel budgets more precisely.
    Despite the progress to date, we understand that DTS does 
not currently accommodate all DOD travel requirements. For 
example, DTS does not process all types of travel for permanent 
change of station, group, or mobilization travel. We expect 
these requirements to be addressed by the end of fiscal year 
2006.
    Further, while DTS enhances visibility and auditability for 
travel, it does not eliminate travelers' or approving 
officials' erroneous use or approval of premium travel.
    We also recognize that the travel industry and emerging 
technologies are changing how travel should be administered. At 
the conclusion of this contract, we plan to competitively award 
a follow-on contract that will address these emerging 
opportunities.
    In closing, I would emphasize that the Department of 
Defense has acted to correct the previous issues with DTS and 
is providing proper oversight to make the best use of taxpayer 
resources to improve our travel process. We welcome input from 
the GAO and this Subcommittee to help us fulfill our commitment 
to provide a world class travel system for DOD travelers. We 
appreciate your interest in DTS and look forward to working 
with you in the future. Thank you.
    Senator Coleman. Thank you very much, Mr. Gaddy.
    Mr. Williams, I think it was in your testimony, you 
reflected on the DOD system being one of the largest and most 
complex in the world and we understand that.
    Mr. Williams. Yes, sir.
    Senator Coleman. But even with that understanding, as you 
look at the history of this and where it started and even now 
we are talking looking at originally 2003 for a goal of 
integrating systems and now it is a goal of 2009, that is a 
long time. The cost started at $263 million to $500 million. 
Those are the things that have obviously raised the level of 
concern of this Subcommittee.
    One of the questions that has come up, and I think, Mr. 
Williams, you indicated an answer to it, but I would like it 
very clear for the record, who owns this system? Who owns the 
DTS system? In the court decision, it appeared that Northrop 
owned it, and in fact, the judge specifically raised concerns 
saying one of the reasons we are not going to stop it now is 
because we would walk away with nothing. Was the judge mistaken 
on that assessment, or is it different today than it was then?
    Mr. Gaddy. I would like to try to answer your question, Mr. 
Chairman. DTS is owned by DOD. However, when I say that, there 
are aspects of the program where there is software code 
developed by DOD that we own outright. All the interfaces to 
the accounting and finance systems within the Department, we 
own all of those interfaces and all of that software.
    The commercially developed software that Northrop Grumman 
developed, we have an unlimited license to use that software. 
We don't physically own the software, but we own unlimited 
rights to use that software and we can delegate those rights to 
any other user as a follow-on contract.
    Senator Coleman. But, hypothetically, if the contract were 
to be terminated with Northrop, what would DOD be left with, 
because that was the concern of the judge, that we can't start 
from scratch here. Again, it goes back to the nature of our 
ownership interest on things that have been developed with 
taxpayer dollars. What do we own if it were to be terminated? 
Can you divide between what Northrop would have and what we 
would have?
    Mr. Gaddy. Mr. Chairman, as I said earlier, I believe the 
correct answer is, we would be able to take the software that 
has been developed by Northrop and turn it over to a subsequent 
contractor to use.
    Senator Coleman. Thank you. In Mr. Langsfeld's testimony, 
he said the system is not cost effective and does not use the 
best available software. Does anybody want to respond to that, 
because my concern is even if it is deployed, how are you going 
to realize full cost savings, and can this fundamental problem 
be fixed? First, do you see this as a fundamental problem? Do 
you agree with the testimony? And then, second, if so, can it 
be fixed?
    Mr. Gaddy. I am unable to fully address what Mr. Langsfeld 
was referring to when he said it was not cost effective. I do 
know from his study that he determined the software, DTS, did 
not display all City Pair Contract flights that were available. 
We took the information he supplied to us. We actually used 
that information and my internal review organization 
independently looked at the information to determine whether 
there was a problem with how we had configured or established 
the settings on the displays.
    We, in fact, went and found we have a 4-hour display of 12 
flights, a limitation in the system at the time Mr. Langsfeld 
did his study, compared to other displays which use the 12-hour 
window and did not have the 12-flight display limitation. If 
you widen the aperture and look at it in the same 12-hour 
window, we changed that, we believe we find at least 92 percent 
of the flights that are in the City Pair Contract.
    We have since, based on information, revised our program to 
display a 12-hour window and to display a 25-flight limitation 
as opposed to a 12-flight limitation, and in November, we will 
start a new change or a new setting that will display City Pair 
flights first. So that way, you always know you get all 
available City Pair flights before you look at other available 
fares.
    Senator Coleman. We don't have the chart here, but in one 
of his charts, Table 1, he had top 25 domestic City Pairs and 
he had total displayed, for the DTS, he had 33 percent whereas 
for FedTraveler or Government Trip, E2 Solutions, has higher 
figures. Is your testimony that you have made corrections there 
that would change these conclusions?
    Mr. Gaddy. Yes, sir, Mr. Chairman. We have gone back and 
looked at what they were reviewing. The flights are available 
in the system, they just were not displayed, and that is what 
he was asked to look at. We have since opened the time frame to 
12 hours versus 4 hours and the limits on flights from 12 
flights to 25 flights so that we can display all available 
flights.
    Senator Coleman. He also indicated that he was told that 
DTS only displayed one-third of the available fares, and that 
was the 8 percent figure, and then his comment was that DOD 
told him that was completely acceptable. Do you agree or 
disagree with that?
    Mr. Gaddy. I cannot agree that is acceptable, not to 
display all the flights. The 8 percent limitation I believe he 
was referring to are not all flights available, all City Pair 
flights are in the Global Distribution System. Up to 8 percent, 
I believe, of City Pair flights are not currently available in 
the GDS or Global Distribution System. Therefore, they would 
not be accessible by any software looking for them.
    Within the context of what was available, the 92 percent 
that are available because of our settings, and I believe that 
was buried in a footnote in his actual table in the report, he 
said the settings themselves would determine what would be 
displayed, and based on those settings, we looked at it and 
said, yes, you are right. A 4-hour window does block displaying 
all available flights, and that is why we went in and changed 
the setting to 12 hours.
    Senator Coleman. To a 12-hour window. When you said 8 
percent are not in the system, is that in any system? Is there 
any system that is capable, or is it just the DTS system?
    Mr. Gaddy. As I understood his comments, the 8 percent were 
flights not in the Global Distribution System, which is what 
any travel system would go to to find available flights. It is 
not DTS per se or ETS. It is not in the Global Distribution 
System that the systems are querying to find available flights.
    Senator Coleman. One of the questions that has come up here 
is utilization of the system. The testimony, and Mr. Williams 
mentioned it, about continued use of legacy travel systems, 
higher processing fees, etc.
    Mr. Williams. That is correct.
    Senator Coleman. If we know that there are higher 
processing fees with continued use of legacy systems, can you 
help me understand the under utilization? Why doesn't the 
Secretary of Defense simply mandate that we start using DTS?
    Mr. Williams. Mr. Chairman, as currently structured, each 
of the various components within DOD have funding authority. 
Until a decision is made at the top level of the organization 
that DTS will be used once it is implemented, the different 
components will continue to use those legacy systems. Once DTS 
is deployed and it is operational, then it must be used and the 
legacy systems must be cut off, then the utilization rate will 
go up.
    But there needs to be a decision made at the top, across 
the organization, that this is going to be the policy.
    Senator Coleman. And my concern is we don't have that 
decision and I am trying to understand the reason for that 
decision. If on the one hand we talk about the system being 
effective and cost effective, on the other hand we hear there 
are continued problems in terms of getting the end-to-end 
system that we like, is the reason the decision hasn't been 
made because there isn't a unanimity of agreement that the 
system is effective and that it is meeting needs?
    Mr. Gaddy. Actually, Mr. Chairman, I would like to comment 
further on that. There was a directive signed by the Deputy 
Secretary of Defense last November directing usage of DTS once 
deployed to the user sites. You need to understand that when we 
talk about the time frame for deploying DTS--I will use an 
example. Hill Air Force base in Utah has 16,000 employees. We 
have recently deployed DTS to that site. It will take probably 
a year to fully deploy across all 16,000 users. So one of the 
reasons you will see other systems still in use is it hasn't 
been fully deployed across all the users at a particular 
location.
    The directive that was signed last November, however, said 
DTS is the official system for this Department. Prior to that 
time, various organizations, as Mr. Williams indicated, were 
making investments in alternative systems. The Reserve Travel 
System in the Air Force comes to mind as an example. There was 
a decision. DTS is the official DOD system.
    However, as you well know, within the Department, you get a 
directive on top and then the execution of that directive 
sometimes takes a while. One of the factors in it is the 
deployment of the system itself. It is not fully deployed yet. 
Another factor is even where it has been deployed to particular 
sites, it is not fully at use in those sites quite yet. And the 
third factor is what I described a little bit earlier, and that 
is all types of travel are not currently accommodated in DTS, 
so they will need to use legacy systems until other types of 
travel are folded into the DTS capability.
    At that time, I do believe Dr. Chu, in my conversations 
with him and others, we are pushing very hard that old legacy 
systems do, in fact, need to be shut down and a decision has to 
be made, for example, 60 days post-deployment, full usage has 
been acknowledged. At some point, you have to terminate the old 
systems, and one of the best ways to do that is just stop 
funding them.
    Senator Coleman. Let me then go to the folks on the audit 
inspection side to see if their perspectives, having looked at 
this, are as optimistic as Mr. Gaddy's.
    Mr. Gimble, if I can just kind of step back, you originally 
started your evaluation based on hotline complaints, which I 
found--is that something that is usual?
    Mr. Gimble. It is fairly usual. We do get a lot of 
complaints to the DOD IG hotline and it is typical, you do get 
them on systems of various kinds, IT systems, weapons systems.
    One thing I would just preface, most of our work on DTS is 
in the 2002 time frame and we just recently started some new 
work on that system. But for the 3 years that intervened there, 
we really hadn't done much work, so we don't have much current 
knowledge. We know there were some agreements made on actions 
that were going to be done to bring it into a system-managed 
arena. We think, according to the documentation that we have, 
that has been done.
    Now, we will go back and look and really do some 
assessments. That is the plan that we just started out with in 
the last week or so. In fact, it was at your request and we are 
going to address the follow-up actions to see if those original 
recommendations were appropriately addressed and achieved the 
results that we think they should have. Also, we will be 
looking at cost effectiveness and also how wide the utilization 
is.
    Senator Coleman. One of the things that I recall, your 
original, I believe that you had an original recommendation 
that recommended dropping funding for DTS until cost and 
benefits were determined based--is that correct?
    Mr. Gimble. In the draft report, we had recommended 
suspending the funding until the system was determined to be 
cost effective.
    Senator Coleman. And then you dropped that recommendation--
--
    Mr. Gimble. Well, what we did is we--I would like to say we 
got an alternate solution there. They agreed to--the Department 
agreed to put the system under an acquisition program, which is 
one part of that recommendation, and the other was they agreed 
to do the cost-effectiveness study, which was done by PA&E. 
Subsequent to that, our auditors had been redirected into other 
programs and so we relied on the Acquisition Memorandum 
Decision that was signed off in December 2003 that said 
everything was compliant and moving forward in terms of--it was 
a major acquisition information system versus a special 
interest initiative. So we really have been pretty dormant in 
the oversight of this particular system since the audit report 
was issued in July 2002.
    Senator Coleman. But one of the things you were waiting on 
was a cost-benefit analysis from PA&E. Do you believe that was 
done? Have you had a chance to review that?
    Mr. Gimble. We did not review that. This was over on our 
follow-up side and there was documentation that indicated it 
had been performed. When the Assistant Secretary or the CIO of 
the Department signed off on the Acquisition Memorandum 
Decision in December 2003 saying that everything was completed, 
we didn't go back and follow it. We closed out and redirected 
our assets into other areas.
    Senator Coleman. Dr. Comes, did you consider your work to 
be--at least as I understand it, my review of the record is 
that the Inspector General agreed to drop its recommendation 
that program funding be suspended until costs and benefits were 
determined. Have you seen a cost-benefit analysis?
    Mr. Comes. We looked at the costs and benefits at the time 
of the program. The program was rather immature, so the 
available data to compare on the costs and benefits was rather 
limited. So we focused our efforts on what the requirements 
were for the program and whether there might be alternative 
solutions.
    Senator Coleman. So would it be fair to say, as I 
understand it, you didn't have the data to do a cost-benefit--
did you do a cost-benefit analysis?
    Mr. Comes. The reason you couldn't do a cost-benefit 
analysis at the time, it was almost a circular argument. You 
would need a good travel system to collect all of that data. 
Lacking a travel system, you had no data. So we did what we 
could with the available data that the Program Office had at 
the time. They had done some pilot experiments at a few sites 
and they had reports for Congress that we reviewed to see what 
was available at the time.
    Senator Coleman. I think it is certainly part of my 
frustration is we had a recommendation to stop funding until 
there was a cost-benefit analysis. It is really not possible to 
do a cost-benefit analysis if you don't have the system in 
place to do the analysis. I won't ask where we are at. I think 
where we are at, and we have sent a letter on this in August to 
the Inspector General to perform a cost-benefit analysis. I 
think it has to be done.
    Mr. Gimble. And we started that work this week.
    Senator Coleman. Apparently, this contract is going to be 
rebid sometime next year. Can somebody explain what pieces of 
it--what is going to be rebid, is it next August, next year?
    Mr. Gaddy. Mr. Chairman, the current contract is set to 
expire at the end of fiscal year 2006. What will be rebid is 
the follow-on contract support to operate and maintain the 
system, and if there are any additional changes to be made, we 
call it Phase II, travel reengineering kinds of things that 
were talked a little bit about in the earlier panel, if any of 
those things lead to changes, emerging changes in the 
marketplace that we want to adopt within the program through a 
follow-on contract, we would make those changes to the system.
    Senator Coleman. Are we confident that we have identified 
several major problems getting to this end-to-end system that 
we would like, and clearly, they have been recognized that 
there are still some deficiencies in that regard. Do you 
believe that we need to resolve those problems at the time it 
is rebid? What happens if those problems aren't resolved? I am 
trying to understand a process here. If you still have issues 
out there, how do you effectively rebid?
    Mr. Gaddy. Mr. Chairman, what normally happens with this 
program is we have a series of releases, they are called 
Presidential releases. The Monroe release will be deployed in 
the December time frame. The Quincy Adams release will be 
deployed sometime in the June 2006 time frame. That is the last 
scheduled release we have for this program.
    Each one of these releases, the intent of it is to improve 
upon the capability of the system to provide even more 
functionality so we can address additional types of travel, for 
example, Guard and Reserve mobilization travel that is an issue 
for people.
    What we are looking for in what we call the Phase II 
follow-on is how permanent duty travel is even managed. Some of 
the things that were alluded to here, if we want to change how 
travel policies--right now, the system is configured to comply 
on fares with the Joint Federal Travel Regulation. If there are 
changes to how travel should be administered, those would be 
then part of the follow-on contract.
    In the basic sense, however, the intent is to manage the 
current application, operate it, sustain it, and then make any 
additional changes that might be deemed desirable using cost-
benefit analysis to see if it is worth doing or not.
    Senator Coleman. Mr. Williams, I would like to have you 
address this same question if you have problems, identify them. 
I am trying to get a sense of the measure of resolution 
required by the time a contract is rebid.
    Mr. Williams. We are looking at about a 12-month time frame 
to go through the procurement process. The process would have 
to be very aggressive, in my opinion. I would say that you 
would want to make sure you do the things that were just 
described. You want to make sure you are doing everything that 
you can to upgrade the system to address those issues along the 
way.
    We believe that because the system has already been 
implemented at approximately 5,600 out of the 11,000 locations, 
that Block 1 or Phase 1 should be completed. Once that is 
completed, we think that there should be a process in which 
there is an oversight, Management Oversight Review Board that 
needs to take a look at the whole DTS process, where do we go 
from here, and look at it from the standpoint of not just DTS, 
but this is just one component within an overall architecture 
for DOD and how is it fitting in and make some decisions on how 
the Department should proceed with DTS.
    Senator Coleman. You indicated that it is presently in 
5,600 of 11,000 locations, but my understanding is it is only 
used in a small percentage of those. So we are not getting 50 
percent use. That is a 50 percent figure. What is the percent 
usage right now of DTS?
    Mr. Gaddy. You are correct that it is not fully used or 
utilized at all of those locations yet. While it has been 
deployed to 5,600 sites, during fiscal year 2005, approximately 
8 percent of travel tickets were procured using DTS. Today, the 
usage of the system is about 80,000 travel vouchers a month. 
That number is growing at a rate of about 10 to 15 percent per 
month, so we are seeing more and more uses as it goes to more 
sites----
    Senator Coleman. What are 80,000 travel vouchers? About 
what percentage of use does that represent?
    Mr. Gaddy. Again, looking at five million or so a year, 
that is about a million--so it is about 20 percent in total. 
But the usage is starting to grow because we are going to more 
sites and more users are being trained. There is a one-week 
training program, for example, for initial usage at a site. The 
usage will expand. We will finish deploying to all of the major 
sites during fiscal year 2006.
    Those major sites where the travel--and it is kind of 
interesting. If you look at total usage, 80 percent, roughly, 
of all travel is performed at those major sites. We talk 
11,000, quite honestly, but there are probably 200 to 300 
locations where about 80 percent of all the travel is actually 
conducted, and those are the targeted sites that we are really 
trying to take the system to first to get it fully deployed, 
fully used, so we can take advantage of the benefits that the 
system provides.
    Senator Coleman. My concern is that it is $25--is it $20 or 
$25 per transaction without DTS? What is the figure?
    Mr. Gaddy. If you use DTS for travel, for example, if you 
use full DTS, no touch, it is about $5----
    Senator Coleman. Five dollars.
    Mr. Gaddy [continuing]. For a travel reservation. If you go 
to a commercial vendor or a commercial travel office, you are 
talking, on average, $25 for the same transaction.
    Senator Coleman. It is about a $20 difference?
    Mr. Gaddy. Right.
    Senator Coleman. You have five million vouchers, $12.2 
million at $20 more per cost.
    Mr. Gaddy. And on the back end, there is a big difference 
between the actual computation of the settlement, of the travel 
transaction. DTS is much cheaper. So we know that there is a 
lot of potential out there, and one of the things you cited, 
Dr. Chu's letter, as the owner of this area, one of the things, 
that same decision that directed the use of DTS was the 
establishment of a Travel Management Office within the 
Department because you have each service doing something with 
its own unique systems, including my own. As a result, his 
organization is now standing up a standard Travel Management 
Office which will assume the responsibility for managing 
department-wide travel so that we can begin to take advantage 
of a common application for all users and that is something 
that I very strongly support, that there ought to be one way of 
doing business within the Department.
    Senator Coleman. I just want to make sure the record is 
clear. Is your testimony that DTS, that the Department has 
mandated by order the use of DTS?
    Mr. Gaddy. There was a directive signed last November by 
the Deputy Secretary that said DTS is the official travel 
system for the Department.
    There is a subject of interpretation, I think, on the part 
of some that says, well, OK, that means I can use what I have 
got until you replace it, which is true. You have to have 
something that you use. But our perspective on it, our Program 
Management's perspective on it is as we deploy the system to 
these sites, once it is fully deployed to those sites, then our 
expectation is we will start shutting down the old systems. I 
am not sure that we have full agreement of that by the 
activities that own those systems.
    Senator Coleman. Well, I would hope, and it is one of the 
things that we would like--you would think that there would be 
a common understanding from those at the highest level, if it 
is being directed down to--as a military organization, people 
follow orders, don't they?
    Mr. Gaddy. Yes, sir, they normally do. However, what I find 
interesting about this business is some will claim they have 
never seen the order.
    Senator Coleman. Dr. Comes, on page 13 of your report, you 
state, ``It is our understanding that DOD has not bought the 
rights to the software developed for the DTS program. This 
could potentially limit the number of competitors that may 
support the Department's voucher processing in the future.'' Is 
there anything you have heard today that somehow is contrary to 
that notion?
    Mr. Comes. That report was written in 2002--in December 
2002. I am not aware of what has happened in the ensuing time.
    Senator Coleman. I raise that, Mr. Gaddy, because of your 
testimony. Is it your testimony that as of today, that the 
statement that DOD has not bought the rights to software 
developed for DTS, that this could potentially limit the number 
of competitors that may support the Department's voucher 
processing in the future? Are there limitations on the 
opportunity for competitors based on limitations on property 
rights, software property rights?
    Mr. Gaddy. Mr. Chairman, there are no limitations on 
subsequent users or contractors who might want to operate this 
system on behalf of the Department.
    Senator Coleman. And part of my concern here is I don't 
believe that the Department has really bought anything in the 
interim. You are simply giving an interpretation that obviously 
is contrary to--because nothing has changed. There was no 
purchase of property rights here, right, of software rights?
    Mr. Gaddy. Actually, what happened when the contract was 
restructured and we went from buying a service to buying 
software development, the normal Federal Acquisition Regulation 
rules kicked in that say if it is commercially developed 
software, we have rights to the software. Since then, we have 
actually gotten a signed letter from the contractor that 
acknowledges that and we are in the process of modifying the 
contract to make sure it specifically clarifies that. But our 
understanding and interpretation of the FAR is when we pay the 
contractor to develop software on our behalf, we have unlimited 
usage to that software as long as we wish to do so.
    Senator Coleman. Mr. Williams, does the GAO have the same 
assessment of property rights as the DOD has?
    Mr. Williams. As stated in Appendix 1 to my testimony, that 
is consistent with our belief.
    Senator Coleman. As we move forward, there is obviously 
more work to be done. The testimony of the Department is 
certainly more optimistic than some of the assessments, as we 
heard on the earlier panel.
    Can we talk just a little bit about cost savings. We are 
spending, as I understand, and I think it is Mr. Comes, is it 
$537 million? Is that the figure? I don't know where that came 
from. Was it your study, from fiscal year 2001 to fiscal year 
2014? Is that a valid figure? Does anybody dispute about $537 
million as the amount to complete software development in the 
system?
    Mr. Comes. Again, that study was done in 2002. I am not 
aware of what is happening now as far as what the current cost 
to complete would be.
    Senator Coleman. Do we have any estimates of the current 
cost to complete the system?
    Mr. Gaddy. Yes. Currently, the system total acquisition 
costs for the whole program is $474 million.
    Senator Coleman. And what is the time frame for that?
    Mr. Gaddy. Through fiscal year 2006. We have currently 
expended $402.5 million of that amount.
    Senator Coleman. If I went back to Mr. Schatz's testimony, 
he talked about the original study that this whole thing was 
$260 million, that it was supposed to be looked at as that 
amount set aside and it was a cost per transaction. Is that 
simply out the window now and we are paying for it, this is our 
obligation, but Northrop runs the system? How does that work?
    Mr. Gaddy. Actually, Mr. Chairman, when the contract was 
restructured, you are correct. Prior to that point, it was a 
purchase of service. After the restructure, we bought software 
development work, program management support, deployment 
support. So we have, in fact, paid $229 million of that 
contract value, original estimate $264 million, we have 
expended $229 million of that with Northrop Grumman to date.
    Senator Coleman. I will bring this portion of the hearing 
to a close. My colleague, Senator Coburn, does have a series of 
questions, I think he indicated five pages. I am going to keep 
the record open for 2 weeks so that we can get a response to 
those.
    But just an observation--and I also say that we will 
conduct a follow-up hearing to focus on the later reports that 
we expect to receive from the Inspector General and hopefully 
working with Mr. Williams, the GAO.
    The concern as I sit here and have reviewed all the 
materials is there has been a concern certainly about process, 
Mr. Gaddy, and that was reflected in some court actions. But 
there have been concerns about process. There have been 
concerns about evaluation along the way, but many of those 
evaluations are now dated and so we will certainly get more 
current ones.
    In the end, we want to make sure the system works. That is 
what it is about. If it doesn't work, then we need to know that 
and we need to have a very honest assessment of that so we are 
not throwing good money after bad. There may be a cheaper, 
better alternative if it doesn't work. But if it does work, let 
us make sure that we understand what the limitations are, that 
we then deal with those limitations, and I appreciate the 
letter from the Under Secretary, and then we will go from 
there.
    As I said, this is simply a step along the road. We have 
not completed this process. We do appreciate your coming before 
us, the work you have done. We look forward to working with you 
in the future.
    With that, the record will be kept open for 14 days. 
Questions will be submitted and responded to. This hearing is 
now adjourned.
    [Whereupon, at 12:39 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

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