[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
  IRAQI RECONSTRUCTION: RELIANCE ON PRIVATE MILITARY CONTRACTORS AND 
                             STATUS REPORT

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 7, 2007

                               __________

                           Serial No. 110-11

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform

                     U.S. GOVERNMENT PRINTING OFFICE

36-546 PDF                 WASHINGTON DC:  2007
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001





















             COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California               TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York             DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania      CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York         JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      DARRELL E. ISSA, California
BRIAN HIGGINS, New York              KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky            LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of   VIRGINIA FOXX, North Carolina
    Columbia                         BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota            BILL SALI, Idaho
JIM COOPER, Tennessee                ------ ------
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
                  David Marin, Minority Staff Director






















                            C O N T E N T S


                              ----------                              
                                                                   Page
Hearing held on February 7, 2007.................................     1
Statement of:
    Ballard, Tina, Assistant Undersecretary for Procurement and 
      Policy, U.S. Department of the Army; Andrew G. Howell, 
      general counsel, Blackwater USA; R. Timothy Tapp, managing 
      director, business operations, Regency Hotel and Hospital 
      Co.; W. Steve Murray, Jr., director of contracting, ESS 
      Support Services Worldwide; George Seagle, director of 
      security, government and infrastructure division, KBR; Tom 
      Flores, senior director, corporate security, Fluor Corp.; 
      and Alan Chvotkin, senior vice president and counsel, 
      Professional Services Council..............................   111
        Ballard, Tina............................................   111
        Chvotkin, Alan...........................................   135
        Flores, Tom..............................................   133
        Howell, Andrew G.........................................   121
        Murray, W. Steve Jr......................................   117
        Seagle, George...........................................   128
    Helvenston-Wettengel, Kathryn, mother of Blackwater employee 
      Stephen Helvenston; Kristal Batalona, daughter of 
      Blackwater employee Wesley Batalona; Rhonda Teague, wife of 
      Blackwater employee Michael Teague; and Donna Zovko, mother 
      of Blackwater employee Jerry Zovko.........................    71
        Helvenston-Wettengel, Kathryn............................    71
Letters, statements, etc., submitted for the record by:
    Ballard, Tina, Assistant Undersecretary for Procurement and 
      Policy, U.S. Department of the Army, prepared statement of.   113
    Blackwater family members, prepared statement of.............    76
    Chvotkin, Alan, senior vice president and counsel, 
      Professional Services Council, prepared statement of.......   138
    Flores, Tom, senior director, corporate security, Fluor 
      Corp., prepared statement of...............................   134
    Davis, Hon. Tom, a Representative in Congress from the State 
      of Virginia:
        Letter dated December 13, 2006...........................    15
        Prepared statement of....................................    19
    Howell, Andrew G., general counsel, Blackwater USA, prepared 
      statement of...............................................   123
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, letter dated December 13, 2006........    35
    Murray, W. Steve, Jr., director of contracting, ESS Support 
      Services Worldwide, prepared statement of..................   119
    Seagle, George, director of security, government and 
      infrastructure division, KBR, prepared statement of........   130
    Waxman, Chairman Henry A., a Representative in Congress from 
      the State of California:
        Memorandum dated February 7, 2007........................    27
        Prepared statement of....................................     4


  IRAQI RECONSTRUCTION: RELIANCE ON PRIVATE MILITARY CONTRACTORS AND 
                             STATUS REPORT

                              ----------                              


                      WEDNESDAY, FEBRUARY 7, 2007

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m. in 
room 2157, Rayburn House Office Building, Hon. Henry A. Waxman 
(chairman of the committee) presiding.
    Present: Representatives Waxman, Lantos, Towns, Maloney, 
Cummings, Kucinich, Davis of Illinois, Tierney, Clay, Watson, 
Lynch, Higgins, Yarmuth, Braley, Holmes-Norton, Cooper, Van 
Hollen, Hodes, Murphy, Sarbanes, Welch, Davis of Virginia, 
Shays, Souder, Platts, Cannon, Duncan, Turner, Issa, 
Westmoreland, McHenry, Foxx, Bilbray, and Sali.
    Also present: Representative Schakowsky.
    Staff present: Phil Schiliro, chief of staff; Phil Barnett, 
staff director and chief counsel; Kristin Amerling, general 
counsel; Karen Lightfood, communications director and senior 
policy advisor; David Rapallo, chief investigative counsel; 
Theodore Chuang, deputy chief investigative counsel; Jeff 
Baran, counsel; Christopher Davis, professional staff member; 
Earley Green, chief clerk; Teresa Coufal, deputy clerk; Matt 
Siegle, special assistant; Lauren Belive, Kerry Gutknecht, 
Davis Hake, and Will Ragland, staff assistants; Leneal Scott, 
information officer; David Martin, minority staff director; 
Larry Halloran, minority deputy staff director; Jennifer 
Safavian, minority chief counsel for oversight and 
investigations; Keith Ausbrook, minority general counsel; Ellen 
Brown, minority legislative director and senior policy counsel; 
John Brosnan, minority senior procurement counsel; Steve 
Castor, minority counsel; Edward Kidd, Christopher Bright, and 
Allyson Blandford, minority professional staff members; John 
Cuaderes and Larry Brady, minority senior investigator and 
policy advisors; Patrick Lyden, minority parliamentarian and 
member services coordinator; Brian McNicoll, minority 
communications director; and Benjamin Chance, minority clerk.
    Chairman Waxman. The meeting of the committee will come to 
order.
    Today the committee will investigate potential fraud, 
waste, and abuse in the almost indecipherable world of 
contractors and subcontractors.
    In the last 2 years I have tried to get a clear answer to 
what I thought was a simple question: How much money the 
Halliburton subsidiary named KBR and private security 
subcontractors were making under the Army's troop support 
contract called LOGCAP.
    We know that the war in Iraq has given private contractors 
an unprecedented role in providing security services. Almost $4 
billion in taxpayer funds has been paid for private security 
services in the reconstruction effort, alone. But sorting out 
overhead, subcontracts, sub-subcontracts, profit, and 
performance has been nearly impossible.
    For over 18 months the Defense Department wouldn't even 
respond to my inquiry. When it finally replied last July, it 
didn't even supply the breakdown I requested. In fact, it 
denied that private security contractors did any work at all 
under the LOGCAP contract. We now know that isn't true, and 
today we will try to understand the layers of subcontractors, 
with a particular emphasis on the Blackwater company.
    On March 31, 2004, four Americans working as private 
security personnel for Blackwater, all of whom were military 
veterans, were ambushed and killed in Fallujah while on a 
protection mission. Their tragic death became a turning point 
in public opinion about the war and directly resulted in a 
major U.S. military offensive, which is known as the First 
Battle of Fallujah.
    Twenty-seven American soldiers and over 800 insurgents and 
Iraqi citizens died in that battle, and military observers 
believe it helped fuel an escalation of the insurgency.
    It is now almost 3 years later and we still don't know for 
sure the identity of the primary contractor under which the 
four Blackwater employees were working. What we do know is that 
Blackwater was providing security services under a contract 
with a Kuwaiti company called Regency, and that Regency was, 
itself, a subcontractor for ESS Support Services Worldwide, 
which in turn was a subcontractor providing dining services and 
contract services for other contractors such as KBR and Fluor 
Corp.
    We also know that both Blackwater and Regency were adding 
significant markups to the cost of providing the security 
services. And, on top of that, the prime contractor, whomever 
it was, was making its own percentage off the contract. 
Blackwater initially indicated that it believed KBR was the 
prime contractor under the LOGCAP contract. Three months ago, 
however, ESS told the committee that the Fluor Corp. was 
actually the prime contractor for Blackwater work in Fallujah. 
The Fluor Corp. disputes this, and the Defense Department 
doesn't seem to be sure what is going on.
    It is remarkable that the world of contractors and 
subcontractors is so murky that we can't even get to the bottom 
of this, let alone calculate how many millions of dollars 
taxpayers lose in each step of the subcontracting process, but 
the impacts of contracting waste go beyond just dollars and 
cents.
    Today four family members of the four murdered Blackwater 
employees will share their testimony with us. They believe 
Blackwater sent their relatives into Fallujah unprepared and 
without armored vehicles, a rear gunner for each vehicle, or 
heavy automatic weapons to defend against attacks. Their 
experience tells them that tax dollars never reached the 
security personnel on the ground. They believe that the money 
for protective equipment took a back seat to the multiple 
layers of contractor profits.
    I don't know if we will be able to resolve that issue 
today, but I am deeply troubled by one document we have found 
in preparing for this hearing. The day before the four soldiers 
were killed, a Blackwater employee sent an e-mail alerting 
superiors that a lack of equipment, armored vehicles, and other 
safety equipment left the team unprepared to begin its mission. 
That warning was seemingly ignored, and we need to explore that 
further.
    Without objection, this e-mail will be made part of the 
hearing record today.
    I have already learned that sorting out the webs of 
subcontracts is confusing work, but our committee has an 
absolute obligation to the taxpayers to make sure their tax 
dollars are well spent and not siphoned off into billions of 
dollars of unnecessary overhead. And, even more important, we 
have an inviolate obligation to the men and women in harm's way 
and to their families to make certain that their safety doesn't 
take a back seat to corporate profits or wasteful spending.
    I look forward to learning more from our witnesses this 
morning.
    [The prepared statement of Chairman Henry A. Waxman and the 
e-mail follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FOMRAT]

    Chairman Waxman. I now call on the ranking member of this 
committee, Mr. Davis.
    Mr. Davis of Virginia. Thank you, Mr. Waxman. And thank you 
for holding this hearing.
    We once again meet to examine the challenges of managing 
contracts in Iraq. Since 2004 the committee has been engaged in 
continuous and vigorous oversight of contracting activities in 
the war zone. That oversight involved 5 full committee 
hearings, 14 subcommittee sessions, numerous briefings from the 
agencies involved, and review of thousands of documents the 
committee obtained from key Federal agencies. Those efforts 
focused on contracts for logistical support of U.S. military 
operations and for reconstruction efforts.
    Throughout this review it has been our goal to move beyond 
just the charged rhetoric and easy generalities that swirl 
around the topic and get to the underlying realities of 
acquisitions in Iraq. The truth is gritty enough. No one needs 
to embellish or exaggerate it. Still, some prefer to 
oversimplify, distort, and prejudge the outcome of complex 
contracting processes to fit the preordained conclusion that 
nothing goes right in Iraq. I would rather pursue a more 
constructive mode of oversight that looks beyond the headlines 
to make a lasting difference in our policies and save taxpayers 
money.
    Some of today's testimony will focus on a brutal incident 
in 2004 in which four civilian security personnel retained by 
Blackwater USA, a security contractor, were ambushed and killed 
in Fallujah. Our hearts go out to the families of those four 
men. Committee members should keep in mind that liability of 
Fallujah incident is the subject of pending civil litigation, 
and I would ask unanimous consent at this point to put in the 
record a letter from Callahan and Blain to Speaker Pelosi on 
this matter.
    Chairman Waxman. Without objection, the letter will be made 
a part of the record.
    Mr. Davis of Virginia. Thank you.
    [The information referred to follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Davis of Virginia. In view of the court actions, I know 
that the longstanding committee policy still applies. This is 
not the forum to prosecute private lawsuits or the place to 
exploit the tragic events, but there are some unanswered 
questions, Mr. Waxman, and I applaud you for trying to get to 
some closure on these issues.
    A separate focus on this hearing is on management and 
oversight of private security agreements; specifically, the 
allegation that tiering of personnel charges by layers of 
security subcontractors exorbitantly inflated the price paid by 
the Government under cost-plus agreements. Tiering could be 
pernicious if each party was free to mark up their invoices and 
pass them on, but so far we found that subcontractors had fixed 
price contracts with the DOD prime contractor, KBR, a former 
Halliburton subsidiary, so the subcontractors could not pass on 
costs beyond the fixed unit prices--mostly competitive bid--in 
their contracts. In those cases, at least, the alleged 
profiteering shouldn't be possible. There is no legal way to 
profit from tiering under that scenario.
    Even so, there remains the question of whether KBR may have 
acted improperly by allowing its subcontractors to use any type 
of security services at all, or for not knowing whether third 
and fourth-tier subs included any security costs in their 
competitively bid fixed price contract costs.
    The prime contract includes a generic prohibition against 
employees carrying weapons without special permission. Whether 
state prohibition can be stretched into a specific ban or even 
specific security charges by remote subcontractors operating in 
a war zone will likely be the subject of intense discussion 
between the Army and KBR.
    Make no mistake: there are still too many problems with 
contracting in Iraq. Just look again at the mess made through 
the Baghdad Police College, with raw sewage surging through 
classrooms. More recently we heard about unauthorized VIP 
trailers and Olympic-sized swimming pools paid for with U.S. 
tax dollars. With that in mind, I look forward to exploring 
solutions to the constant security and logistical challenges 
that make contract oversight in a war zone so challenging.
    How do we get the right number of acquisition professionals 
and auditors with the right skills to the operational theater 
in time to prevent and not just chase costly mistakes?
    In previous hearings we heard that emergency short-term 
contracting gave way to longer contingency agreements. Then 
many sustainment contracts were opened into using full and open 
competition. The process needs to mature and stabilize even 
further. I hope these hearings help us get to that end. We are 
looking for a slope to the acquisition learning curve, evidence 
that lessons learned are being applied.
    Thank you.
    [The prepared statement of Hon. Tom Davis follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you very much, Mr. Davis.
    By the announcement yesterday, all Members who have made an 
opening statement will not be called on today for an opening 
statement. Mr. Towns was not here yesterday and has requested 
that he be given an opportunity for an opening statement.
    Mr. Townes. Thank you very much, Mr. Chairman. I had a 
conflict yesterday and, of course, was unable to be present. 
Thank you, Mr. Chairman, for holding these hearings on waste, 
fraud, and abuse in Federal contracting.
    Today's hearing focuses on military contracts in Iraq, but 
the problems identified are not unique to the Pentagon or the 
war. In fact, we see exactly the same type of waste in 
contracts of Hurricane Katrina and in other areas. The American 
people and Congress have been very, very generous, but not 
nearly enough of the money has been sent into the places that 
need the help, especially the victims of Katrina.
    One of the biggest problems I see, Mr. Chairman, and 
something that I plan to look into in my subcommittee as the 
Chair, the layers and layers and layers of middle men, each 
taking a cut of the money before it gets to the people who are 
actually doing the work. If we could cut out these middle men 
and middle women, we could get more funds applied to the 
problems we are trying to solve and save some money while we 
are dealing with the problem.
    This problem is more than just wasted dollars. With so many 
layers of subcontractors, the Government cannot monitor the 
work and hold people accountable. This absence of 
accountability has real, real human cost. People who lost homes 
in Hurricane Katrina tell us how many different contractors 
they had to deal with just to get a trailer to live in or to 
put a roof over their heads. And relatives of Blackwater 
employees will tell us today how the lack of oversight and 
planning can contribute to a tragedy.
    Mr. Chairman, I am glad that we have the chance today to 
question some contractors and finally do some oversight, but 
the same type of wasteful contracting happens so often that 
this is not just a problem with a few bad apples. The Federal 
contracting system is broken and we must fix it.
    In this Congress we need to pass a bill that closes 
loopholes and requires more competition. We need to take 
oversight and control out of the hands of huge contractors and 
have Government officials supervising the people who are 
actually doing the work. And we need to make sure that we are 
not outsourcing work that should be done by Government 
employees.
    I look forward to working with you, Mr. Chairman, and with 
the members of this committee on both sides of the aisle to 
pass some real contracting reform as soon as possible.
    On that note, Mr. Chairman, I yield back. I am eager to 
hear from the witnesses.
    Chairman Waxman. Thank you very much, Mr. Towns.
    The Chair would note that Ms. Foxx did not have an 
opportunity for an opening statement yesterday. I want to see 
if she wishes to make one to day.
    Ms. Foxx. I do, Mr. Chairman. Thank you very much for this 
opportunity.
    As our country engages in the historic struggle against 
evil and terror, some publicly question whether our efforts are 
being properly administered and operated. While constructive 
criticism and genuine critical analysis help ensure 
transparency and proper management, some partisan rhetoric can 
actually compromise the good work that is being accomplished in 
places like Iraq.
    Many contractors operating in Iraq have been subjected to a 
great deal of scrutiny. While I understand there may be some 
waste as contractors operate in a war zone, a vast majority of 
the work done by our military contractors is praiseworthy.
    American contractors deliver critical supplies, 
infrastructure, and security in an incredibly hostile 
environment. One of these contractors, Blackwater USA, is 
headquartered in my home State of North Carolina. Today they 
are facing accusations of negligence and profiteering, but I 
see another side of this company that often remains unmentioned 
in the media. For example, many Blackwater security personnel 
were previously honorable law enforcement and military 
personnel, professionals. These folks are well trained and well 
equipped as they work tirelessly side by side with our military 
as they pursue victory over vicious, heartless attacks of 
violence. Furthermore, in response to emerging threats arising 
in the war on terror, Blackwater is developing a number of 
technologies which can serve to protect our brave servicemen 
and women fighting overseas.
    Given the tremendous personal sacrifices and acts of 
patriotism made every day by the brave folks who work for 
contractors such as Blackwater, I hope that today's hearing 
will provide an opportunity for a fair defense against some of 
the accusations which have been leveled against them.
    I look forward to the testimony of today's witnesses.
    I want to add one comment to the prepared statements. I 
appreciate very much what Mr. Towns was saying about how we 
should be looking at waste, fraud, and abuse throughout the 
Federal Government. I will tell you that this is an issue near 
and dear to my heart. But one of the problems that we have is 
we are doing too much at the Federal level and Congress is not 
exercising its appropriate oversight authorities. I think many 
times we are working with systems that simply don't work. 
Having hearing after hearing is not as productive as it should 
be in terms of our looking at that. But I think one of our 
biggest problems is that the Federal Government tries to do 
things it has no business doing, and we simply cannot do the 
proper oversight, and we need to reduce the role of the Federal 
Government instead of increasing the role of the Federal 
Government.
    Thank you.
    Chairman Waxman. Thank you very much for your comments.
    We will now turn to the witnesses, but before that we have 
a memo that has been circulated to the members of the 
committee. It is additional information for hearing on private 
security contractors. Without objection, we would like to make 
that part of the record.
    [The information referred to follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. We will receive testimony from the first 
panel of witnesses. Let me introduce them.
    On March 31, 2004, four men working as private security 
personnel for Blackwater USA were securing a convoy when they 
were killed as they traveled through Fallujah. These brave and 
patriotic men were Scott Helvenston, Wesley Batalona, Jerry 
Zovko, and Michael Teague.
    We have with us today family members of all four men. Katy 
Helvenston-Wettengel is the mother of Scott Helvenston. Scott 
was a former Navy Seal and a Seal instructor, a world-class 
athlete, and the father of two young children. Donna Zovko is 
the mother of Jerry Zovko, a former Army Ranger who was fluent 
in four languages and was just 32 at the time of his death. 
Rhonda Teague is the widow of Michael Teague, who was also 
survived by his son. Mike has served as a member of the Army's 
elite helicopter unit known as the Nightstalkers. He had 
completed tours of duty in Afghanistan, Panama, and Grenada. He 
was awarded the Bronze Star. Kristal Batalona is the daughter 
of Wesley Batalona, a 20-year veteran of the Army Rangers, who 
took part in the 1989 invasion of Panama, the first Gulf war in 
1991, and the 1993 humanitarian mission in Somalia. Ms. 
Batalona heard the news of her father's death on her 22nd 
birthday.
    Before we begin, I would like to express, on behalf of 
myself and the entire committee, our deepest condolences. Our 
hearts go out to all of you for your loss. As Americans, we all 
felt the pain that came across when we saw the horrific images, 
but none of us can truly know your anguish and loss.
    Second, I would like to thank you for being here today. 
Just like your husbands, your fathers, and your sons, you are 
also very brave to testify before Congress. It is not an easy 
thing to do, so we thank you very much for it.
    It is the custom of this committee to swear in all 
witnesses that appear before us, so if you don't mind I'd like 
to ask you to stand.
    [Witnesses sworn.]
    Chairman Waxman. Thank you very much. The record will note 
that each of the witnesses answered in the affirmative.
    We invited all of you to be here today. I understand that 
you have a joint statement that all four of you signed and want 
to provide to the committee. Normally we'd give each witness 5 
minutes, but if one of you would like to read the statement we 
would like to recognize you to do that and to take as much time 
as you need to read the statement.
    Mr. Issa. Mr. Chairman, I would like unanimous consent to 
place into the record two documents pertinent to this hearing, 
one addressed to you and Mrs. Pelosi in which it is cited that 
hearings should go after the Blackwater, the serious lead by 
extremely Republican companies such as Blackwater, and second a 
memorandum of the funds given specifically to democratic causes 
by the law firm that represents these three women.
    Chairman Waxman. OK. Have you had a chance to review them? 
Without objection, we will accept those and make them part of 
the record.
    Mr. Issa. Thank you, Mr. Chairman.
    [The information referred to follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Please proceed however you wish, and thank 
you very much for being here.

STATEMENTS OF KRISTAL BATALONA, DAUGHTER OF BLACKWATER EMPLOYEE 
   WESLEY BATALONA; KATHRYN HELVENSTON-WETTENGEL, MOTHER OF 
BLACKWATER EMPLOYEE STEPHEN HELVENSTON; RHONDA TEAGUE, WIFE OF 
BLACKWATER EMPLOYEE MICHAEL TEAGUE; AND DONNA ZOVKO, MOTHER OF 
                BLACKWATER EMPLOYEE JERRY ZOVKO

           STATEMENT OF KATHRYN HELVENSTON-WETTENGEL

    Ms. Helvenston-Wettengel. I would like to start off by 
sincerely thanking the committee for inviting each of the 
families of the four men who were killed in Fallujah. Although 
everyone remembers those images of the bodies being burned, 
beaten, dragged through the streets, and ultimately hung up 
from a bridge, we continue to relive that horror day after day, 
as those men were our fathers, sons, and husbands.
    Following that horrific incident on March 31, 2004, we 
turned to Blackwater for answers. What we received was 
appalling. We were told that the information surrounding the 
circumstances in which our loved ones were killed was 
confidential. When we insisted on seeing the report concerning 
the incident, Blackwater told us that we would have to sue them 
to get it.
    Having just lost the most important people in our lives, a 
lawsuit was the last thing on our minds. Instead, our focus was 
concentrated on finding out just what happened. However, the 
people in the best position to tell us what happened refused to 
do so. It was not as if Blackwater was claiming that it did not 
know what happened; but instead Blackwater concealed the 
information from us that we needed so desperately to understand 
why our loved ones were dead.
    Imagine having the people so near and dear to your hearts 
killed overseas in a foreign country, and then having his or 
her employer tell you that the details are confidential and 
that it would take a lawsuit to turn the information over.
    There is no accountability for the tens of thousands of 
contractors working Iraq and abroad. Private contractors like 
Blackwater work outside the scope of the military's chain of 
command and can literally do whatever they please without any 
liability or accountability from the U.S. Government.
    They also work in countries like Iraq which are not 
currently capable of enforcing the law and prosecuting wrongful 
conduct such as murder. Therefore, Blackwater can continue 
accepting hundreds of millions of dollars in taxpayer money 
from the Government without having to answer a single question 
about its security operators.
    It is our understanding that Blackwater has lost more 
operators than any other U.S. security company working in Iraq. 
The inherent flaw in the manner in which private contractors 
are being used is that there is no accountability or oversight. 
If the U.S. military was performing the job that is now farmed 
out to the private sector, there would always be someone to 
answer to, all the way up to the President of the United 
States. More importantly, those in the chain of command would 
be looking out for the best interest of the soldiers and their 
country.
    In the case of Blackwater, the people making critical 
decisions are those in corporate America, whose focus is often 
on cutting cost and making profit. When the decision was made 
to save millions of dollars by not buying armored vehicles, our 
husbands, fathers, and sons were killed. Blackwater gets paid 
by the number of warm bodies it can put on the ground in 
certain locations throughout the world. If some are killed, it 
replaces them at a moment's notice. What Blackwater fails to 
realize is that the commodity it trades in is human life.
    While it may be just a statistic to Blackwater, the four 
men killed in Fallujah were exceptional Special Forces who 
collectively gave decades of military service to our country. 
My son Scotty became the youngest Navy Seal ever at the age of 
17. He was fluent in five dialects of Spanish. He served as a 
Navy Seal from Europe to Central and South America. He helped 
train embassy staffs and even set up the security for President 
Ronald Reagan's summit meeting in Venice, Italy.
    Before leaving the Navy, Scott rose to the level of 
teaching Navy Seal courses and was ultimately offered a 
commission. Scott was also a Gold Medal winner at the World 
Pentathalon. That year he won two golds, a silver, and a bronze 
out of five events.
    Mike Teague served in the U.S. Army for 15 years in the 
160th Special Operations Community. He had deployed in Panama, 
Grenada, Spain, Somalia, and other places that constantly 
immersed him in covert operations. As a civilian, Mike taught 
gun training classes for the State of Tennessee, provided 
security for high-profile celebrities and athletes, and worked 
as a police officer for the Federal Reserve. He was reactivated 
during the war in Iraq and spent 12 months in the Army Special 
Forces in Afghanistan.
    Jerry Zovko and Wesley Batalona were similarly former 
Special Forces with the U.S. Army. Jerry was a member of the 
U.S. Army's 82nd Airborne Division and the Army Rangers. He 
served in Bosnia, and the Sinai Peninsula.
    Wesley joined the Army after high school and quickly became 
an Army Ranger. He gave 20 years of service to our country by 
serving all around the world.
    The talents of highly skilled Special Forces personnel do 
not always translate well into civilian life; however, 
Blackwater provided the high-paying alternative to the routine 
jobs that former military personnel usually resort to. 
Blackwater offered our men $600 per day to work private 
security in Iraq. More importantly, Blackwater also promised 
our men certain protections which were critical in determining 
whether to accept such a high-paying job to work in a war zone.
    Our four men were told that they would be working in 
armored vehicles with no less than six operators in each 
detail. There were supposed to be at least three people in each 
vehicle. This would have provided a driver, a navigator, and a 
rear gunner. They would have heavy machine guns to fight off 
any attacks.
    Our men were also told that they would be able to learn the 
routes through Iraq prior to going on any missions, and to 
conduct a risk assessment of each mission to determine if it 
was too dangerous to go.
    Blackwater did not provide our men with any of these 
protections. It is undisputed that they did not have armored 
vehicles, they did not have a team of six, they did not have 
three people per vehicle. They did not have a rear gunner. They 
did not have heavy machine weapons. They were not able to 
conduct a risk assessment of the mission. They did not have a 
chance to learn their routes before going on the mission. In 
fact, when Scotty asked for a map of the route, he was told, 
``It is a little too late for a map now.''
    Ultimately, all four men died before the contract they were 
working under was even scheduled to begin.
    Lack of preparation and the strive to make as much money as 
quickly as possible, even if not 100 percent ready, is 
Blackwater's style of business. This style was confirmed just 
last month when Blackwater's president, Gary Jackson, told the 
Harvard Business Review, ``I constantly push for the 80 percent 
solution that is executable now over the 100 percent solution 
we might be able to devise in another 3 weeks.'' An 80 percent 
solution means that 20 percent of the operators are dead. 
Blackwater actually lost 9 of its 34 operators in just over 2 
months. That means that only 74 percent survived, which is 
pretty close to Blackwater's goal of 80 percent.
    Our men were told that they would be performing work that 
would make a difference, such as guarding Ambassador Paul 
Bremer. Instead, they died escorting empty trucks that were 
going to pick up kitchen equipment.
    Once the men signed on with Blackwater and were flown to 
the Middle East, Blackwater treated them as fungible 
commodities. For example, Scotty was physically and verbally 
attacked one night by a Blackwater program manager when Scotty 
indicated that he was not well enough to leave the following 
morning on the mission. Despite two other Blackwater operators 
offering to go in Scott's place, the Blackwater manager burst 
in to Scott's room late at night, confiscated his weapon, and 
told Scotty that if he personally did not go on the mission the 
following day, he would be fired.
    It was under this threat of being fired and abandoned in 
Iraq that forced Scott to leave for Baghdad the following 
morning. However, late that night Scott sent his last e-mail. 
It was addressed to the owner, president, and upper management 
of Blackwater Security. The treatment of the security operators 
was so bad that after working for Blackwater for just 11 days 
Scott felt compelled to write an e-mail to the owner and 
president of the company that began, ``It is with deep regret 
and remorse that I send you this e-mail. During my short tenure 
here with Blackwater I have witnessed and endured some extreme 
unprofessionalism.''
    In this lengthy e-mail, Scott detailed all of the problems 
with the entire program and the treatment of the operators. 
There was no response from Blackwater's management to this call 
from help. Instead, our men were dead 4 days later.
    After the incident, Blackwater held a small memorial 
service for our men and the other Blackwater operators who were 
killed. During our time at the Blackwater compound, there were 
guards assigned to each of the families. The guards were with 
us at all times and did not let us speak with the other family 
members in private.
    Ultimately, Blackwater refused to tell us anything about 
how our men died. For 6 months after the incident, Blackwater 
did not return telephone calls or inquiries about the incident. 
Ultimately, I tracked down a direct number for Blackwater's 
owner, Erik Prince. When I called it, Mr. Prince actually 
answered the phone. We had a brief conversation, and I asked 
Mr. Prince for a copy of Scott's contract and the incident 
report. He told me that I should receive them within a couple 
of weeks. No documents ever came.
    Although Blackwater told us that we would have to file a 
lawsuit to obtain a copy of the incident report, Blackwater has 
done everything possible to prevent the disclosure of any 
information. During the past 2 years that the lawsuit has been 
pending, Blackwater has not answered a single question or 
produced a single document. Instead, Blackwater has appealed 
every single ruling all the way up to the U.S. Supreme Court. 
When we attempted to take the deposition of a key witness, 
Blackwater sent him out of the country just days before his 
deposition. When he recently returned to the United States 
after working for Blackwater for the past 2 years, we obtained 
another court order to take his deposition. Blackwater has now 
appealed that order, as well.
    Thus far in our legal quest Blackwater has hired five 
different law firms to fight us, including such politically 
connected lawyers as Fred Fielding, White House counsel, and 
Kenneth Starr. It appears that Blackwater will go to any 
lengths to prevent us from finding out why our men were killed 
and to avoid any accountability for its actions.
    Through it all, Blackwater has never denied that it was 
obligated to provide our men with certain protections. More 
importantly, Blackwater has never denied that it did not 
provide our men with these protections. Instead, Blackwater has 
simply said that it cannot be sued for its conduct.
    As appalling as it may seem, Blackwater also recently filed 
a $10 million claim against us for bringing our lawsuit.
    First and foremost, we are seeking answers from Blackwater 
as to how and why our loved ones are dead. Why were they not in 
armored vehicles? Why were they not in a team of six? Why were 
there not three operators in each vehicle? Why were there not 
provided heavy weapons? Why were they not permitted to learn 
the routes in Iraq before going on their mission? Why were they 
not allowed to gather intelligence from the outgoing security 
company?
    Why was a risk assessment not performed prior to that 
mission? Why were they not given 24 hours notice before their 
mission? Why were they lost in the middle of Iraq? Why did they 
drive through the center of Fallujah at a time when even U.S. 
military would not go through? Why were they lied to about the 
weapons and protections they would have? In short, why did 
Blackwater choose to make a profit over the safety of our loved 
ones?
    Second, we are seeking accountability for the wrongful 
conduct of Blackwater. Private contractors such as Blackwater 
are being paid millions of dollars of our taxpayer money to 
line their own pockets and jeopardize the safety of the men and 
women working for them. There needs to be accountability for 
their conduct. While Blackwater is a private North Carolina 
company and should be held to answer to a North Carolina jury, 
the Government should also create some type of accountability 
and oversight for private contractors.
    Third, we are seeking to prevent other families from 
receiving that dreadful telephone call explaining that the 
father, a son, or a husband has been killed. If the message is 
sent throughout the industry that private contractors will be 
held accountable for their wrongful conduct abroad, the 
companies may devote more attention to the safety of their 
workers and less to the amount of their profits.
    Having lost those close to our hearts and then having 
experienced the callous indifference of Blackwater, we 
sincerely hope that Congress will take action by creating 
accountability for the private contractors and not continue to 
allow them to make millions of dollars at the cost of the 
American lives.
    [The prepared statement of the Blackwater family members 
follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Waxman. Thank you very much for that statement on 
behalf of all of you. I know that up here we have the Democrats 
and we have the Republicans. I don't know whether you are 
Democrats or Republicans. I don't know whether your sons or 
husbands or family members were Democrats or Republicans. And 
it doesn't make any difference.
    Ms. Helvenston-Wettengel. No, it doesn't.
    Chairman Waxman. They were American patriots. They were 
veterans of our armed services. We want to know some of the 
things that you want to know, because we ought to know what is 
happening with our young men and women who are in the military 
and who are in the front line risking their lives working for 
private contractors paid by the U.S. taxpayers.
    So we want to get some of the answers to some of the same 
questions, but we have an obligation beyond that to the 
taxpayers of this country to know how this whole operation 
works. You have a contractor, a subcontractor, and who is 
responsible. Who is accountable? If your loved ones had been 
members of the military put into battle, I can't imagine you 
would have had to go through all that you seem to have had to 
go through just to get answers to what happened to them. It is 
really inconceivable to me.
    Ms. Helvenston-Wettengel. I agree. It is unconscionable.
    Chairman Waxman. Let me ask you some questions, because we 
are trying to get a record which we will share with our 
colleagues and help us get the information that we need to try 
to understand what has been happening.
    Some of these questions you may have the answers to and 
some you may not. I am asking anybody on the panel who wants to 
give us your views.
    Were your family members traveling in armored vehicles the 
day in Fallujah when they were killed, to your knowledge?
    Ms. Helvenston-Wettengel. They were Mitsubishi Pajeros with 
reinforced back bumpers.
    Chairman Waxman. And how about the number of team members 
that were in each vehicle?
    Ms. Helvenston-Wettengel. Well, when they originally 
started to pull out there were three. At the last minute, Dr. 
Justin McGuown pulled out the rear gunner in each vehicle 
claiming that they needed to have them there to help them do 
some clerical work.
    Chairman Waxman. What was that third person supposed to do 
in the vehicle?
    Ms. Helvenston-Wettengel. He was the one that would save 
them if they got in trouble. He was the one to protect them.
    Chairman Waxman. Did they have machine guns?
    Ms. Helvenston-Wettengel. I don't think Scotty ever got his 
own gun back. I don't think the navigators fired one bullet. 
The people in Fallujah literally just walked up to these 
vehicles and shot them at point blank range, but then what they 
did afterward was just so horrendous.
    Chairman Waxman. Yes.
    Ms. Helvenston-Wettengel. Scotty lived a short while after 
the initial shooting. I was told he was still alive when they 
tied him to the back of that truck and drug him through the 
streets of Fallujah, and that was before they decapitated him, 
dismembered him, and torched him.
    Chairman Waxman. Do you know whether they had--I assume----
    Ms. Helvenston-Wettengel. I have no idea. I know they 
didn't----
    Chairman Waxman. If there is any difference among the 
others, because what you are saying, I assume you are speaking 
for all of the----
    Ms. Helvenston-Wettengel. Ask them.
    Chairman Waxman. If there are any differences, please let 
us know.
    Did they have maps of the area?
    Ms. Teague. Not that I am aware of. I am not aware that 
they had any maps.
    Chairman Waxman. Did any of you know whether they had maps?
    Ms. Helvenston-Wettengel. I was told Scott specifically 
asked for a map and he was told it was too late for a map.
    Chairman Waxman. So it appears, from what all four of you 
know, is that they were not traveling in armored vehicles, they 
were traveling in teams of two in cars instead of three, and 
they didn't have a rear gunner, and they didn't have heavy 
machine guns, and they didn't have a map; is that correct?
    Ms. Helvenston-Wettengel. That is my understanding.
    Chairman Waxman. All of you agree. And you believe it was 
Blackwater's responsibility to provide these items to your 
family members; is that right?
    Ms. Helvenston-Wettengel. Well, by just removing the 
armored vehicle, I was told gave Blackwater a profit of $1.5 
million.
    Chairman Waxman. Well, we don't know. That is something you 
have heard.
    Ms. Helvenston-Wettengel. Yes.
    Ms. Teague. I am not sure of the profits gained by not 
providing these men with armored vehicles, but I have watched 
extensive footage of other contractors in Iraq taking heavy 
fire in fully armored vehicles. They can sustain 20 to 30 
minutes. That is a possibility that our men could have gotten 
out, but we will never know because they did not have those.
    Chairman Waxman. You have wanted to know information from 
Blackwater. What information did you want to get from 
Blackwater that you feel you still haven't received? I think, 
Ms. Zovko, you had some specific information; is that right?
    Ms. Zovko. Questions.
    Chairman Waxman. Questions?
    Ms. Zovko. Not information, but questions. Why were they 
sent? What led them into the mission that they were going to or 
the job that they were on for 3 days or 4 days prior than the 
contract actually going into effect? Why not prepare them? Why 
not give them time to prepare and get to know the route, all of 
these things that they were supposed to have been allowed to do 
prior to doing the job. There are 1,001 questions, and no 
answers.
    Chairman Waxman. Did you talk to anybody from Blackwater?
    Ms. Zovko. Did I? Yes, actually I did. On March 31st in the 
late evening I spoke to a young woman by the name of Susan who 
had, after three phone calls, confirmed that yes, Mr. Prince 
will be coming to our house to tell us that our son was dead, 
and had talked to her a couple of times about the body coming 
home, and then all of a sudden she disappeared. The only 
contact and good ears that I had there to listen to me were not 
there any more. I have lost contact with them. My son, Tom, had 
talked to Blackwater and had communicated with them more so 
than I did after that. I met with the Blackwater employees at 
the memorial that they had in October, which is 6 months after 
the death of my son, and after that nothing.
    Chairman Waxman. In the joint statement, at least one of 
you was told sue Blackwater in order to get information. Is 
that something that was told to you?
    Ms. Zovko. Yes, and told us to sue. I was under the 
impression that all of the families, the families of my Jerry's 
coworkers and the families of the other young men that were 
killed that worked for Blackwater in Iraq will have the 
opportunity to go into this boardroom meeting for answers and 
questions. Actually, that is the impression that I was under. 
Well, after lunch and after everything that we went through 
that we did at the Blackwater facilities, my husband, my son, 
and I were escorted to this meeting to where it was only the 
three of us and four of the Blackwater employees. There was no 
questions and answers really.
    Chairman Waxman. Tell me about somebody telling you you 
have to sue them to get answers.
    Ms. Zovko. My husband was asking where are my son's 
personal things, where are things that belonged to my son, how 
did my son die. And she said that was confidential. It was the 
information that if we wanted to know we needed to sue. And she 
actually was sitting at this part of the table at the end of 
the table, or head of the table. We were on the side. She stood 
up and she said that if we wanted to know that, that we needed 
to sue. That was confidential.
    Chairman Waxman. And was there anybody else there in that 
room from Blackwater?
    Ms. Zovko. Yes, there was Mr. Rush.
    Chairman Waxman. That is Mike Rush?
    Ms. Zovko. Yes.
    Chairman Waxman. He's a very senior Blackwater official, 
according to our information. And he's the deputy director for 
operations at North Carolina headquarters. What did he have to 
say?
    Ms. Zovko. Maybe at that time he wasn't so high in the 
position in chain of command, if you will, but, no, he was the 
person that we had met that had spent time with the families, 
and he was sitting there. He was sitting to the right of Ann, 
and right next to him was a gentleman by the first name of Dave 
that was the fastest gun, mind you, the fastest gun in Iraq. 
That was a joke. This is supposed to make me feel like smiling 
or laughing because we are sitting at this table and they are 
introducing this gentleman that just came back from Iraq and he 
was the fastest gun in Iraq.
    But we were told to sue, and we had gotten no information. 
We did receive a copy of a flag that people that live near the 
Blackwater headquarters have made for our sons, or it could 
have been the employees of Blackwater that were in Baghdad and 
Iraq, but it did have my son Jerry's name, Scotty's, Wes' and 
Mike's on that flag. That was the only thing that we have 
gotten out of that answers and question session with 
Blackwater.
    Chairman Waxman. Thank you.
    Ms. Helvenston-Wettengel. I would like to add something 
about that flag. It was crocheted by a 70 some year old woman 
that lived near the Blackwater compound, and she crocheted it. 
It was a very large flag. But Blackwater had nothing to do with 
that. She just wanted to do something and she thought that 
might help us feel better.
    Chairman Waxman. Thank you.
    Ms. Helvenston-Wettengel. But Blackwater had nothing to do 
with it.
    Chairman Waxman. Thank you.
    Mr. Davis, I want to recognize you.
    Mr. Davis of Virginia. Thank you. I join Chairman Waxman in 
expressing our appreciation for their patriotism and trying to 
honor their memories in an appropriate fashion. I am having a 
hard time even understanding the contractual vehicle as we look 
at all of the documents, too, if this was an ESS LOGCAP or 
ESSEUR. They were a 4th or 5th year subcontractor, and I hope 
we can get to the bottom of that. But one question I have, as 
we understand it, families ought to be entitled to and receive 
compensation under the insurance that contractors are required 
to carry pursuant to the Defense Base Act. Have each of you 
received those benefits?
    Ms. Helvenston-Wettengel. Widows and minor children receive 
those benefits.
    Mr. Davis of Virginia. Correct.
    Ms. Helvenston-Wettengel. I don't receive any.
    Ms. Teague. I personally never applied for those benefits. 
That has been brought to my attention several times as we have 
asked questions. That, to me, has nothing to do with who is 
accountable for not providing the things to my husband and 
those other men that they were promised for their protection.
    Mr. Davis of Virginia. I agree.
    Ms. Zovko. I received no benefits.
    Mr. Davis of Virginia. OK.
    Ms. Batalona. My mother receives benefits.
    Mr. Davis of Virginia. OK. Thank you. That is all my 
questions.
    Chairman Waxman. Any questions?
    Mr. Davis of Virginia. I will yield to Mr. Issa.
    Mr. Issa. Thank you. Thank you, Mr. Chairman.
    I guess I have one opening comment. Although I don't think 
your testimony today is particularly germane to the oversight 
of this committee, I am deeply sorry for the losses that you 
have had. Camp Pendleton is the center of my District, and so 
Fallujah was particularly painful for all of us in the 
community there, because during the same period, obviously, the 
Camp Pendleton Marines were heavily engaged in a dangerous 
zone.
    One question I have is the opening statement. Who wrote it?
    Ms. Helvenston-Wettengel. It was a compilation of all four 
of us. We all sent in our thoughts and feelings to Dan Callahan 
and he compiled it, because we were told we only had 5 minutes, 
and so we had to--I have my own personal statement that I----
    Mr. Issa. It was well written and I asked because it did 
appear as though it was written by an attorney who had 
obviously slipped in a lot of things that they believe would be 
facts in the lawsuit now pending, and certainly I think it is 
regrettable that a family should have to sue to get 
information.
    I guess one question, all four of these men were 
experienced, seasoned people who understood the military and 
law enforcement; is that fair to say?
    Ms. Helvenston-Wettengel. Yes.
    Mr. Issa. In a sense, and hearing some of the biographies, 
these were people who would have been able to set policy, set 
the terms, if you will. I see you shaking the head, but think 
about this before you answer. These are people who, in fact, 
trained other people, particularly Scotty, so, as I understand, 
what we are talking about are professionals, highly skilled, 
going into a combat situation with experience about combat. 
Would that be fair to say?
    Ms. Helvenston-Wettengel. No experience would have 
protected them that day.
    Mr. Issa. But that is not the question. Were these four 
loved ones of yours----
    Ms. Helvenston-Wettengel. They were very experienced. They 
were definitely.
    Mr. Issa. OK. I think it is important, because one thing 
that is legitimate to this committee's oversight is: Does 
Blackwater, who I don't know from Adam, basically, but do they 
hire top-notch, skilled professionals that come prepared with 
skills commensurate with those of the U.S. military if they are 
to do similar jobs.
    Ms. Helvenston-Wettengel. May I answer that?
    Mr. Issa. Yes, please.
    Ms. Helvenston-Wettengel. Well, they do hire very highly 
trained people, but they also are in Africa in these little 
villages hiring these men that make $30 a month and are told 
that if they die that their families will get $1 million. There 
is a man from Africa that came and interviewed me. I have done 
interviews from two of them from Korea because they are hiring 
there.
    Mr. Issa. Sure. But you are experts on your children, your 
husbands, your father, your loved ones. They were highly 
qualified, highly skilled.
    Ms. Helvenston-Wettengel. They certainly were.
    Mr. Issa. They were the type that we should want to have 
doing security and assisting our military in this combat zone. 
Would that be fair to say for all four?
    Ms. Helvenston-Wettengel. Those four were very highly 
trained, but I cannot say that is the case for all of 
Blackwater's employees.
    Mr. Issa. That is a great loss, obviously, to you and to 
the work----
    Ms. Helvenston-Wettengel. Yes. I am a widow.
    Mr. Issa [continuing]. That they were doing. I'd like to 
thank you for the service they provided and again express our 
sympathies for their loss.
    I yield back.
    Chairman Waxman. I just want to take exception that it is 
not germane to our inquiry. If taxpayers are paying for layers 
and layers and layers of private bureaucracy, and if somebody 
who is getting taxpayers' dollars tells even highly trained 
American veterans that they are going to have body armor, they 
are going to have armed vehicles, and they are going to have 
special people with them to help them carry out their job, we 
ought to know whether they failed to do that, because of 
indifference or negligence or incompetence. That is very much 
our job in oversight. It seems to me sometimes those who are 
criticizing our oversight didn't think we were actually going 
to do oversight, and this is part of our job.
    Ms. Schakowsky. Would the gentleman yield for just a 
second?
    Chairman Waxman. Well, let me ask unanimous consent that 
Ms. Schakowsky, who is not a member of this committee, be able 
to sit with us. Without objection, that will be the order.
    I do want to recognize Members who----
    Ms. Schakowsky. Can I just, in that regard----
    Chairman Waxman. Yes.
    Ms. Schakowsky. I also wanted to take exception to the 
question about who wrote the testimony, because I think clearly 
the implication was that somehow these wonderful women couldn't 
possibly have written that wonderful heartfelt testimony and 
that it took a lawyer in order to put it together. I resent 
that very much and I wanted to just put that on the record. 
Thank you.
    Ms. Helvenston-Wettengel. I do have my personal testimony, 
if you would like to see it.
    Chairman Waxman. Well, whatever you have, we will be happy 
to receive for the record.
    Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    In your testimony that was given, you had a written 
question that you wanted Blackwater to answer, and it 
essentially was: Why did Blackwater not listen to its own 
manager in charge in Kuwait who had warned of all the problems 
well in advance of the deaths of your relatives. Ms. 
Helvenston-Wettengel, who was this manager?
    Ms. Helvenston-Wettengel. Justin McGuown was his immediate 
superior.
    Mr. Tierney. I am sorry. I couldn't hear you.
    Ms. Helvenston-Wettengel. His name was Justin McGuown. He 
was Scott's immediate superior.
    Mr. Tierney. And what concerns did he raise with 
Blackwater?
    Ms. Helvenston-Wettengel. John Potter.
    Mr. Tierney. Mr. Potter? What concerns did Mr. Potter raise 
with Blackwater?
    Ms. Helvenston-Wettengel. Apparently it is my understanding 
that the guarantees that were given to our four men were not 
allowed in a subcontract that was signed with ESS. In the ESS 
contract they deleted the word ``armored.''
    Mr. Tierney. They deleted the word ``armor?''
    Ms. Helvenston-Wettengel. Yes.
    Mr. Tierney. From the vehicles and from the----
    Ms. Helvenston-Wettengel. In the ESS contract that 
Blackwater signed after Scotty had signed his contract.
    Mr. Tierney. And you have had some difficulty getting the 
answers to these questions from Blackwater, so what was their 
response to Mr. Potter's concerns, if you know?
    Ms. Helvenston-Wettengel. Well, they fired him initially.
    Mr. Tierney. They fired him?
    Ms. Helvenston-Wettengel. Initially, yes, because he was 
very upset because the word ``armored'' was deleted, and he 
argued for that. He said we'd have to have armored vehicles. 
And he subsequently was fired.
    Mr. Tierney. And have you had any communications with him 
since he was fired by Blackwater?
    Ms. Helvenston-Wettengel. Yes.
    Mr. Tierney. Yes.
    Ms. Helvenston-Wettengel. And you know where he is?
    Mr. Tierney. Yes.
    Ms. Helvenston-Wettengel. OK. Now, you brought a lawsuit 
against the company, and their response was what?
    Ms. Helvenston-Wettengel. They were outraged that we had 
the audacity to sue them. They claim that they cannot be sued 
because they are a Defense contractor.
    Mr. Tierney. And did they take any action against you?
    Ms. Helvenston-Wettengel. Personally, $10 million is 
something kind of personal.
    Mr. Tierney. The countersuit?
    Ms. Helvenston-Wettengel. Yes. That is pretty personal.
    Mr. Tierney. And, if I understand it, their countersuit 
asserts that you had no right to sue them under the terms of 
the contract, and therefore you are responsible to them for $10 
million?
    Ms. Helvenston-Wettengel. Yes, basically.
    Mr. Tierney. And where in the court process is that suit 
and countersuit right now? How far along are you?
    Ms. Helvenston-Wettengel. That was fairly recently that 
they did that. I don't know how far it has progressed.
    Mr. Tierney. If I discuss with you----
    Ms. Helvenston-Wettengel. Well, after 3 years they have yet 
to give us any kind of document or deposition.
    Mr. Tierney. That is exactly where I was going to go.
    Ms. Helvenston-Wettengel. Yes.
    Mr. Tierney. So your lawyers have asked for written 
documents to be produced?
    Ms. Helvenston-Wettengel. We have received nothing.
    Mr. Tierney. And you have received nothing. Have you had 
depositions, times where you came in before----
    Ms. Helvenston-Wettengel. At one point Mark Miles, who 
works with Dan on this case, he flew all the way to Norfolk, 
and he scheduled----
    Mr. Tierney. All the way to Norfolk?
    Ms. Helvenston-Wettengel. Norfolk. He had deposed a number 
of Blackwater employees and they just didn't show, and so Mark 
sat in his hotel room for 2\1/2\ days and he kept faxing their 
attorney saying at least give me the courtesy, if no one is 
going to show all the way through Friday, please just let me 
know, sign it, and I will go home. After I think it was the 3rd 
day they finally gave him that courtesy, just that nobody that 
had been deposed would be there.
    Mr. Tierney. In the course of your lawsuit do you know 
whether or not your counsel have sought to have documents 
produced by any Government agency, the Department of Defense, 
for instance, or taken any testimony from any Government 
individuals?
    Ms. Helvenston-Wettengel. I have no knowledge. I am not 
saying that they didn't; I just have no knowledge of it.
    Mr. Tierney. I want to thank all of you for your testimony 
today and say how sorry we all are. I think most people in this 
country, if not all, understand that, while your family members 
may have been serving as private individuals or citizens in 
this case, that they were working in the interest of our 
country, and we all feel that they deserve the same protections 
and regard as people in the military, whether from our own 
Department of Defense or from their contracting agent, so you 
have our sympathy.
    Ms. Helvenston-Wettengel. They were all very proud, 
patriotic men----
    Mr. Tierney. I am sure they were.
    Ms. Helvenston-Wettengel [continuing]. Who loved their 
country.
    Mr. Tierney. As are you. Thank you very much.
    Ms. Helvenston-Wettengel. You are welcome.
    Mr. Tierney. I yield back.
    Chairman Waxman. Thank you, Mr. Tierney.
    Mr. Issa. Mr. Chairman, point of order.
    Chairman Waxman. Yes?
    Mr. Issa. While I was out of the room voting in Judiciary I 
understand that there was what I would consider a disparaging 
comment implying that my question to the witness was related to 
having been a woman outside the ordinary course of business. 
Would that be correct?
    Chairman Waxman. Well, it is not an adequate point of 
order, but do you want to make a statement?
    Mr. Issa. I would like to have the words taken down.
    Chairman Waxman. We will check with the parliamentarian to 
see if that is appropriate in a committee. But meanwhile we 
have witnesses here and I want to pursue----
    Mr. Issa. I look forward to hearing their testimony.
    Chairman Waxman. Mr. Westmoreland. Mr. Bilbray. Mr. Platts.
    Ms. Teague. Congressman Waxman.
    Chairman Waxman. Yes.
    Ms. Teague. I would just like to go back for a second for a 
point simply to try to make it a little bit clearer about the 
Congressman's point that these were men that were highly 
skilled, familiar with combat, the kind of men you would want 
in these positions. I agree with that. But I don't know if this 
was made clear. All four of these men had not been with 
Blackwater. My husband had been with them literally--I put him 
on the plane March 26th. He arrived in Kuwait March 29th, and 
he was killed March 31st. Had never done a mission with 
Blackwater before. OK? Her son had been with Blackwater 11 
days. Her son about 3 months, I believe.
    Ms. Batalona. Two weeks.
    Ms. Teague. Two weeks. So here you have four men, highly 
skilled, yes, understand combat, yes, but they are sent out on 
a mission, my understanding, no map, no prior time to assess 
the situation. Could someone that has not worked with this 
company for some time go with them or help them or sort of be, 
you know, take the lead in that? You are all very well versed 
in this community and in this building, but if you have never 
been here before wouldn't you need someone to show you a few 
things?
    So whether they are highly skilled or not does not take 
away from providing them with maybe just the operations of that 
company. That is different from active military. There are 
several things that were different that they were not privy to.
    Chairman Waxman. Thank you very much. That is a good 
clarifying point.
    Mr. Platts.
    Mr. Platts. Thank you, Mr. Chairman.
    Ms. Helvenston-Wettengel. I would like to make one more 
statement.
    Chairman Waxman. See if you can respond in the question 
period, and then if you want to make a statement I am sure that 
those of us who are proceeding with questions would be pleased 
to allow you to do that.
    Mr. Platts.
    Mr. Platts. Thank you, Mr. Chairman. No question. I would 
just convey my deep sympathies to you and your families on the 
loss and for the service of your loved ones to our Nation and 
to the cause of freedom.
    Ms. Helvenston-Wettengel. I am having trouble hearing you, 
sir.
    Mr. Platts. I said no question, I would just convey my 
sympathies to you and your families on your loss and to the 
sacrifices that your loved ones made to our Nation and to the 
cause of freedom.
    Ms. Helvenston-Wettengel. Thank you.
    Chairman Waxman. Thank you.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman. I also want to thank 
Ranking Member Davis for helping on this.
    First of all, I am very appreciative that you have come 
here today to help the committee with its work.
    I do want to go to the germaneness issue because it has 
been raised by my colleague. First of all, we have a situation 
here where there is a growing tendency for the military or for 
the administration to subcontract out work that has 
traditionally been performed by our military, instead using 
private contractors. While the tangled web of subcontractors 
and sub-subcontractors has been noted here this morning, it 
certainly is germane when American citizens are put in a very 
difficult situation without adequate protection.
    With respect to the gentleman's comments, he initially 
raised the fact that the germaneness may not be to this 
committee's jurisdiction but may instead be connected to a 
civil lawsuit. That was the gentleman's comments. And then the 
question was whether or not the opening statement of the 
witnesses here had been drafted by a lawyer, presumably with 
the same lawsuit. That was the inference that was left here.
    I have only been a Member here for 5 years. I have only sat 
through several hundred, maybe 1,000 hearings. That is the 
first time as a Member of Congress that I have heard any 
witnesses asked who wrote their opening statements. And I might 
say also that, if that question is a fair one, then you might 
ask how many Members up here at this table wrote their own 
opening statements. [Laughter.]
    You might be surprised at those answers.
    Ms. Helvenston-Wettengel. Good point.
    Mr. Lynch. But I do want to ask the witnesses this. There 
is an inference here by the attorney for Blackwater in a letter 
they have presented to us that by coming forward and filing a 
lawsuit on behalf of your loved ones--and, you know, I have 
been to Fallujah a couple of times. I have actually been under 
escort with Blackwater security forces in Afghanistan, as well, 
so I understand how brave your loved ones were and how 
patriotic they were, with the same fervor, same patriotism as 
those who serve in American military uniforms. I understand 
that. But the inference is there in the letter from 
Blackwater's counsel that, by their contract, somehow your 
husbands, sons, brothers gave away the right for you to sue in 
the event that negligence or extreme negligence caused their 
death. Can you tell me where that came from?
    Ms. Helvenston-Wettengel. They were also guaranteed certain 
provisions. Had they had any of those provisions, I know in my 
heart they would be alive today. But the few minor things that 
they were promised when they took that employment were taken 
away from them, every single one of them. If they had that 
armored vehicle, if they had that rear gunner, if they had a 
map--I think it is referred to as a black zone or red zone. The 
military would not even go in there with the heaviest equipment 
over there, it was so dangerous.
    Mr. Lynch. And I do realize at this point when their 
caravan, their convoy had gone through Fallujah, the Marines 
hadn't been in to central Fallujah before your husbands and 
your loved ones took that convoy through.
    But, with respect to the inference that there is a bar on 
their lawsuit because of the contract that your loved ones 
signed, is there any more information that you have on that? 
And I realize that there are allegations and there is certainly 
evidence that Blackwater didn't fulfill their part of the 
contract, but this bar on your lawsuit, is that--that is 
something that concerns me for other employees in the same 
situation that your loved ones were in. I want to try to make 
sure that there is no assertion to other families that they 
can't bring lawsuits because of something that was put in that 
contract.
    Ms. Helvenston-Wettengel. I am not familiar with this bar 
that you refer to. I am not sure what that means.
    Mr. Lynch. OK. All right. That is fair enough.
    Thank you, Mr. Chairman. I yield back.
    Chairman Waxman. Thank you, Mr. Lynch.
    Mr. Issa, you are recognized on your own time.
    Mr. Issa. Thank you, Mr. Chairman. Perhaps I will use a 
little of it to straighten out two things.
    My understanding is that the U.S. Congress has put into law 
prohibitions on lawsuits for our Government contractors 
operating as agents of the U.S. Government in a combat zone.
    Ms. Helvenston-Wettengel. Sir, I cannot answer any legal 
questions. I don't have the----
    Mr. Issa. I am not asking. I am making a statement just to 
set the record straight. I have reviewed some of that. That bar 
might be something that this and other committees should look 
at. Obviously, when a company bids, they bid based on the 
assumption that relevant U.S. law would be there. In other 
words, that their losses would be limited to whatever they 
contracted for in the case of a death.
    Having said that, I did ask an appropriate question, I 
believe, of who wrote the opening statement for you, not 
because it is without any--I mean, it is very common for 
attorneys or organizations, in-house people to write opening 
statements.
    Ms. Helvenston-Wettengel. Why are you dwelling on that?
    Mr. Issa. I am dwelling on that because, in fact, there is 
a real question, not as to whether or not we should oversee 
Blackwater and other contractors, but the role of having you 
three bereaved women here----
    Ms. Helvenston-Wettengel. There are four of us.
    Mr. Issa. I am sorry. Thank you. You know, it is a good 
thing I learned to count early but not well. Having you here to 
tell us about your loss when, in fact, it is the subject of a 
lawsuit that is ongoing and, in fact, this committee has no 
jurisdiction here to change the outcome of your loss today or 
to settle your lawsuit----
    Ms. Helvenston-Wettengel. And why is that? We are 
subcontracting out our war. I understand there are 100,000 
contractors over there and there doesn't seem to be a law that 
applies. They literally can get away with murder, and it is 
happening over and over again. It just happened to our four 
men. It is like the Wild West over there, and there is no 
accountability.
    Mr. Issa. I would gather that all four of you would like us 
to cease using contractors wherever possible? You think it 
inappropriate? Is that spoken for all of you?
    Ms. Helvenston-Wettengel. I have found it difficult to 
understand why they do, because they are paid so much more than 
the military, and the military resents them for that. They are 
taking jobs that the military had been trained to do and they 
are giving it to Blackwater and they are being paid enormous 
amounts of money, and it is like a secret army over there that 
the majority of Americans aren't aware of. But if you are going 
to subcontract out this war, then there needs to be some laws 
that apply to these people.
    Ms. Teague. Sir, I would like to comment.
    Mr. Issa. Yes, please.
    Ms. Teague. I think these questions are a bit leading, but 
I would still like to comment. I think there is a need for 
contractors and subcontractors in this war. I have felt that. I 
didn't want my husband to leave home again and work with 
Blackwater. It wasn't necessarily because it was Blackwater. I 
did not know as much about Blackwater. I was tired of my 
husband being gone. He felt it was his calling and it was what 
he should do. I don't feel that it necessarily calls for there 
to be no contractors, no subcontractors, but you just made a 
point, a very valid point. When these contractors bid jobs with 
the Department of Defense and they do so under maybe some 
understanding that they are above the law and that they can do 
this, do they also have to account for where all those billions 
of dollars go? I don't see where any of that is spent. I have 
never heard or had any account of where it is at.
    Mr. Issa. Well, that is something that is--I appreciate 
that. That is something that is very germane to this committee 
and something that we are very interested in. As you probably 
know, we are going to have Blackwater's counsel here next. That 
will be one of the questions is the money.
    I would like to make a small enclosure into the record. 
During the same time that your loved ones were there, March to 
August 2004, one of my legislative assistants was there with 
one of the provisional ministers in an unarmored vehicle with 
only a guard/driver, the three of them in a car outside the 
green zone. It appears as though this has been a war that we 
thought wasn't a war, then we thought it was a war, then we 
thought it wasn't a war, and it is not uncommon for these loved 
ones to be lost or put into danger when people are saying they 
are not in danger. We had 3,000 people working in that sort of 
capacity that were working for $35,000 or $40,000 for the U.S. 
Government at the time as USAID and other provisional 
authority. This is something that is appropriate to this 
committee to see whether or not we should have those kinds of 
people in those kinds of zones with that kind of protection, 
and to that extent I thank you for your testimony, because I 
think, to the extent that we do understand whether we have 
appropriately used contractors is very germane to this 
committee.
    I yield back.
    Ms. Helvenston-Wettengel. The Blackwater has claimed from 
the beginning that they are exempt from all State and all 
Federal laws. How can that be? These are human beings they are 
dealing with, and they literally feel they cannot be sued, 
regardless of what they have done.
    Chairman Waxman. Mr. Kucinich is going to ask some 
questions.
    Mr. Kucinich. Thank you very much, Mr. Waxman.
    Just picking up on the comments of the witness, if that is 
what we are told is characterized as Blackwater's way of 
operating, then it is basically anything goes.
    Ms. Helvenston-Wettengel. I am sorry?
    Mr. Kucinich. If Blackwater operates the way you say they 
operate, then it is basically anything goes, they aren't bound 
by any laws at all.
    Ms. Helvenston-Wettengel. Exactly. That is the point I am 
trying to make.
    Mr. Kucinich. I just wanted to make sure that it came 
through boldly, because what you are saying is, you know, we 
see these witnesses effectively being impugned because they 
filed a lawsuit.
    Let me ask you, the members of the families, were you 
motivated by money or were you motivated by accountability? Did 
you want to make sure that Blackwater was held accountable?
    Ms. Helvenston-Wettengel. I will not get one cent from this 
lawsuit. I refuse to take a penny.
    Ms. Teague. I would like accountability, sir, from the 
beginning.
    Ms. Batalona. Same here.
    Mr. Kucinich. Ms. Zovko.
    Ms. Zovko. Same here. Just let them face what they have 
done and let them not do it to anyone else. Be accountable for 
what they have done.
    Ms. Helvenston-Wettengel. What I don't understand is how 
our Government can hire corporations like Blackwater knowing 
that they refuse accountability. I mean, what does that say 
about us as a country, as a Nation?
    Mr. Kucinich. See, this needs to be known. This is about a 
matter of the heart here. This isn't about people trying to get 
money, because when you see what these families have gone 
through and even the courage it takes for them to come forward 
today, this committee is very appreciative of your being here.
    I have a quick couple of questions that I want to ask the 
members of the panel here. The practice of contracting out 
military operations in a war zone to private security 
contractors, it is troubling. I will tell you why. When the 
Government first began turning to contractors on the 
battlefield it was to provide meals and laundry and other 
services so the troops could focus on the fighting. It was so 
our soldiers could be what they call the tip of the spear. But 
today we are hiring out contractors to be that tip of the 
spear.
    Now, here is what the head of Blackwater said last December 
about his company's role. ``We are trying to do for the 
national security apparatus what FedEx did for the Postal 
Service. They did many of the same services that the Postal 
Service did better, cheaper, smarter, and faster by innovating, 
which the private sector can do much more effectively.'' That 
is a direct quote.
    Ms. Helvenston-Wettengel. Was that Blackwater?
    Mr. Kucinich. Pardon?
    Ms. Helvenston-Wettengel. Is that from Blackwater?
    Mr. Kucinich. That is Erik Prince.
    Ms. Helvenston-Wettengel. OK.
    Mr. Kucinich. And so he makes clear that the private sector 
has a fundamentally different goal than our military. It is the 
private sector that wants to make money. That is why some 
people could be seeing the world in their own image, claiming 
that you are here to make money. The private sector wants to 
make money. There is nothing wrong with that unless it comes in 
conflict with the goals of our military.
    Each of your loved ones spent years as the best of the 
best, the most elite in the U.S. military, each of them, and 
you were accustomed to military culture, so here's the 
question. Ms. Zovko or Ms. Helvenston-Wettengel, what were some 
of the differences that you noticed between the U.S. military 
and Blackwater or a for-profit business entity? For example, 
when your families were on active duty what was the military 
more interested in, the safety of the troops or how cheap they 
could carry out the mission? I would like to hear your response 
to that.
    Ms. Helvenston-Wettengel. Donna, do you want to go first?
    Ms. Zovko. Well, I know when my son Jerry was in the Army 
he was the best that he could be. He loved it, and he was taken 
care of and protected. He was to do his job, but he was given 
the tools to do it with. He was the best of the best in the 
world, 82nd Airborne, MP Company, Ranger. He didn't lack 
anything. His experience and his knowledge from the Army he was 
going to use with Blackwater, but they shot off his arms and 
his legs. They just let him out there to die. They did not 
provide anything for him. He had his discipline, he has his 
know-how, knowing the Middle East as he did, but they didn't 
give him the tools to work with. They just simply sent him out 
there to die. They did.
    You know, if you do what your job requires you to do and if 
you are making the laws, you are not making them only for our 
country, for America, it is the world that we make because we 
are the No. 1. My son was the No. 1. Blackwater and other 
companies like Blackwater, they are recruiting from other 
countries and they are not paying them well enough or taking 
care of them well enough at all, so that needs to be seen. If 
we are going to police the world, then let's do it right. Let's 
start at home taking care of what we need to do here and go on 
with everything else.
    Mr. Kucinich. Ms. Zovko, first of all, to all of the 
witnesses, our deepest condolences to your family for what you 
have suffered. If you can make a final comment, Ms. Zovko, do 
you believe that Blackwater is more concerned about the safety 
of its personnel or how much profit it could make on the 
contract?
    Ms. Zovko. It is profit. It is definitely profit, and I 
will go to my grave believing it was profit. They were not 
concerned about my son or his well-being or what he can do for 
them. It is what they could have charged for my son. Remember, 
our country had given the tools to my son to be who he was. He 
was an ex-Army person, a Ranger, the best of the best, and they 
used him to get him killed.
    Mr. Kucinich. Thank you. Thank you to all of the witnesses. 
Thank you.
    Chairman Waxman. Thank you, Mr. Kucinich.
    Mr. Shays.
    Mr. Shays. Thank you, all four of you, for being here. We 
have had a number of hearings in the subcommittee that I have 
chaired over the last few years, and I have been to Iraq 15 
times, and I say that because I have been outside the umbrella 
of the military, where I have literally gone in a taxi, where I 
have gone in a vehicle that, unfortunately, was white and four-
wheel drive and was a signal, you know, there was probably a 
European in it. You knew intuitively the moment you got off the 
airplane in Iraq that you were in dangerous territory.
    What I am wrestling with is this. First off, I want to tell 
you I find myself agreeing with a lot of different people who 
you disagree with and agreeing with you at the same time. All 
four of you have a right to be outraged. You lost your loved 
ones. You have an extraordinary right to be hurt. The reason we 
pay contractors what we pay them was so they could pay people 
who make much more there than here, and a lot of people who 
went to Iraq went because they could make more money, and they 
knew they were being put in harm's way. They could make two, 
three, four times as much.
    Ms. Helvenston-Wettengel. Not if you are dead they can't. 
They can't make a thing.
    Mr. Shays. Don't interrupt me, ma'am. Let me make my point 
and then you can make your point. It depends which contractor 
is there. You interrupt me before you know whether I agree or 
disagree. Just listen. And so people went there so, in fact, 
they could make additional money, and they knew they were in 
harm's way. What we wanted is to make sure we sent the best-
trained people there, the contractors.
    One of the things that is not in dispute is all four of 
your family members were skilled and knew the risk and knew 
what to do to deal with it. The issue is were they being given 
the kind of assistance they needed to do their job properly.
    So one of the questions that is raising for me is: Did they 
have the capability to say hell, no, we are not going out 
there?
    Ms. Helvenston-Wettengel. Scotty did say that, and he said 
he would be fired.
    Mr. Shays. Please do not interrupt. So I am just throwing 
that out as an issue. Were they, in fact, capable? And if they 
did refuse, what would be the result? Would they be court 
martialed or would they be asked to say we don't want you to 
work here? And, frankly, if you are a skilled person you would 
say I don't want to work here. Were they forced under a threat 
of some kind of court martial not to carry out what they did?
    So I am saying what is the value of what you are doing here 
in the course of this hearing is, one is we need to evaluate 
the role of contractors. They aren't the tip of the spear. The 
tip of the spear are the men and women in uniform who are going 
out and actively trying to root out the enemy. The whole 
purpose of contractors is to free up our military from, instead 
of doing security work, the whole purpose is to make sure that 
our military doesn't have to do the security work so they can 
be the tip of the spear.
    And now I want to tell you where I have tremendous 
sympathy. This company should answer every question you have, 
every question. They should have immediately called you up, 
they should have let you know what happened, they should have 
said this is what we know, what questions can we answer. They 
should have assigned someone to you to help you get 
information, an ombudsman in the company. I will tell you, the 
moment I was in your shoes where I got pushed back, I would sue 
them. I would sue them. I would do anything I could to get the 
information. And so I am just going to throw that out for your 
comment.
    I do want to say, in sympathy to Mr. Issa, his point is I 
asked this question on occasion to witnesses: Is this your 
statement or is this a statement drafted by your attorney? The 
reason is, when an attorney drafts a statement they are 
thinking of the lawsuit and what information they want to put 
in the public record. It is a very valid question. I know my 
colleague. It wasn't whether you as women or as bereaved people 
could write a statement. You could write a wonderful statement. 
The question is, as we look at it, is the committee being used 
properly to look at this, or are we furthering a private 
lawsuit.
    So let me just say to you: Is it true, in fact, that you 
asked for information immediately and you got pushed back? And 
I would like everybody, not just one spokesman. I would like to 
ask you.
    Ms. Zovko. Yes, sir, it is the truth. We were pushed back 
and not told the truth.
    Ms. Teague. Yes.
    Ms. Helvenston-Wettengel. Blackwater lied to us.
    Ms. Batalona. Yes.
    Mr. Shays. OK. and so the purpose, it seems to me, is that 
once they did that you had no choice but to take action against 
them. That is my view.
    Ms. Helvenston-Wettengel. There was an earlier question in 
your statement, and it was regarding whether or not Scotty had 
a choice. An employee of Blackwater's went up to Scotty's room 
with two thugs, held him down, took his gun away from him, told 
him if he did not go on that mission he was on the streets of 
Baghdad that night, he would be on his own to get home, and he 
would pay back any moneys that Blackwater had paid him. So he 
didn't have a choice.
    Mr. Shays. Let me just say that is an extraordinary 
statement to put on the record under oath. Just tell me how you 
know that to be true.
    Ms. Helvenston-Wettengel. The person that was in the room 
at that time with Scotty told me.
    Mr. Shays. So someone else who was there shared that 
information with you? And would you identify who that person 
was?
    Ms. Helvenston-Wettengel. I can't. Also, Scotty's e-mail 
stated----
    Mr. Shays. Ma'am, I need you to say--you said a person 
said. Who is that person? You need to ask your attorney?
    Ms. Helvenston-Wettengel. The person was in Scotty's room. 
Can I answer that?
    Chairman Waxman. Well, as I understand--first of all, your 
time is up. As I understand the question, you said there was a 
person who said he was in the room and he sent an e-mail to you 
and you believe it.
    Ms. Helvenston-Wettengel. I know.
    Chairman Waxman. I guess the real question is, even if he 
had not been told that information, are people assuming the 
risk of dying because their employees want to cut back on the 
payments to provide the security for their employees? This is a 
doctrine that----
    Ms. Helvenston-Wettengel. Well, they took every--the few 
very minor things that they were guaranteed, they took every 
one of them away. Had they had any one of those they probably 
would be alive today. It seems to me it was kind of a personal, 
intentional thing. It was blatant.
    Chairman Waxman. I understand what you are saying, and I 
just want--I know it is not my time.
    Ms. Helvenston-Wettengel. I can give the name of this 
person.
    Chairman Waxman. It doesn't make any difference.
    Mr. Shays. A point of order, Mr. Chairman, please.
    Chairman Waxman. What is your point of order?
    Mr. Shays. My point of order is that I had time, you've 
taken it away, and now you are speaking without time and you 
are speaking on something that I was pursuing and leaving in 
question something, making a statement it doesn't matter. It 
doesn't matter to you; it matters to me. If I could have my 
time or if you could have legitimate time we could have----
    Chairman Waxman. The gentleman's point of order is well 
taken. I now recognize Mr. Yarmuth for his time.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    Thanks to all of you for being here today. I join the other 
members of the committee in offering our sympathies and our 
gratitude for your sacrifice and for being here.
    I want to pursue for a second the train of thought of Mr. 
Shays, because he tried to draw a distinction between what 
would be characterized as providing security and other types of 
military activity. This may be something you may not be able to 
answer, but if so, say so. It seems to me that a lot of what 
our military is being asked to do in Iraq involves security; is 
that correct?
    Ms. Helvenston-Wettengel. Yes.
    Mr. Yarmuth. So my point, by way of a question, is: To the 
extent that you know, was the activity that your relatives were 
involved in distinguishable from what many of our military are 
doing in Iraq right now, our active military?
    Ms. Helvenston-Wettengel. I don't know.
    Mr. Yarmuth. You don't know? OK.
    Ms. Helvenston-Wettengel. Well, I know Scotty was told he 
was going to be security for Paul Bremer and he would be 
working in the green zone. He never met Paul Bremer.
    Mr. Yarmuth. He was told that by Blackwater?
    Ms. Helvenston-Wettengel. Yes.
    Mr. Yarmuth. So essentially, to the best of your knowledge, 
then, there really isn't a distinction between what your 
relatives were doing and what our active military are doing 
now, many of our active military?
    Ms. Helvenston-Wettengel. The main distinction is that they 
were not given the equipment to do it.
    Mr. Yarmuth. And they are being paid by a different 
employer.
    Ms. Helvenston-Wettengel. Right.
    Mr. Yarmuth. Immediately following the incident at Fallujah 
there was a New York Times story and in that New York Times 
story a man named Patrick Tooey, who is a high-level executive 
at Blackwater, apparently, was asked about the attack and was 
quoted as saying, ``The truth is we got led into this ambush,'' 
and he then provided some details about the Iraqi Civil Defense 
Corps and how an escort had been arranged just east of the 
city, and so forth, so he seemed to know a fair amount of 
detail about the attack. Have any of you ever been contacted by 
Mr. Tooey? Did you try to get information from him?
    Ms. Helvenston-Wettengel. No.
    Mr. Yarmuth. No?
    Ms. Helvenston-Wettengel. We have contacted them numerous 
times asking those very questions and they won't return our 
calls.
    Mr. Yarmuth. So he was apparently willing to talk to the 
New York Times, but not to you?
    Ms. Helvenston-Wettengel. Yes.
    Mr. Yarmuth. Somewhere later in that article he talked 
about the fact that they were planning to conduct a more 
thorough investigation. Did you ever get any more information 
about subsequent investigation that they may have----
    Ms. Helvenston-Wettengel. We have received no information, 
period.
    Mr. Yarmuth. Thank you, Mr. Chairman. I yield back my time.
    Chairman Waxman. Thank you, Mr. Yarmuth.
    Mr. Hodes.
    Mr. Hodes. Thank you, Mr. Chairman.
    Ladies, thank you for coming today. I want you to know how 
sincerely we appreciate your being here and the sacrifice that 
you have made. Having some familiarity with litigation in my 
former life, I know how tough it is to go through what you are 
going through with the push-back from the other side, and it 
takes a great deal of courage to do what you are doing in 
pursuing answers from this company.
    We have watched over a period of years this intermingling 
of contractors with forces and the use of contractors growing 
by the U.S. military, especially in Iraq, and it is clear now 
that the numbers of Americans who are serving in Iraq, serving 
their country as your loved ones did, is actually much, much 
higher than the numbers that the military reports because they 
don't talk to us about the contractors, even though they are 
providing those services that your loved ones did, so this is 
really a very important issue in the way things work together.
    And it doesn't matter to us whether your loved ones were in 
the Army or they were private contractors; they were Americans 
serving their country bravely, so we really understand and feel 
that.
    I want to ask you what may be some basic questions about 
some information that you had or didn't have. Did your loved 
ones sign written contracts with Blackwater?
    Ms. Helvenston-Wettengel. No.
    Mr. Hodes. There were no written contracts?
    Ms. Helvenston-Wettengel. Are you asking us personally did 
we sign?
    Mr. Hodes. Yes. Not you. Did your sons and husbands sign 
written contracts with Blackwater?
    Ms. Helvenston-Wettengel. I believe they did.
    Mr. Hodes. Do you have copies of those contracts?
    Ms. Helvenston-Wettengel. Yes.
    Mr. Hodes. OK. And were you aware of whether or not there 
were any other discussions surrounding those contracts where 
Blackwater made representations to your loved ones about what 
they would have to protect themselves and what equipment they 
would have?
    Ms. Helvenston-Wettengel. Your questions are long. Chris 
Berman, who was with Scotty, he signed the same contract and so 
he joined the same time Scotty did, so they were there 
together, and they were friends back in California, so a lot of 
this information comes directly from Chris Berman.
    Mr. Hodes. And your folks were told they would have armored 
vehicles, they would have protection, they would have machine 
guns, they would have what they needed to protect themselves 
from risk?
    Ms. Helvenston-Wettengel. Correct.
    Mr. Hodes. Were they told anything about the various levels 
of subcontracts between Blackwater and these other companies 
that we have now heard about?
    Ms. Helvenston-Wettengel. I don't know. I would doubt that 
would have transpired.
    Mr. Hodes. Sitting here today, can any of you say with any 
certainty what the relationships were between Blackwater and 
Fluor or KBR or ESS? Do you have any idea how that worked at 
all?
    Ms. Helvenston-Wettengel. Well, I understand it is a 
pyramid type thing, and usually starts with Halliburton, then 
it goes to KBR, then Regency, then ESS, and then Blackwater, 
and then Blackwater prepares their invoice, adds on their 35 
percent, it goes to ESS, they prepare theirs and add on 35 
percent on top of Blackwater's 35 percent, and it just goes on 
and on.
    Mr. Hodes. So everybody gets a cut as it goes on up?
    Ms. Helvenston-Wettengel. And it just keeps growing, too, 
because they are adding 35 percent on other 35 percents.
    Mr. Hodes. Do you know whether or not any of the companies, 
as things go up, exercised any oversight over Blackwater and 
how it was treating its employees?
    Ms. Helvenston-Wettengel. I am not aware of any.
    Mr. Hodes. Do you know if the Defense Department, which 
ultimately was at the top of this pyramid, as you have called 
it, was monitoring what Blackwater was doing with its 
employees?
    Ms. Helvenston-Wettengel. The only Defense paper I saw when 
Chris brought Scotty home and he gave me his personal things, 
there was something in there with the Defense Department 
heading, and it basically just said that they had no liability 
to Blackwater.
    Mr. Hodes. Do you think that someone should do more to 
watch over what is going on with the private security 
contractors, including Blackwater?
    Ms. Helvenston-Wettengel. Yes. Most definitely.
    Mr. Hodes. And do you have any feelings as to whether or 
not it ought to be the Department of Defense which ought to be 
doing more to monitor what is going on with the contractors who 
are serving our country so bravely?
    Ms. Helvenston-Wettengel. Well, since Blackwater's whole 
defense is if they had a Government contract with the Defense 
Department, yes, I think the Defense Department should 
establish some rules.
    Mr. Hodes. And do the rest of you agree with that 
statement?
    Ms. Batalona. Yes.
    Ms. Zovko. Yes.
    Ms. Teague. I do.
    Mr. Hodes. Thank you very much. Thank you for being here.
    Thank you, Mr. Chairman. I yield back my time.
    Chairman Waxman. Thank you, Mr. Hodes.
    Mr. Welch.
    Mr. Welch. Thank you, Mr. Chairman.
    Welcome. You mentioned that there was a service at 
Blackwater--not at Blackwater, for your loved ones. Did all of 
you attend that?
    Ms. Helvenston-Wettengel. Yes.
    Ms. Teague. I did not.
    Ms. Helvenston-Wettengel. No, Rhonda didn't.
    Ms. Batalona. I didn't attend.
    Mr. Welch. Did your----
    Ms. Batalona. My mother did.
    Mr. Welch. Your mother did? OK. And there was a reference 
that there were guards, that each of you was separated from one 
another. I would like to ask you if you could each comment on 
that, and in your case comment on how your parent was treated 
there.
    Ms. Batalona. I know that my mom said somebody was with 
her. Somebody was with my mother, but I don't think she ever 
referred to them as guards, per se.
    Mr. Welch. She what?
    Ms. Batalona. She never referred to them as being guards.
    Mr. Welch. OK.
    Ms. Batalona. But she knew that they were always with her 
when--they never had alone time together with the family.
    Mr. Welch. Was she discouraged from spending time with the 
other families?
    Ms. Batalona. She seemed that way, yes, because whenever 
they went out to dinner they joined and if she went somewhere 
in the hotel they followed.
    Mr. Welch. Thank you. And how about you, Ms. Helvenston?
    Ms. Helvenston-Wettengel. The same. They would walk me to 
my door to go to bed at night and there would be someone 
standing outside of that door in the morning. The last night we 
were all there we wanted to go out to dinner and just talk, and 
uninvited they chose to join us, a number of them, and so it 
was a pretty quiet dinner.
    Mr. Welch. Did that inhibit your conversation?
    Ms. Helvenston-Wettengel. Well, one night, though, after 
the first night we were there after the guards left, I snuck 
out of the room and we all went down to Donna's room and we 
talked. They at least allowed us that.
    Mr. Welch. All right. And, Ms. Teague, you were not there?
    Ms. Teague. No. The time that it happened was my son's 
birthday, Mike's son. He was struggling and we opted not to 
attend.
    Mr. Welch. How old is your son?
    Ms. Teague. He is 19 now.
    Mr. Welch. All right. Ms. Zovko, how about you?
    Ms. Zovko. Well, what they have shared, I did feel that 
they were there to watch over us to see, you know, not to 
communicate with the other people. For instance, this one 
thing, they have planted trees and made headstones for my son 
and for his coworkers, or, you know, people that worked for 
Blackwater that were killed in Iraq, and I ran out of film to 
take a picture. I just wanted a picture of my husband with the 
headstone and all of that. I was going to ask a lady that was 
there to take a picture for me so that, you know, I was going 
to give her my address to mail it to me. Well, before you know 
it there was someone already there saying, ``No, you don't have 
to do that. I will take the picture and I will send them to 
you.'' Well, he took the pictures but he never mailed the 
pictures to us.
    Mr. Welch. OK.
    Ms. Zovko. That is there. I had my grandchildren there, and 
my daughter-in-law. We were all there, but there was no ease. 
They have told us that they didn't work for Blackwater when we 
came in.
    Mr. Welch. Yes.
    Ms. Zovko. When we flew in. In reality, when we came into 
the headquarters the following day, the same people that said 
that did not work for Blackwater, that their wives worked for 
Blackwater, had the T-shirts of Blackwater on and standing at 
the entrance letting us in.
    Mr. Welch. Thank you. Just one quick question for each. I 
appreciate that. You are all strong women, made stronger by 
being together. If each of you could have asked a question of 
Blackwater to get one piece of information, what would each of 
you ask Blackwater to do to help you come to terms with the 
loss that you have suffered?
    Ms. Zovko. The truth. The simple, plain truth. ``Mrs. Zovko 
or Donna, this is what happened. This is how it happened. You 
couldn't see your son's body, but we are telling you that this 
is how it is.'' Do you know the remains of my sons were sent to 
me in 11 months. The first was in 10 days, and then what was 
left of him, 11 months later.
    Ms. Helvenston-Wettengel. They sent his charred arm to her.
    Ms. Zovko. Just the truth. I mean, basic truth. You know, 
we live in the best country in the whole wide world. Why can't 
we have the basics, what we were built on, the truth, you know, 
God and truth. That is all.
    Mr. Welch. Thank you.
    Ms. Zovko. That is all. That is all, nothing else.
    Mr. Welch. Ms. Teague. Thank you.
    Ms. Teague. Very similar. I would like an account from 
start to finish of that day. Whether I want to hear it or see 
it, I would, every minute of it, every part of it, the truth.
    Mr. Welch. Thank you. Ms. Helvenston.
    Ms. Helvenston-Wettengel. They showed such a callous 
disregard for life, and now they claim we have no rights? If we 
don't have the right to sue them, I don't know about you but I 
am outraged. Where is your outrage?
    Mr. Welch. Thank you. Ms. Batalona.
    Ms. Batalona. Like everybody else, I would also like the 
truth. Just a simple question of why. Why couldn't they give 
them the protection and the tools that he needed to complete 
his mission?
    Mr. Welch. Thank you.
    Mr. Chairman, I yield whatever time I have.
    Chairman Waxman. Thank you, Mr. Welch.
    Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Let me thank the ladies for being here today. I think it is 
essential to remind us that, no matter how good the intentions 
are, there is always, in major efforts, major mistakes. 
Congress bears the responsibility of not just finding fault, 
but trying to find answers. We can't relieve you of the burden 
that you are going to bear the rest of your lives, and your 
loved ones, but we do bear the burden of trying to modify the 
process, to minimize the potential for this to happen again.
    Ms. Teague, there was a lot of discussion here about the 
isolation of your loved ones from the rest of the rank and file 
of the employment of the group that was under Blackwater, and 
there were specific references to the fact of contractors going 
to Third World countries to find ``inexpensive employees'' to 
be able to provide the infrastructure, the support that your 
loved ones needed.
    I will be very blunt with you. Do you think we should be 
looking at the fact that the people that are recruited to do 
American jobs may need to be Americans and should be required 
to be U.S. citizens so that it is U.S. citizens fighting side 
by side? Let me just poll you. Would you suggest that we just 
make it a matter of fact policy or consider a policy that says 
when an American contractor gets an American contract to go 
into these situations, they must hire U.S. citizens to do the 
job?
    Ms. Helvenston-Wettengel. I think that would be very 
appropriate.
    Ms. Zovko. I agree with that.
    Ms. Teague. I agree, but I think that there is also the 
intel part of that, which again falls on other people, but you 
have to have intel that involves, when you are in a foreign 
country, people that can integrate in that. But I do prefer and 
wish they were all American, but that is a problem that has to 
be addressed in that.
    Mr. Bilbray. Thank you very much. I appreciate that. I 
appreciate the very balanced approach of many of you on this 
issue. It is astonishing that you can be so level-headed and so 
cool with the kind of experience you have gone through. I 
appreciate that.
    At this time, the gentleman from California, the time I 
yield to Mr. Issa.
    Mr. Issa. I thank the gentleman.
    Following up a little bit on what Mr. Shays had asked 
about, there was a statement made that there is--I think there 
were four names named and a 35 percent markup each time. How 
did any of you know about that, or what do you know about that?
    Ms. Helvenston-Wettengel. I have read just about every 
article that has come out regarding Blackwater since about 6 
months after the incident. Jay Scahill has just finished a 
book. He has done such incredible research and he is so 
thorough. Jerry Price has been incredible.
    Mr. Issa. So it is from unclassified information. And if I 
did my arithmetic, basically your loved ones were paid about 
$200,000 annualized. That would mean, with 35 percent, it would 
be about $800,000 the Government would pay per person per year 
if four contractors did 35 percent markup? Is that roughly your 
understanding, from the readings you have had?
    Ms. Helvenston-Wettengel. I haven't done the math, but all 
I know is Scotty didn't even get one paycheck.
    Mr. Issa. I understand. Are all of you aware that Secretary 
Bremer was guarded for his time in Baghdad by Blackwater?
    Ms. Helvenston-Wettengel. Yes.
    Ms. Teague. Yes.
    Ms. Zovko. Yes.
    Mr. Issa. That is not inconsistent?
    Ms. Helvenston-Wettengel. I would venture a guess he had 
armored vehicles.
    Mr. Issa. In your reading, were you aware of all the write-
ups about our military personnel, including the Marines from 
Camp Pendleton, who were short of armored humvees and as a 
result were driving around with tin-sided humvees at the time 
because there was a worldwide shortage of the armor capability?
    Ms. Helvenston-Wettengel. Yes, I was aware they would 
scavenge around Iraq in these junkyards trying to armor their 
own vehicles, which is horrible. How could our Government send 
them over there and they become scavengers trying to protect 
themselves?
    Mr. Issa. I understand that, and it is regrettable, but it 
is documented that the U.S. military had the same problem of 
insufficient armored vehicles during that time.
    Are you also aware that Mr. Waxman and Speaker Pelosi and 
myself were guarded by Blackwater as late as 2005, 2006 on our 
last--March 2005, when we were there, that they have guarded, I 
believe, 91 codels? Virtually every Congressman that went in 
and out were guarded by Blackwater in Iraq.
    Ms. Helvenston-Wettengel. I wasn't aware of that.
    Ms. Zovko. But what does that have to do with them----
    Ms. Helvenston-Wettengel. What's the point?
    Ms. Zovko [continuing]. Sending my son the way they did on 
the job that he was doing when he died. I mean, I didn't come 
here and say the people that work for Blackwater are not 
qualified to guard and protect. My son was one of them. The 
reason that I am here is because they did not supply to my son 
what he needed to do his job, what he was qualified for. So 
what they did, that is just fine. I hope that they keep on 
doing a great job. But that has nothing to do with the death of 
my son or preventing them from not doing it to someone else 
just because they are good at green zone and they are able to 
protect the people that come there, be it you or anyone else. 
They did not protect my son.
    Mr. Issa. Thank you, Mr. Chairman. I yield back as 
appropriate.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman. Thank you for this 
hearing today.
    It seems to me that, regardless of who they are technically 
working for, when Americans are killed in action in a war zone 
there should be a moral obligation to tell the family how it 
happened.
    Ms. Zovko, what is it that you want to know from 
Blackwater, and what specific questions would you like to get 
the answers to? If you have a list, send it forward. Can staff 
go get the list for us, please.
    Ms. Zovko. I want to know the truth about March 31, 2004. I 
want to know about the way that they knew of this contract 
coming up, that Blackwater is going to have the contract. They 
were working on having the things put together for the 
missions, and then all of a sudden the last minute they do what 
they did and send these men on the mission as they did. I want 
to know about the contracts that Blackwater needed to fulfill 
with the other companies that they were subcontracting from. 
Why didn't they oblige? Why did they not provide what they 
needed to provide for these employees of theirs if these 
employees were going to do the job? Why did they do it 3 days 
before the day was ever to come for them to go into the effect? 
What was the hurry? What was the rush, and especially with not 
giving them what they needed to have? Why did it take so long 
for my son's body to come home? Why wasn't there someone in 
front of them with the heavier equipment, if they were not 
equipped, someone that was more equipped? If our military 
couldn't go in, how come Blackwater could send them? Why? Why? 
Don't you understand? What is the truth behind it? Is it the 
dollar or what is it, or were there really lives being saved by 
taking my Jerry's life? What is it? Tell me. I don't know.
    Mr. Clay. I don't have the answers for you, and hopefully 
the next panel can help shed some light on it, but it sounds 
like reasonable questions that deserve answers, and Blackwater 
should be willing to answer those questions. I am sure that the 
military, if these were active duty military, they would be 
willing to give you the answers.
    Let me also ask you about Erik Prince, who is Blackwater's 
CEO. He is known to be a very private man who does not often go 
on the record to talk about his company, but I understand that 
two of you have spoken with him personally.
    Ms. Zovko. Yes.
    Mr. Clay. And, Ms. Zovko, Mr. Prince came to visit you at 
your home in Ohio after news of Jerry's death. What do you 
remember about that visit?
    Ms. Zovko. I remember being told that he would be there 
about 8. He came, accompanied by our sheriff's department. They 
escorted him to my son's house. Out of everything, my brothers-
in-law and my sisters-in-law were there, my daughter-in-law, 
and myself, and my husband. All I can remember--I can still see 
him sitting across the table, my son's dining room table, 
telling me that if he thought I thought--his words--``if anyone 
could survive the war in Iraq, it would be Jerry.'' He actually 
told me and made me feel like he knew who my Jerry was, to find 
out later that he was just an employee that he did not know.
    Mr. Clay. It sounds as though they just looked at Jerry and 
the other employees as just that, employees----
    Ms. Zovko. Just that, employees.
    Mr. Clay [continuing]. That didn't have a family attached 
to them or anything else.
    Ms. Zovko. Just a figure, just someone to be able to charge 
the Government for services rendered from people the Government 
had educated and made who and what they were, you know. But 
their own choices, though, granted. My son went to work for 
Blackwater, you know. He chose to, because that is how he could 
contribute in fighting the war in Iraq. But Blackwater did him 
wrong, very, very, very wrong.
    Mr. Clay. And it seems that this war has gone awry.
    Ms. Zovko. It does.
    Mr. Clay. And people have died unnecessarily that didn't 
have to, and in this case all under the name of profit.
    Ms. Zovko. Yes. All.
    Mr. Clay. Thank you all for being here. Thank you for your 
testimony, and thank you for your insight.
    Mr. Chairman, I yield back.
    Chairman Waxman. Thank you for yielding back.
    Someone asked whether this is germane of our job as Members 
of Congress. If our military wasn't providing sufficient 
equipment, armored vests, basic needs of our troops, that is 
germane to us. And if our subcontractors and contractors are 
not providing what they should be providing to our troops that 
they have hired to represent our interests, that also is in our 
interest, that is also germane to what we want to know.
    Ms. Schakowsky, do you want to be recognized?
    Ms. Schakowsky. Thank you, Mr. Chairman. I really 
appreciate the courtesy you have extended to me as someone who 
is not a member of this committee but has tried to drill down 
over time on the issue of private military contractors.
    I want to say to you that I saw--I am not sure if it was 
all of you--on the film ``Iraq for Sale,'' the Robert Greenwald 
film that I wish every Member of Congress would watch about the 
role of private contractors in Iraq. I really appreciate your 
raising the questions of accountability that you have, because 
that is really the policy, the questions we have. But one 
policy question I wanted to point out to you is the question of 
why should we hire companies like Blackwater if they are so 
much more expensive than the military. And Erik Prince actually 
answered that in a way that you may have heard. He said last 
year about the military, ``So when they say ah, we need about 
100 guys to do that job, we say actually you only need about 10 
to do that job.'' I don't know if you have heard that quote 
before. You know, he's saying Blackwater needs only one-tenth 
the manpower to do the same job as the military. I wondered if 
anyone had a reaction to that.
    Ms. Helvenston-Wettengel. If you would compare the time 
they were slaughtered, Blackwater had 400 employees in Iraq. By 
March 2004, I think almost 25 had already died, versus the 
military, the total military over there and the total military 
that have died. As I say, I have not done the math, but their 
percentage is much higher, and if he thinks it is only worth 
sending 10 men out, I would pretty much guarantee those 10 men 
would come back dead.
    Ms. Schakowsky. You know, on June 13, 2006 Chairman Shays 
of the subcommittee you mentioned, we had a hearing.
    Ms. Helvenston-Wettengel. I heard that entire hearing.
    Ms. Schakowsky. At that hearing where we had the State 
Department, the Department of Defense, the USAID, I asked 
questions about how many contractors do we have there, how much 
does it cost, how much are we paying, what's the total number 
of dead and wounded. You know, your loved ones are not 
considered when the number----
    Ms. Helvenston-Wettengel. They don't count.
    Ms. Schakowsky. No. They are not counted.
    Ms. Helvenston-Wettengel. They are so insignificant, they 
don't even count.
    Ms. Schakowsky. We think that it is upwards of about 800, 
but we can't get that answer. I asked to see a Blackwater 
contract at that time. We wanted to know if any laws had been 
broken in the host country, U.S. laws, international laws, if 
disciplinary actions had been taken against any contractors. No 
one had an answer. That was in June.
    In December 2006 the Government Accountability Office said 
there is little visibility over these contracts. We don't know.
    So I just want you to know today I introduced a piece of 
legislation, the Iraq and Afghanistan Contractor Sunshine Act, 
to answer those questions. We need to know. Are your loved ones 
being asked to do jobs that are inherently governmental 
functions and given what any soldier, what any U.S. military 
uniformed person would be given? We need answers to these 
questions that you have been asking, as responsible Members of 
Congress.
    I really want to thank you, because you put a face on this 
veil of secrecy of these troops that are there, or these 
personnel that are there carrying on these missions for our 
country, and we don't know a darned thing about them, and when 
they die we don't even report their deaths. We don't answer 
that.
    I don't know if you want to respond to that, but I thank 
you so much.
    Ms. Helvenston-Wettengel. Just thank you so much for that 
acknowledgement, because that is why we are here today. That is 
why. I appreciate so much, because my next question was after 
this hearing what happens next. What will you do with the 
information?
    Ms. Schakowsky. I hope more sponsors to this legislation.
    I yield back. Thank you, Mr. Chairman.
    Chairman Waxman. Before we do that, I would just like to--
if the gentlelady would yield?
    Ms. Schakowsky. Yes.
    Mr. Shays. I would just like to say I think it is a great 
summary of the value of your testimony today.
    Ms. Helvenston-Wettengel. Thank you.
    Mr. Shays. I, for one, would like to be put on your 
legislation.
    Ms. Schakowsky. Thank you, Mr. Shays.
    Mr. Shays. Thank you for yielding.
    Ms. Helvenston-Wettengel. Thank you, sir.
    Chairman Waxman. Before we have you leave and hear from the 
next panel, Mr. Shays did ask a question, and I saw you leaning 
back. I guess that is your lawyer. I think he should get an 
answer. We all want to get the answer to the question. Who was 
in the room with your son?
    Ms. Helvenston-Wettengel. It was Chris Berman.
    Chairman Waxman. Chris Berman?
    Ms. Helvenston-Wettengel. Chris Berman was the youngest 
Navy Seal ever until Scotty came along, and they did these 
workout camps and workout videos together, and Scotty usurped 
him, and that record will hold forever, so they have this fun 
rivalry. So they went over together, and they had been friends 
prior to that.
    Chairman Waxman. Mr. Shays, did you want anything else?
    Mr. Shays. No, Mr. Chairman. I really appreciate you moving 
forward with that, and it is helpful for us to know, and I 
thank you.
    Ms. Helvenston-Wettengel. OK.
    Mr. Shays. Thank you, Mr. Chairman.
    Chairman Waxman. I think it is important when we ask 
questions of witnesses we get answers, complete answers, and I 
appreciate that you gave us that.
    Ms. Helvenston-Wettengel. Chris Berman now is in Kuwait 
City building armored vehicles. He finished his 2-month 
contract with Blackwater then left, came home, built the most 
heavily plated armored vehicle over there, and he can't build 
them fast enough, so Chris is making a difference.
    Chairman Waxman. Thank you. Well, I think your testimony 
will make a difference, as well. I thank you very much for 
giving it.
    Ms. Helvenston-Wettengel. Thank you.
    Chairman Waxman. You can leave. We are going to now hear 
from the next panel. In this next panel we will receive 
testimony. First, we want to welcome Tina Ballard, the Deputy 
Assistant Secretary for Policy and Procurement for the U.S. 
Army. We also welcome Andrew Howell, general counsel for 
Blackwater USA; Steve Murray, the director of contracting for 
ESS Support Services Worldwide; George Seagle, the director of 
security for the Government and Infrastructure Division of KBR; 
and Tom Flores, the senior director for corporate security at 
the Fluor Corp.
    It is our policy to swear in all the witnesses that appear 
before our committee, so I would like to ask our witnesses to 
please rise.
    [Witnesses sworn.]
    Chairman Waxman. The record will indicate that each of the 
witnesses answered in the affirmative.
    We have your prepared statements, which will be part of the 
record in their entirety. We would like to ask each of the 
witnesses to give a summary of that testimony and try to keep 
within the 5-minutes that we allot. You may submit a longer 
written statement and the committee will include that statement 
in the official hearing record.
    Ms. Ballard, why don't we start with you? We will go down 
in the list and have questions after each witness has 
testified.

   STATEMENTS OF TINA BALLARD, ASSISTANT UNDERSECRETARY FOR 
PROCUREMENT AND POLICY, U.S. DEPARTMENT OF THE ARMY; ANDREW G. 
   HOWELL, GENERAL COUNSEL, BLACKWATER USA; R. TIMOTHY TAPP, 
   MANAGING DIRECTOR, BUSINESS OPERATIONS, REGENCY HOTEL AND 
 HOSPITAL CO.; W. STEVE MURRAY, JR., DIRECTOR OF CONTRACTING, 
  ESS SUPPORT SERVICES WORLDWIDE; GEORGE SEAGLE, DIRECTOR OF 
  SECURITY, GOVERNMENT AND INFRASTRUCTURE DIVISION, KBR; TOM 
 FLORES, SENIOR DIRECTOR, CORPORATE SECURITY, FLUOR CORP.; AND 
ALAN CHVOTKIN, SENIOR VICE PRESIDENT AND COUNSEL, PROFESSIONAL 
                        SERVICES COUNCIL

                   STATEMENT OF TINA BALLARD

    Ms. Ballard. Thank you. Thank you, Mr. Chairman, for this 
opportunity to again report to you on the U.S. Army contracts 
for reconstruction and troop support activities in Iraq. It is 
my privilege to represent U.S. Army leadership, as well as the 
dedicated military and civilian members of the contracting work 
force who have been at the forefront in Iraq.
    Our work and our success to date would be impossible 
without the tremendous support the Army receives from you, the 
members of this committee. We thank you for your wisdom, your 
advice, and your guidance.
    The Army contracting work force has two very different 
important missions in Iraq: to support reconstruction 
contracting and to provide support for the troops. The mission 
is also one of constant change. Over time the reconstruction 
has moved from large design/build contracts to firm fixed-price 
contracts with Iraqi firms in an effort to reduce security 
costs and to provide economic opportunity to the Iraqi people. 
The LOGCAP contract for troop support is also changing as we 
move away from one contractor, as currently exists under 
LOGCAP-III, to multiple contractors under LOGCAP-IV. Regardless 
of the contract vehicle, however, one thing has and will remain 
constant over time--our commitment to ensuring that our 
contractors comply with the terms and conditions of their 
contracts. There is no flexibility or negotiation or compromise 
in this commitment.
    The last time I testified before this committee I was asked 
about a letter from the Secretary of the Army dated July 14, 
2006. The letter from the Secretary was sent in response to 
allegations that there was as subcontractor relationship 
between Kellogg, Brown and Root Services, Inc., ESS worldwide 
Services, Regency Hotel & Hospital Co., and Blackwater Security 
Services. The Secretary's letter stated that, based on 
information provided by KBRS to the U.S. Army, KBRS had never 
directly hired a private security contractor in support of the 
execution of a statement of work under any LOGCAP-III task 
order. Additionally, the letter stated, ``KBR has queried ESS 
and they are unaware of any services under the LOGCAP contract 
that were provided by Blackwater USA.'' I was asked if this 
letter was accurate. I responded that Secretary Harvey's letter 
was correct. I also committed to looking into this matter, and 
I have kept that commitment.
    As a result of extensive research, the U.S. Army 
correspondence with ESS and KBRS, ESS recently confirmed to 
KBRS and the Army that they obtained security services. ESS 
built and operated dining facilities both as a direct 
contractor to the U.S. Government and as a subcontractor to 
KBRS and other companies. On January 30, 2007, we learned ESS 
engaged Blackwater through Regency Hotel, and that ESS employed 
private security, primarily to protect its employees and 
management traveling in Iraq, and to transport currency to pay 
vendors and employees.
    Based on information we received from KBRS, we understand 
that these security costs, which were not itemized in the 
contracts or invoices, were factored into ESS labor costs under 
its DFAC service contracts with KBRS under LOGCAP-III.
    The U.S. Army is continuing to investigate this matter and 
we are committed to providing full disclosure of the results of 
our investigations to the committee. If KBRS violated the terms 
of the LOGCAP-III contract and knowingly or unknowingly 
incurred costs for private security subcontractors under the 
LOGCAP-III, the U.S. Army will take appropriate steps under the 
contract terms to recoup any funds paid for those services.
    The last time I testified before this committee I also 
listed a few reconstruction accomplishments of the Defense 
Department implementing agencies. Today I can add to that list. 
Twelve hospitals serving over 6,000 patients a day have been 
refurbished. Water treatment capacity now serves an estimated 
2.2 million Iraqis. Electrical generation projects have added 
1,420 megawatts to the power grid. Crude oil production has 
increased, though extenuating circumstances have kept 
production from reaching full production. And 839 schools 
providing classrooms for over 350,000 students have been 
constructed or rehabilitated.
    Sir, in conclusion we are proud of the dedication, 
commitment, and hard work of our contracting work force in 
supporting our troops and rebuilding Iraq.
    Thank you. I look forward to your questions.
    [The prepared statement of Ms. Ballard follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you very much, Ms. Ballard.
    Mr. Murray?

                   STATEMENT OF STEVE MURRAY

    Mr. Murray. Chairman Waxman, Representative Davis, members 
of the committee, I am Steve Murray, the director of 
contracting for ESS Support Services Worldwide. I served over 
20 years in the U.S. Army, retiring as a chief warrant officer. 
During my service, my mission often was to deliver food 
services and other logistics support to our troops. I carried 
out a similar mission as an employee of ESS.
    ESS has extensive experience building and operating food 
service facilities in remote and challenging locations, such as 
mining camps and offshore in oil and gas drilling platforms, in 
Asia, Africa, and the Middle East. ESS provides a range of 
support services to its customers, including full food 
services, supply logistics management, transportation, vehicle 
maintenance, facilities management, and communications.
    I joined ESS in June 2003, to oversee its contracting for 
operations in Kuwait and Iraq. In December 2002, ESS began to 
build and operate dining facilities known as DFACs to feed the 
American and other Coalition troops that were arriving in 
Kuwait at bases such as Camp Commando and Camp Coyote. Every 
day ESS served thousands of our soldiers and marines four full-
service, high-quality meals: breakfast, lunch, dinner, and a 
midnight meal.
    After Coalition forces moved into Iraq in March 2003, ESS 
followed our troops, making sure that they were soon eating hot 
meals instead of MREs. From 2003 to 2006, ESS built and 
operated DFACs at over a dozen sites in Iraq, including 
Baghdad, Fallujah, and Tikrit, as well as performing camp 
construction at Camp Taji and in Basrah. ESS also provided food 
services and facilities management to the Coalition Provisional 
Authority, as well as food services for civilians performing 
reconstruction work in Iraq.
    ESS performed many of its services in Iraq as a 
subcontractor to KBR. We also delivered on numerous contracts 
directly for the Army, the Marine Corps, and the Department of 
State. All of the subcontracts that ESS entered with KBR were 
competitively awarded and were performed by ESS on a firm, 
fixed-price basis. Instead of being a cost reimbursable or 
cost-plus contract, ESS' contracts with KBR stated a bottom 
line, or a maximum not to exceed price for the services that 
ESS was contracted to provide. Except in unusual circumstances, 
if our costs were higher than anticipated that was our problem. 
We had agreed to a fixed price.
    One of ESS' costs that was higher than we had anticipated 
for was for private security. Beginning in the middle of 2003, 
security conditions in Iraq compelled ESS to hire private 
security firms to move its personnel and supplies among DFACs. 
Without the aid of private security firms, ESS could not have 
performed its mission of feeding the troops.
    ESS moved most of its supplies through sporadic military 
escorted convoys, and supplies often took days or even weeks to 
reach the DFACs, or simply never arrived at all. When 
necessary, ESS called on private security firms to provide 
well-trained, armed personnel who escorted supply trucks and 
ensured that food services to the troops were not disrupted. 
Many other contractors did the same.
    ESS also used private security firms to escort our managers 
and staff as they drove to and from DFACs and other sites. I 
traveled between sites with our private security providers on 
many occasions.
    The military escorted convoy system was intended to move 
supplies, not people. We had over 100 ESS managers and over 
1,000 ESS staff getting the job done at more than a dozen sites 
in Iraq. We could not have fed the troops if we could not get 
our people to and from the DFACs. We were determined to never 
compromise the safety of our personnel when they traveled 
between sites.
    ESS used a number of different private security firms 
between 2003 and 2006, including Blackwater. We always made it 
clear to KBR and other parties that contracted with ESS that we 
were using private security firms.
    I am proud of the work that I have performed for ESS and my 
country during my time in Iraq. I am glad to be here today to 
help this committee sort out the facts for the American people.
    Thank you.
    [The prepared statement of Mr. Murray follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you very much.
    Mr. Howell.

                   STATEMENT OF ANDREW HOWELL

    Mr. Howell. Chairman Waxman, Congressman Davis, members of 
the committee, my name is Andrew Howell, and I am general 
counsel of Blackwater USA, dedicated security professionals 
whose primary mission is to protect the lives of Americans in 
very dangerous places. More specifically, Blackwater 
professionals, most of whom are military veterans, voluntarily 
go in harm's way at the request, direction, and control of the 
U.S. Government. Chances are if and when you, as Members of 
Congress, and your staffs travel into Iraq, your lives will be 
protected for at least part of the trip by Blackwater.
    Areas of Iraq are among the most dangerous places on Earth, 
where violence against Americans is endemic. Our people choose 
to put their lives on the line daily in the service of our 
country. On behalf of Blackwater, I thank them for their 
service, especially those wounded or killed in the line of 
duty. I express again our deepest condolences to the families 
of our fallen colleagues, both those who appeared here today 
and those who did not. Losing our teammates is the hardest 
reality of our profession.
    Just 2 weeks ago we lost five good men who were shot down 
in Iraq protecting a diplomatic convoy. Our thoughts and 
prayers are with their familys. The U.S. Ambassador to Iraq 
said of the incident, ``These five American citizens were our 
colleagues and worked on behalf of the U.S. Government. They 
represent the best of America, showing valor and courage in the 
work they did each day.''
    The State Department noted that, ``These men played a 
critical role in our effort to bring a better way of life to 
the people of a country who had never experienced freedom and 
opportunity. We will always remember their courage, commitment, 
and ultimate sacrifice for their country.''
    Like the other good men we have lost in the line of duty, 
these men are heroes who embody the best of who we are and who 
we strive to be.
    Our professionals serving today in Iraq are part of our 
Nation's total force. Just last month, before the Senate Armed 
Services committee, Lieutenant General Petraeus, the new 
commander in Iraq, said he counts contract security forces 
among the assets available to him to deal with the enemy 
insurgency.
    To be clear, we do not engage in offensive operations, but 
our defensive security function helps to unburden more of those 
in uniform to do so.
    With regard to the important policy issues we will discuss 
here today, we look forward to working with Congress so that 
the right laws, policies, and procedures are in place to ensure 
that private security contractors can support our Nation's 
essential security missions.
    I hope you will understand that there are matters that I 
cannot discuss in an open forum such as this, especially 
matters relating to operational security or matters that our 
Government has classified.
    I will endeavor to answer your questions as fully as 
possible with these restrictions in mind. However, my task is 
even more complicated. Our company comes before this committee 
today facing a lawsuit. As you know, committee staff provided 
us with a copy of a December 13th letter from plaintiff's 
counsel to Speaker Pelosi effectively requesting that Congress 
hold this hearing. I respectfully request careful consideration 
of the impact of asking in an open oversight hearing questions 
that were requested by one party in ongoing litigation.
    Our hope is that this hearing will not delve into an 
incomplete and one-sided exploration of a specific battlefield 
incident, but rather will explore the important policy issue of 
whether death and should be benefits of contractors and service 
members should remain roughly the same as current congressional 
policy dictates.
    At Blackwater we are proud to serve the United States. Our 
professionals are highly skilled and experienced. Yet, for all 
of the experience and training, no one can guarantee that they 
will be safe when they step into a war zone. Our enemy has 
ensured that.
    Although our teammates have bled and even died in our 
mission of protecting other Americans, we have never lost a 
protectee, and our support for and dedication to our Nation 
remain strong.
    I am prepared to answer whatever questions I can under 
these unfortunate circumstances.
    [The prepared statement of Mr. Howell follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you very much, Mr. Howell.
    Mr. Seagle.

                   STATEMENT OF GEORGE SEAGLE

    Mr. Seagle. Thank you. Chairman Waxman and members of the 
committee, my name is George Seagle. I am the director of 
security for KBR's Government and Infrastructure Division. From 
October 2003, to May 2006, I was the director of security for 
KBR's Middle East operations. In that role I oversaw all of 
security measures for 150 project locations and more than 
50,000 employees and subcontractors. I was in Iraq an average 
of once a week for the 32 months I was in that job. Let me say 
my heart goes out to the families of all of those who have lost 
their lives in brutal attacks in Iraq. My own friends and 
colleagues, both members of the military and civilian 
contractors, have been killed in support of operations in the 
region.
    We know how difficult the situation on the ground is, and 
the situation the troops face is a very, very tough challenge.
    We are proud to provide food, housing, and other 
necessities to them. We support U.S. and Coalition troops at 55 
sites in Iraq, 70 other sites in the region. Since 2003, we 
have served more than 490 million meals, transported more than 
675 million gallons of fuel, delivered more than 220 million 
pounds of mail, washed more than 30 million bundles of laundry, 
and hosted more than 80 million visits to morale, welfare, and 
recreation facilities.
    Whether building mess halls, providing food service, or 
setting up housing, our goal is to provide the soldiers with 
the basic necessities--a hot meal, clean clothes--when they are 
back on base returning from dangerous missions. The feedback we 
have received from the troops on the ground has been 
overwhelmingly positive, and we are proud of the work of our 
courageous employees.
    Like me, many of my KBR colleagues served in the Armed 
Forces. We understand the importance of our work to support the 
brave men and women of our military. I followed my father into 
the Marines, and I am proud to say that my son followed me and 
also joined the Corps. I served for 26 years, and my career 
culminated with nearly 3\1/2\ years as a White House liaison 
officer for the unit that includes Marine One, securely 
transporting both Presidents Bill Clinton and George W. Bush.
    The focus of today's hearing is the use of private security 
contractors. To my knowledge, every foreign company working in 
Iraq uses private security in one capacity or another. KBR uses 
private security on our non-LOGCAP work, and in certain 
circumstances our LOGCAP subcontractors did, as well. Military 
security was not guaranteed for all of the work the company did 
in the region, and traveling without security is exceptionally 
dangerous.
    Since 2003, there have been approximately 400 injuries and 
fatalities to KBR employees and subcontractors through the 
hostile acts. Those injuries and fatalities were due to 
improvised explosive devices, mortar and rocket attacks, small 
arms fire, and kidnapping. At Christmas time in 2004 a suicide 
bomber blew himself up during lunch time in a KBR-run dining 
facility, killing 13 troops, 4 of our employees, and 3 
subcontractors.
    To date we have lost 98 people in Iraq, Kuwait, and 
Afghanistan. According to this morning's news reports, overall 
more than 770 civilian workers have been killed in Iraq and 
more than 7,000 injured. These are the realities our employees 
and subcontractors face every day.
    Amid such dangerous conditions, KBR operates a fleet of 
trucks that transports military fuel, military parts, medicine, 
hospital supplies, food, and mail to Coalition troops. They 
have logged more than 100 miles with more than 700 trucks on 
the road on any given day. Our mission has required us to be 
extremely flexible.
    In 2003 KBR was initially directed by the Army to plan to 
support between 25,000 and 50,000 troops. The scope and nature 
of our task changed dramatically. This is not a criticism. 
Ever-changing priorities are a reality of war, and the reality 
was that our mission grew to supporting more than 185,000 
troops.
    This dramatic change in the scope of services presented 
significant challenges. KBR first faced difficulties in 
mounting such a large enterprise in a hostile environment. As 
with any endeavor of this size and magnitude, there have been 
times when our company and those that we work with have made 
mistakes. A handful of our 50,000 individuals on the ground 
have acted improperly. When we had questions about the actions 
of certain individuals, we investigated and reported them to 
the Army.
    The rapid growth of our assignment and constant changes 
taxed our systems, but we adapted and developed systems that 
work.
    In conclusion, for more than 60 years KBR has undertaken 
demanding assignments in dangerous regions to support the U.S. 
military. I speak for everyone in our company when I say we are 
extremely proud to support the courageous men and women of our 
armed forces. With each meal we serve, we try to bring them 
some small sense of the comforts of home. And when a soldier 
does have a few extra hours, the fitness centers we run and the 
activities we host at our morale, welfare, and recreation 
facilities offer a brief refuge from the strain of combat.
    As the Congress continues its oversight of the war effort 
and contracting, I want to assure you that we are fully 
committed to cooperating with the Congress as it fulfills its 
oversight responsibilities. As a Government contractor, we take 
very seriously our responsibility to assist in the proper 
oversight of our work.
    Mr. Chairman and members of the committee, I look forward 
to your questions and will do my best to provide you with the 
information you need.
    Thank you.
    [The prepared statement of Mr. Seagle follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you, Mr. Seagle.
    Mr. Flores.

                    STATEMENT OF TOM FLORES

    Mr. Flores. Mr. Chairman and members of the committee, my 
name is Tom Flores. I am the senior director of corporate 
security for Fluor Corp.
    After a nearly 25-year career in the U.S. Army, I joined 
Fluor in 1998 and have since been responsible for Fluor 
security programs around the world. In 2003 I was assigned to 
oversee Fluor's security programs in Iraq.
    Fluor began working in Iraq under a contract with the U.S. 
Army Corps of Engineers, through which we provided services 
throughout the entire U.S. Army Central Command region, 
including Iraq. Subsequently, Fluor and its joint venture 
partner country, AMEC, a U.K.-based engineering and 
construction company, also competitively bid on and were 
awarded three of the reconstruction contracts. These contracts 
covered water programs in the north and south of Iraq and 
restoration of electricity.
    In the course of executing that work, Fluor had no 
contractual arrangement with Blackwater USA and Regency Hotel 
and Hospital Co. for security or other services, a fact 
acknowledged by Blackwater in a letter provided to the 
committee.
    With respect to ESS, Fluor and Fluor/AMEC contracted with 
ESS at three separate locations in Iraq. In two locations, ESS 
provided dining and/or camp facilities to Fluor and Fluor/AMEC. 
Those locations were Baghdad's international zone, where ESS 
provided dining facilities for employees working on our two 
water contracts, and Buzurgan power station in southern Iraq, 
where ESS provided camp services. In a third location at Camp 
Cooke in Al-Taji, under a subcontract to Fluor ESS provided 
planning, field engineering, procurement, transportation, 
construction, and rapid setup of housing and latrine units.
    Thank you for the opportunity to testify before the 
committee. I stand ready to answer your question about Fluor's 
work in Iraq.
    Thank you.
    [The prepared statement of Mr. Flores follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you very much for your testimony.
    Mr. Chvotkin.

                   STATEMENT OF ALAN CHVOTKIN

    Mr. Chvotkin. Mr. Chairman, thank you very much for the 
invitation. My name is Alan Chvotkin and I am the senior vice 
president and counsel for the Professional Services Council. 
The Professional Services Council is the leading national trade 
association representing more than 200 companies of all sizes 
that provide professional and technical services to the Federal 
Government. Many of our member companies are operating in Iraq 
under contracts awarded by the departments and agencies of the 
Federal Government. These firms are purchasers of security 
services, and we have worked with them to highlight and address 
their concerns.
    Several of our member companies provide security services 
in Iraq, in the United States, and around the globe. Some also 
have contracts directly with the U.S. Government, and we are 
working with them on a myriad of issues, as well.
    We share the outrage at some of the events taking place in 
Iraq; however, we must be realistic about the circumstances in 
which the events are taking place and the options that may be 
available to address them.
    We share the outrage at the unfortunate loss of life in 
Iraq. Thousands of American troops have been killed in the line 
of duty, and many thousand more wounded. U.S. contractor 
employees have also been killed while performing their work, 
with several thousand more wounded. We offer our condolences 
and prayers for their recovery. Yet, we must be realistic about 
the missions that they are asked to perform and the risk that 
all who are working in that hazardous environment take on a 
daily basis.
    Iraq is a unique foreign policy event in our Nation's 
experience. To our knowledge, it is the first time that the 
U.S. Government has attempted three simultaneous activities: a 
military action, a massive reconstruction effort across 10 
sectors, and extensive developmental assistance effort. There 
was an initial massive surge of resources into Iraq, often in 
uncoordinated and overlapping activities, that led good people 
with good intentions to make their best judgments under trying 
circumstances in the middle of a war zone.
    While we share the outrage about the dollars spent in Iraq 
for the results achieved to date, we must also be realistic 
about the reasons for those dollars spent and the results 
achieved.
    In the contracting environment, for example, the U.S. 
Government made a conscious decision to be a good steward of 
the contracts awarded and applied the full scope of the Federal 
acquisition regulations to the preponderance of the contracts 
awarded there. The U.S. Government made a decision to impose 
U.S. health and safety requirements on those contractors. The 
U.S. Government made a decision to require its contractors 
operating in Iraq to have liability insurance. Each of these 
steps in isolation may have been the right decision for the 
right reason, and we don't have any objection to the Government 
imposing them in a planned and consistent manner. But imposing 
these additional contractual requirements increases the cost of 
contract performance, so every dollar awarded by an agency or 
spent by a contractor in performance of these contractual 
requirements is not waste and is not abuse, as those terms have 
been commonly used.
    We share the outrage about the appearance of a lack of 
accountability for certain behaviors in Iraq and strongly 
endorse holding all participants in the contracting process 
equally accountable for their responsibilities. We strongly 
support a robust oversight function, and, where fraud is found, 
we strongly support vigorous prosecution. But we must be 
realistic about the activities that are taking place and the 
root cause for them.
    Companies don't set the mission. The nature of the 
contracting arrangements in Iraq, particularly at the earliest 
stages of the war, was driven exclusively by the Government's 
choice and the Government's requirements. So, while it is 
legitimate to talk about the appropriate roles and assignments 
for contractors, the use of code words for their work mask the 
real issues and diminishes the opportunities for serious 
discussion.
    Contractors are playing critical roles in each of the 
concurrent operational areas taking place in Iraq today. It 
would be impossible to execute the number and scope of projects 
underway without them.
    We share the outrage about the cost of security, but we 
must be realistic about the factors that are driving such 
behaviors. For those contracts awarded by the Defense 
Department to directly support the military's activities, the 
contractors that accompany the force, for them force protection 
and other life cycle support functions have traditionally been 
the responsibility of the military. We strongly support that 
formulation. But in a significantly and little-discussed June 
16, 2006, change to the Defense Department's acquisition 
regulations, the Defense Department has made force protection 
the primary responsibility of the contractors performing unless 
the military accepts the responsibility directly in the 
contract. We strongly oppose that reversal of policy, but our 
companies are adjusting to it, including addressing the cost of 
performance to reflect these changes.
    For contractors who are supporting the reconstruction 
activities or are under contract to other Federal agencies, 
force protection has traditionally been the responsibility of 
the contractor performing that work and we support that. A July 
18, 2006, proposed acquisition regulation has reconfirmed the 
U.S. Government policy to impose this responsibility and the 
expense on contractors. So, while we can be outraged about the 
security instability in Iraq and the cost of security spent by 
contractors to support the activities, we must be pragmatic 
about understanding the costs that are driving such costs.
    In conclusion, hiring private security is common in 
overseas operations. Iraq is not new in that regard. However, 
the magnitude of the work and the concurrent operations taking 
place there create unique challenges we see. The security 
situation is highly volatile and contributes to the unique 
challenges, but any solution must be addressed carefully, with 
full consultation to address the real issues without creating 
new problems.
    The Professional Services Council would welcome the 
opportunity to work with this committee and others on these 
important matters. Thank you for the opportunity to provide 
this information. We look forward to your questions.
    [The prepared statement of Mr. Chvotkin follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Waxman. Thank you. I want to thank each of you for 
your testimony.
    Before we proceed to questions, there was a motion by Mr. 
Issa to take down the words of the gentlelady from Illinois, 
and I want to recognize Mr. Issa on this point.
    Mr. Issa. Thank you, Mr. Chairman. It was unfortunate that 
I was out of the room when the words were spoken. After 
reviewing the words, which I will read just to be sure we all 
understand them: ``I also wanted to take exception to the 
question about who wrote the testimony, because I think clearly 
the implication was that somehow these wonderful women couldn't 
have possibly written that wonderful, heartfelt testimony, and 
that it took a lawyer in order to put it together, and I resent 
that very much and I just wanted to put that in the record.''
    Mr. Chairman, although these words I think are 
inappropriate and they set the wrong tone for the business that 
we must do on a bipartisan basis, after reviewing them and 
after believing that this was an anomaly on this committee and 
not something that would be regularly repeated, I would like to 
withdraw my motion and I appreciate the time.
    I yield back.
    Chairman Waxman. I appreciate that. The gentleman has 
withdrawn his motion and therefore there is nothing pending 
before us.
    I was going to read the words, but the gentleman did 
accurately read the words in question.
    Let me start with my questions. Without objection, the 
Chair and the ranking member will have 10 minutes each and all 
Members will get 5 minutes to pursue the matters.
    Mr. Howell, let me start with you. I want to begin by 
extending my thanks for you to be here. We heard very emotional 
testimony from people who lost their loved ones that worked for 
your company. Their pain is very personal, but there is pain 
for your company, as well, when any of your employees lose 
their lives, and I want to acknowledge that fact. You pointed 
that out in your testimony. I think I am speaking for all the 
members of the committee that we are sorry for your losses.
    Mr. Howell. Thank you, sir.
    Chairman Waxman. At a company providing security services, 
you have a job to do, and as Members of Congress we have a job 
to do. Our job is to provide oversight to make sure Government 
is working effectively and efficiently and to identify and 
eliminate any waste in taxpayers' dollars.
    We have heard allegations that call into question the job 
that Blackwater was performing in Iraq. The family members 
raised questions, I think legitimate questions, that deserve 
answers about whether Blackwater is endangering the lives by 
skimping on protective equipment. That was the issue raised. 
The contracts and audits we have received have raised questions 
about whether Blackwater is overcharging and double billing the 
Government. I don't know what is true or not. I haven't reached 
any conclusions on these allegations, but they are important 
allegations and I think they should be fully investigated.
    I want to focus on an e-mail you provided to us. It is an 
e-mail from Tom Powell, who we understand was operations 
manager for Blackwater in Baghdad. It is dated March 30, 2004, 
1 day before the attack in Fallujah that killed the four 
Blackwater contractors. In hindsight, it is a pretty chilling 
communication. The e-mail begins, ``Ground truth, guys, this is 
reality.'' The e-mail was sent to Brian Berry. I understand 
he's a senior Blackwater executive. My understanding is he is 
the director of Blackwater's security consulting. Am I correct 
that Mr. Berry was a director of Blackwater's security 
consulting?
    Mr. Howell. My understanding is that he was not director at 
that time, but he was certainly a Blackwater official.
    Chairman Waxman. OK. Another recipient of the e-mail was 
Mike Rush. Can you tell us what position he had at attachment 
time?
    Mr. Howell. I believe that he was the director at that 
time.
    Chairman Waxman. He was the director of operations for 
Blackwater?
    Mr. Howell. He was the director of Blackwater security is 
my understanding. Yes, sir.
    Chairman Waxman. The third recipient of the e-mail was 
named Justin, and we presume this is a reference to Justin 
McGuown, who was the program manager in charge of Blackwater's 
contract with ESS and Regency; is this right?
    Mr. Howell. I believe that is correct. If I could, 
chairman, those names have all been made public, but to the 
extent that our personnel, publishing the names of Blackwater 
personnel that are not public information could possibly place 
them at risk. I would ask that if we could find a way to 
identify them without publicly stating the names, or perhaps go 
into closed session, I am certain that they would appreciate 
that respect for their safety.
    Chairman Waxman. I appreciate what you are saying.
    Mr. Howell. Yes, sir.
    Chairman Waxman. This is a disturbing e-mail, because if it 
is correct, if it is accurate, it shows that Blackwater 
personnel working on the contract with Regency and ESS, which 
is the contract involved in the Fallujah incident, did not have 
adequate equipment or vehicles, and it also shows that 
Blackwater may have been circulating situation reports that 
were ``smoke and mirrors show'' and ``not reality-based 
information.''
    Let me read you a passage from the e-mail. ``I need new 
vehicles. I need new COMs--'' which means communication 
devices--``I need ammo, I need Glocks and M-4s--'' which are 
types of weapons--``All the client body armor you've got. Guys 
are in the field with borrowed stuff and in harm's way. I have 
requested hard cars from the beginning, and from my 
understanding an order is still pending. Why, I ask. It is my 
understanding that someone in Kuwait made a decision to go with 
Suburbans that are used. Bad idea.'' The e-mail ends, ``Ground 
truth is appalling.''
    Well, my understanding is that this e-mail was addressing 
the lack of equipment available for Blackwater personnel 
working on the Regency and ESS contract, which is the current 
contract involved in the Fallujah incident; is that correct?
    Mr. Howell. If you would like me to comment on specific 
text from the e-mail, I would like to have it in front of me, 
sir, but the general subject of the e-mail was overall 
equipment requirements. That is correct.
    Chairman Waxman. OK. We will be glad to give that to you. 
But the question I have sort of preliminarily is whether the e-
mail was addressing the lack of equipment available for 
Blackwater personnel working on the Regency and ESS contract, 
which is the contract involved in Fallujah.
    Mr. Howell. It was discussing a lack of equipment as to the 
contract as a whole. It doesn't follow therefrom that any 
individual who set out to accomplish a task didn't have the 
equipment that he needed.
    Chairman Waxman. OK. Mr. Howell, have you investigated the 
circumstances surrounding the Fallujah incident?
    Mr. Howell. I am familiar with them. Yes, sir.
    Chairman Waxman. Have you determined whether the conditions 
described in the e-mail are accurate as it relates to that 
incident? Were your forces sent on missions in used Suburbans 
rather than hardened vehicles, as the e-mail describes?
    Mr. Howell. Yes. Our forces did go on missions, some of 
which were in soft-skinned vehicles. But the nature of what we 
were doing there is that it was not a single task. It was not a 
single mission that our men did, so different equipment was 
appropriate for different missions, given the threat as it was 
known at the time on the ground in Iraq.
    Chairman Waxman. Were your forces short on communications 
devices, as the e-mail describes?
    Mr. Howell. There was not sufficient communication gear for 
the team on the day of this memo had it been fully manned; 
however, there was sufficient communication gear for the teams 
that would have been operational at this time.
    Chairman Waxman. You answered my question about the 
Suburbans as opposed to hardened vehicles, and you said on 
certain missions that was the case. On the mission in Fallujah 
that we heard about this morning, was it the case for that 
incident?
    Mr. Howell. I am not following your question, sir. Was it 
the case that a Suburban was appropriate?
    Chairman Waxman. No. Did they use a Suburban as opposed to 
a hardened vehicle?
    Mr. Howell. They used something equivalent to a Suburban, 
which was a Mitsubishi Pajero. It is the equivalent in the 
United States of a Montero, and the idea behind using that 
vehicle was that it was a sort of a local vehicle that was a 
low-key approach. It sort of blended in, if you will.
    Chairman Waxman. Was it hardened?
    Mr. Howell. It had been outfitted with some steel plate. 
Yes, sir.
    Chairman Waxman. And on the issue of communication devices 
which the e-mail described, in this program Fallujah incident 
did they lack communication devices?
    Mr. Howell. They did not. If we are going to inquire into 
specific facts that are under litigation, I know propose that 
we do so not in an open session. But I can answer that 
question. Yes, sir.
    Chairman Waxman. You cannot answer?
    Mr. Howell. I can answer the question.
    Chairman Waxman. OK. Well, I would like you to answer the 
question.
    Mr. Howell. Yes, sir. The men that day did have 
communication devices.
    Chairman Waxman. They did? OK. Were they short on 
ammunition and weapons, as the e-mail describes?
    Mr. Howell. The e-mail describes the situation for the 
project as a whole. The men who went on the mission on March 
31st each had their weapons and they had sufficient ammunition.
    Chairman Waxman. OK. Mr. Murray, you work for ESS, which is 
the contractor that hired Regency, which is the contractor that 
hired Blackwater. I would like to ask you about this e-mail.
    At one point in the e-mail chain, Laurens Badenhorst 
receives a copy of Mr. Powell's e-mail. Mr. Badenhorst is an 
executive director at ESS, as I understand it; is that 
accurate?
    Mr. Murray. Chairman Waxman, yes, Laurens Badenhorst at the 
time was our CEO of our design and build division.
    Chairman Waxman. And, Mr. Murray, what information does 
your company, ESS, have about the conditions described in Mr. 
Powell's e-mail?
    Mr. Murray. Chairman, I would like to first say that ESS' 
relationship was with Regency. We had contracted with Regency 
to provide ESS with our private security as a turnkey service. 
What I mean by turnkey is we relied on Regency to tell ESS what 
equipment, what routes, and such were safe for us to move 
throughout Iraq. We relied on them exclusively. And in our 
contract with Regency, we gave them the ultimate authority for 
go or no-go scenarios, so if they determined it was unsafe, 
they had the ability to do that. We indemnified them for that 
fact.
    Chairman Waxman. But one of your executives received this 
e-mail. Do you have any information that corroborates the 
complaints about lack of equipment and vehicles that Mr. Powell 
describes?
    Mr. Murray. No, I don't, Chairman.
    Chairman Waxman. OK. Perhaps the most disturbing parts of 
the e-mail involve what Mr. Powell had to say about the 
situation reports that were being prepared by Justin McGuown of 
Blackwater and Regency. Let me read you some excerpts of this 
part of the e-mail. ``The sitreps by Regency/RHHC I am reading 
are very misleading and bogus on the surface. My only hope is 
that Justin sees through the smoke and mirrors show and 
believes me when I am telling him that all is not what it 
seems. Justin knows what has to forward and realizes that it is 
just enough to sustain the appearance of gear and an 
operational capacity. Please, Justin, send your sitreps to the 
client with reality-based information.''
    Mr. Howell, have you investigated the situation reports 
that Mr. McGuown was preparing?
    Mr. Howell. No, sir.
    Chairman Waxman. Do you agree with the description in the 
e-mail that they were smoke and mirrors and not reality based?
    Mr. Howell. Not having seen them, I can't comment one way 
or the other, sir.
    Chairman Waxman. Mr. Murray, do you have any information 
about whether ESS believes it was getting accurate information 
from Blackwater and Regency about the ground truth?
    Mr. Murray. Chairman, ESS had confidence in Regency to 
provide us with accurate intelligence, accurate movement 
guidance, so the answer is yes, we relied on Regency to provide 
that to us.
    Chairman Waxman. We also have a response from Mike Rush, 
who is deputy director of operations for Blackwater. It is 
dated March 30th, the day before the fatal attacks. As I read 
it, Mr. Rush is telling Mr. Powell that the problems he has 
identified are not Blackwater's responsibility to fix. Let me 
read you some excerpts of what Mr. Rush told Mr. Powell, the 
author of the ground truth e-mail. ``You are right about 
vehicles and coms being the responsibility of RHHS--'' which, 
of course, stands for Regency Hotel and Hospitality. ``There is 
no order for hard cars. The contract only allows for hardening, 
and yes, I realize that is not optimum. Body armor for the 
clients is not our responsibility, either. It is, in fact, up 
to RHHS, Regency, to fix some of the things you mentioned, 
particularly reliable vehicles.''
    Mr. Howell, the e-mail from Mr. Rush reads to me like 
someone is passing the buck. Do you agree?
    Mr. Howell. I don't agree, Mr. Chairman. And the reason is 
Mr. Rush is just correctly noting that it was--under our 
contract with Regency, it was the responsibility of Regency to 
fund the acquisition of that equipment. It does not mean that 
Blackwater was not actively seeking to assist in identifying 
and obtaining the required equipment, as the other e-mails 
would indicate.
    Chairman Waxman. Well, there are three issues and questions 
whether the vehicles were hardened sufficiently to protect 
them, whether they had the ammunition and equipment needed to 
protect themselves, and third the question also is whether they 
had the third person to be a tail gunner. Can you tell us 
whether they had what they needed in all three of those areas?
    Mr. Howell. Yes, sir. With regards to the armored vehicle 
question, there was certainly desire to have some sort of 
armored vehicles on this project, meaning the ESS project as a 
whole, but, again, it doesn't follow therefrom that each 
mission involved an armored vehicle. In fact, close review of 
the contracts revealed that it was specifically contemplated 
that there would be other vehicles which had some sort of 
protection added that would be used on the project. Beyond 
that, the armored vehicle question, the vehicle that they went 
out in that day was believed appropriate, based on the mission 
by everyone involved, or the mission. I don't believe that it 
would have been carried out at that point, and the armored 
vehicle, whether it would have affected that day is not a 
question. With regard to the third person, the protocol for the 
type of mission the men were on that day--and, again, we are 
bordering on things that could involve operational security of 
not only our folks but service members--the mission they were 
on that day at that point in time, given the threat as it was 
known on the ground in Iraq, the norm was not to have the third 
person.
    Chairman Waxman. Well, Mr. Powell obviously in his e-mail 
was expressing concern. I guess my general question is: When 
Blackwater sends private forces into a war zone, do you have an 
obligation to equip them adequately? I assume you would have to 
say yes. Then my next question is: Did Blackwater meet this 
obligation in Fallujah?
    Mr. Howell. Yes, we did.
    Chairman Waxman. OK. I just want to conclude by reading 
this quote again. ``But guys are in this field with borrowed 
stuff and in harm's way with the client which I am very 
uncomfortable with given the upcoming events with five million 
Shia moving in Karbulah in 5 days. I have requested hard cars 
from the beginning, and from my understanding an order is still 
pending. Why, I ask.''
    Thank you.
    Mr. Davis.
    Mr. Davis of Virginia. Thank you.
    Ms. Ballard, I am going to start with you. You note that 
the Army will take steps to recoup funds paid under LOGCAP for 
private security contractors, but, as I understand the law, 
these security services were likely performed under a fixed 
price subcontract. As far as you know, has the Army ever been 
able to recoup funds in a situation like these where the costs 
appear to have been imbedded within a fixed price subcontract?
    Ms. Ballard. As far as I know they have not.
    Mr. Davis of Virginia. OK. How would you be able to do that 
if it was competitively bid?
    Ms. Ballard. In a competitive, fixed price contract we 
don't have access to the subcontractor's data. The regulation 
prohibits us from getting cost and pricing data in a fixed 
price competitive contract from the prime, and it also 
prohibits the prime from getting that data from the 
subcontractor.
    Mr. Davis of Virginia. Does the Army have enough personnel 
on the ground to support military convoys for LOGCAP 
subcontractors? Do you know the answer to that?
    Ms. Ballard. I don't have the answer to that, sir.
    Mr. Davis of Virginia. OK. The majority says that the cost 
of security services provided by private firms are 
substantially higher than the direct costs that would be 
incurred by the military. Do you have any comment on that?
    Ms. Ballard. No, sir, I don't. The GAO and CIGAR have 
estimated that our security costs on the ground are between 9.8 
and 12.55 percent.
    Mr. Davis of Virginia. Now, we hear a lot about the so-
called evils of tiering. Now, as I understand the practices of 
using a number of levels of subcontractors to perform various 
functions under a prime contract which is larger and has myriad 
features, of which one company may not be able to deliver all 
of those services, I guess the alternative would be to just 
have more direct contracts, which would entail much higher 
aggregate costs to the Army in terms of overseeing it. But do 
you think the practice is, in general, wasteful and 
inefficient, as is portrayed?
    Ms. Ballard. Sir, the practice of having subcontract tiers 
is a practice, according to our research, that even occurs in 
commercial construction in the United States.
    Mr. Davis of Virginia. Of course. So, from your 
perspective, there is no reason to outlaw it or anything? 
Obviously, oversight is important to make sure that they are 
subcontracting appropriately in this competition? Is that fair 
to say?
    Ms. Ballard. We don't have anything in the regulation that 
allows us to prohibit subcontract tiers.
    Mr. Davis of Virginia. And, in fact, if a prime contractor 
didn't have the in-house capability to perform that, they would 
have to subcontract it, or the alternative would be to have a 
myriad of additional contracts directly with the government, 
where the government would, in a sense, be the integrator?
    Ms. Ballard. Yes, sir.
    Mr. Davis of Virginia. OK. Mr. Howell, we have heard that 
the cost of security services provided by firms such as yours 
are much substantially higher than the direct costs that would 
be incurred by the military. Do you have any comment on that? 
You are not the decisionmaker here, but you are on the ground 
delivering.
    Mr. Howell. I am not qualified to comment on the costs, the 
direct costs of military services.
    Mr. Davis of Virginia. Let me ask you this. You noted that 
99 percent of your contracts in Iraq are fixed price contracts; 
is that correct?
    Mr. Howell. Yes, sir. The vast major are of the firm fixed 
price nature. If I may clarify, sir?
    Mr. Davis of Virginia. Sure.
    Mr. Howell. In some contracts there are mandatory 
provisions for a pass-through of costs, but there is no markup 
or profit on those costs. The general nature of those contracts 
is very limited number of specific items are passed through at 
cost.
    Mr. Davis of Virginia. How many of your contracts were 
awarded under competitive acquisitions?
    Mr. Howell. Of our contracts in Iraq--and, again, I 
understand that the nature of today's hearing is only on 
unclassified contracts. I am not prepared to--I don't know the 
answer regarding any classified work at the moment. But, in 
terms of unclassified work, of approximately--out of all our 
contracts in Iraq, one, to my knowledge, was not competitively 
bid, and it was issued on an urgent and compelling basis after 
the incumbent was unable to provide the services, and we were 
asked on short notice to provide those services.
    Mr. Davis of Virginia. OK. But that is not the contract 
that has been at issue today?
    Mr. Howell. That is not the contract at issue, and 
ultimately that is not a contractor decision. That is a 
Government decision. Yes, sir.
    Mr. Davis of Virginia. We have heard that your people are 
paid anywhere from $600 to $1,500 a day for these dangerous 
assignments. I wonder if you could give us, explain the various 
payment structures you have with your employees.
    Mr. Howell. Yes, sir. First of all, I think there is a 
great deal of myth about the exorbitant pay rates. Certainly 
our people face grave danger and that is well recognized, but 
in terms of the rate structure, which is your real question, 
the general nature of these sorts of Government contracts for 
security services involve breaking it down into classes. They 
are typically called tiers. In a given tier, there are very 
specific requirements by the Government client on the 
experience level and capabilities of the individual, and the 
individual's services are filled out at a firm, fixed price per 
day based on which tier they lie in. So, for example, a special 
forces veteran with extensive experience is billed at a much 
different rate than someone who just had more general military 
experience and less time.
    Mr. Davis of Virginia. What kind of markup do you get over 
the direct costs on a basis? Does that also vary with the tier?
    Mr. Howell. Well, the nature of our contracts is a fixed 
price basis.
    Mr. Davis of Virginia. Right. And it is competitively bid, 
so I am not----
    Mr. Howell. It is competitively bid, yes, sir. So our 
pricing is really based on its----
    Mr. Davis of Virginia. The marketplace.
    Mr. Howell [continuing]. Pricing, not cost.
    Mr. Davis of Virginia. But I am just curious.
    Mr. Howell. I don't want to be unresponsive, sir, but it is 
a question that is sort of mixing apples and oranges. Cost 
contracts involve markups over cost.
    Mr. Davis of Virginia. I understand the business.
    Mr. Howell. Yes, sir.
    Mr. Davis of Virginia. Basically, you don't want to give 
away your cost data?
    Mr. Howell. I am sorry?
    Mr. Davis of Virginia. Basically, you don't want to give 
away--you are not compelled to give it away, and you don't want 
to give it away.
    Mr. Howell. Right. It would harm competition on future 
contracts.
    Mr. Davis of Virginia. Obviously, it is a question, even 
though these are fixed prices, that is of interest to us, but I 
am not going to pressure you at this point.
    Mr. Howell. Yes, sir.
    Mr. Davis of Virginia. What death benefits do you provide 
to the survivors when the enemy kills a contract employee?
    Mr. Howell. Well, all Government contractors are mandated 
by statute to provide benefits under the Defense Base Act, and 
that is a program that was set up. It goes back actually to 
World War II, and it was set up in order to provide what is, in 
effect, a worker's compensation benefit for those who are 
injured or killed in the service of their country, contractors 
overseas working for the Government.
    Mr. Davis of Virginia. You don't do anything in addition to 
that? Is that right?
    Mr. Howell. Well, we are always looking for additional ways 
to protect our folks. We currently have an additional insurance 
policy that is above and beyond that we acquire because we want 
to provide for our folks.
    Mr. Davis of Virginia. In the contract at issue--we heard 
from the first panel--who was Blackwater's clients? Were you 
contracting with Regency or ESS?
    Mr. Howell. Our contract was with Regency.
    Mr. Davis of Virginia. OK. Regency. And I have seen some 
tiers that have been introduced and some charts and the like. 
And who was Regency contracting with above that?
    Mr. Howell. My understanding is that Regency's contract was 
with ESS.
    Mr. Davis of Virginia. OK. There has been a lot of 
attention to the cost of providing security services. Let me 
just ask in a general question, who wants to take it, why are 
these costs--these costs seem to be very, very large over 
there. Obviously, there is a huge premium whenever you are 
doing this kind of thing. Could somebody explain to me what 
goes into your marketing of this and your costing of this, your 
pricing? How do you price a security provision into a contract? 
Is it a marketplace based, or is it your costs, being able to 
recruit people to go over? What goes into that?
    Mr. Howell. These are competitively I don't contracts, so, 
yes, it is ultimately driven by the marketplace. There is high 
competition for the individuals, security provisionals with the 
expertise that is needed.
    Mr. Davis of Virginia. OK.
    Mr. Howell. We have to account for that, as well as the 
many expenses that we incur in training them, often providing 
weeks of training at Moyak, transportation on many contracts. 
There is lodging, subsistence travel to and from Iraq. The list 
of factors that go into it vary with each contract.
    Mr. Davis of Virginia. Is it hard to find people that are 
willing to do this, qualified people?
    Mr. Howell. It is always a challenge to find the most 
qualified people. Yes, sir.
    Mr. Davis of Virginia. Mr. Murray, let me ask you, the 
military convoy system for LOGCAP contractors has been 
described to us as unreliable. Could you address some of the 
choices your company is faced with when the military convoy 
system doesn't work as it should?
    Mr. Murray. Yes, I can. We face many challenges moving our 
cargo. It is actually two aspects. We move cargo and we move 
people. I mentioned in my statement the convoy system wasn't 
designed to move people. We had over in excess of 1,000 ESS 
employees in the country of Iraq. Primarily, we had to move 
them from Kuwait into Iraq, and it was a challenge to move them 
into Iraq into Coalition camp, either a KBR site or another 
site, safely.
    The convoy system, itself, the rules to put our non-
tactical vehicles [NTVs]--those are the vehicles that would 
carry our civilian employees--into a convoy would change 
virtually on a daily basis. Some days we would be allowed to 
put a non-tactical vehicle in a convoy. Some days we would 
arrive with one or two of these vehicles and we would be told 
at that point, ``Well, the rules have changed. We can't accept 
your vehicles to day.'' How does that impact us? That prevented 
us from moving our chefs, our cooks, our laborers up to the 
site. That was one impact on us. That caused and could have 
caused delays in our performance.
    Another impact, another extenuating circumstance, perhaps, 
is the border crossing between Kuwait and Iraq called Nazca was 
an assembly point for all the contractors that crossed our 
vehicles into Iraq. We would ship, at the peak, in excess of 
300 to 350 trucks per week. Convoys in the early days would 
take 5 to 10, perhaps 20 of these trucks. We would be queued up 
or lined up at the border 3, 2 a.m. in hopes of getting in a 
convoy, and it may take 2 or 3 days to have one truck slotted 
into that convoy. That, again, caused further delays to us.
    Mr. Davis of Virginia. Let me ask you this. On the contract 
at issue that you heard the first panel, where the individuals 
lost their lives, were you contracting at that point with KBR 
under LOGCAP or with Fluor?
    Mr. Murray. For the particular contract at issue, we 
engaged--actually, I can answer by saying both. We employed 
private security. You asked about the contract at issue, which 
is the ESS Regency contract for private security. We used that 
private security attachment team, the private security to move 
our people throughout Iraq across all contracts.
    Now, the specific incident on March 31st, if you would like 
me to address that----
    Mr. Davis of Virginia. That is what I want to address.
    Mr. Murray. OK. That particular incident----
    Mr. Davis of Virginia. We have been having a hard time 
figuring out, I think, up here.
    Mr. Murray. OK. On March 31st, that particular incident was 
a movement of ESS cargo. We had a convoy that was moving from 
Taji, Camp Taji, which was going to Al-Asaad. Al-Asaad was on 
the far side of Fallujah, the western side of Fallujah. We were 
picking up cargo, and that was a KBR site, and we were going to 
return that cargo and supplies and construction equipment to 
Camp Taji, where we were building, had a construction contract 
with Fluor.
    The attack occurred en route from Taji through Fallujah to 
Al-Asaad. They never reached their destination, but they were 
moving cargo under our Fluor contract.
    Mr. Davis of Virginia. So it was so intermingled at this 
point. Let me just ask one question, then, Mr. Flores, from 
you. Were you aware that Blackwater was apparently performing 
security services for ESS, as well?
    Mr. Flores. No, sir, I was not.
    Mr. Davis of Virginia. You were not? OK. Thank you very 
much.
    Chairman Waxman. Thank you, Mr. Davis.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    You know, these accounts that we have heard about with 
Blackwater and the private security contractors are very 
troubling, and I am concerned about the profit motive they have 
and the lack of insight. Some reports have estimated that there 
are as many as 50,000 private security contractors in Iraq 
right now, but I have yet to see the data from the Defense 
Department.
    Ms. Ballard, how many private security contractors are 
there in Iraq right now? You know, the President just asked us 
in the State of the Union--I have heard some discussion here--
the President has said during the State of the Union that he 
wanted more civilians. I think he was talking about volunteers. 
But I am just curious. How many security contractors do we 
have?
    Ms. Ballard. Congressman, I can take that question for the 
record. I don't have that number. The security contractors on 
the ground aren't all for the Department of Defense. There are 
contractors on the ground providing security for other 
agencies, as well. So I would have to take that question for 
the record. I don't have it for DOD or the total number.
    Chairman Waxman. We will hold the record open to receive 
that information. How long will it take? Will we get that 
within a week?
    Ms. Ballard. I can go back and request the information be 
provided in a week, Mr. Chairman.
    Chairman Waxman. OK.
    Mr. Cummings. On a larger question--I really appreciate 
that, Ms. Ballard--why does the administration rely on so many 
private contractors? Do you know? And we can't even count them? 
I take it from the testimony here the American people end up 
one way or another paying for them, and I am sure we all would 
want to know how many we have. I know you are going to get that 
information for me, but why do we have to do that?
    We have the President asking for another 21,500 troops. 
There is debate as to whether it is that number or more. I 
guess what we are trying to do here, too, is just trying to get 
to the bottom line of exactly who is over there in Iraq, what 
they are doing, and how much are the American people paying for 
them to do whatever they do, and are they doing the things that 
are lawfully--that they can do lawfully?
    Chairman Waxman. Mr. Cummings, you had asked the question 
about the number of contractors. Ms. Ballard said she has to 
check those other agencies, but you should know for the 
Department of Defense. Do you have that information, please?
    Ms. Ballard. No, sir, I do not.
    Chairman Waxman. OK.
    Mr. Cummings. How soon can you get that to us?
    Ms. Ballard. The question on how many security contractors 
in the Department of Defense?
    Mr. Cummings. Yes.
    Ms. Ballard. I am taking that for the record and, as the 
chairman requested, I will go back and ask if we can provide it 
in a week.
    Mr. Cummings. And would you also get us the number of 
subcontractors, too?
    Ms. Ballard. I will ask for that information, sir.
    Mr. Cummings. And can you find out for us how much, as best 
you can, the citizens of the United States of America are 
paying for these contractors and subcontractors, so as we try 
to assess how we vote on more money for Iraq so we can, you 
know, just have to total picture? Will you do that for us?
    Ms. Ballard. I will certainly ask and take that as a 
question for the record, sir.
    Mr. Cummings. All right. That is all I have, Mr. Chairman.
    Chairman Waxman. Mr. Cummings, it just strikes me as 
amazing that this kind of information wouldn't be readily 
available. That is the purpose of this hearing. The Department 
of Defense--I can understand you might not know other agencies, 
but you certainly should know what is going on in the 
Department of Defense. We did invite you to come and talk about 
this topic. Did you not think you would be asked, Ms. Ballard?
    Ms. Ballard. Mr. Chairman, we appreciate the invitation to 
come and speak on this topic; however, in the case of the KBR 
contract, there were no provisions allowing security, so in our 
estimation there should not have been any security provided.
    Chairman Waxman. No. The question that----
    Ms. Ballard. In terms of the----
    Chairman Waxman. That wasn't the question that Mr. Cummings 
had asked.
    Ms. Ballard. In terms of----
    Chairman Waxman. Mr. Cummings wants to know how many 
contractors and subcontractors----
    Ms. Ballard. I understand, sir.
    Chairman Waxman [continuing]. Do we have out there under 
the Defense Department, how many under other departments. He 
asked you generally. You said, ``Well, I have to check those 
other departments.'' But you also have to check it for the 
Defense Department?
    Ms. Ballard. I can't speak for the Defense Department, sir, 
because I work for the Department of the Army, and in the case 
of----
    Chairman Waxman. Well, tell us about the Department of the 
Army. How many do you have?
    Ms. Ballard. In the case of the Department of the Army, we 
have the design/build contracts where the contractors were 
required to provide their own security. Those costs would be 
subcontracted, so we would have to go back and ask those prime 
contractors to provide that information because we do not have 
privity of contract with the subcontractors.
    Chairman Waxman. How many contractors do you have with the 
Department of the Army that are involved in Iraq?
    Ms. Ballard. Sir, I did not come prepared to answer that 
question. I will take it for the record.
    Chairman Waxman. Well, we will hope that you get that 
information to us and break it down. Thank you.
    We now go to Ms. Foxx. Do you have any questions?
    Ms. Foxx. I do.
    You mentioned that there is a prohibition on the 
contractors having security. That is in the contract. Does that 
apply to other groups? And if there is that prohibition, then 
how do you all expect people to provide security for the people 
there, if there is a prohibition?
    Ms. Ballard. There is a specific clause in the LOGCAP 
contract that addresses security. That clause stipulates that 
the theater commander will provide force protection 
commensurate with that provided to the service and agency 
civilians, unless otherwise stipulated in the task order.
    On the design/build contracts, which are different from the 
LOGCAP contracts, the contractors were expected to provide 
their own security.
    So there are different contract vehicles and different 
terms and conditions.
    Mr. Chvotkin. Ms. Foxx, if I may, Ms. Ballard makes an 
important point and I wanted to reiterate a point I made in my 
testimony. There are three simultaneous actions taking place. 
There is a military action, and for the military action the 
military is supposed to provide force protection for its 
contractors. But for everybody else that is operating in Iraq, 
and that is the reconstruction contractors, those supporting 
the Department of Justice, USAID, the Department of 
Agriculture, Health and Human Services, all of those 
contractors are required to provide their own security, and 
that is why the difficulty of understanding. That is why you 
have a lot of security operations in Iraq unrelated to the 
military activity.
    Ms. Foxx. Mr. Chairman, I want to followup with a question, 
but I want to make a comment about the direction in which this 
hearing has gone. I have been here from the beginning. I have 
read a lot of the material. I am, again, a person who is very 
much opposed to waste, fraud, and abuse, and I like to think in 
system issues. It seems to me that if we are interested in 
waste, fraud, and abuse and we want to do something about it 
what we should be doing is being focused on the way the systems 
operate in all these areas.
    What we've got here is a gotcha situation, it seems to me. 
There is a tragic loss of life that has occurred, and every 
life that has been lost in any of our wars I am sorry for. What 
has been happening in Iraq and the war on terror I am very, 
very sorry for, and the people who were working for Blackwater 
I am extremely sorry they lost their lives. But particularly in 
Iraq, everybody is going there as a volunteer, and I understand 
that. But what we ought to be about is asking for how the 
systems work, what is wrong with the systems now, and how do we 
get at it, instead of spending all this time trying to get 
people on issues that are irrelevant to much of what we should 
be concerned about.
    So I want to ask one question, and I will ask you to answer 
with a yes or no. Has anybody associated with the Congress or 
with any of the departments that you work with asked you in any 
formal way or any organized way to give suggestions on how we 
can make these systems better, because it seems to me that is 
what our focus ought to be. So a real simple answer, yes or no. 
And if you answer yes, then I will ask you to followup with 
some information, but I won't burden us with a lot of time.
    I will start down here. Has anybody in your group looking 
at this, has anybody asked you that question?
    Ms. Ballard. Yes, ma'am.
    Ms. Foxx. Yes, they have. OK. Can I ask each one and then 
come back?
    Chairman Waxman. It is up to you, whatever you want to do. 
It is your time.
    Ms. Foxx. Let's go down the line, and then we will come 
back to whoever says yes.
    Ms. Ballard. Ma'am, we have consistently----
    Ms. Foxx. Hold on 1 second. Next person?
    Mr. Murray. No, they have not.
    Ms. Foxx. Mr. Howell.
    Mr. Howell. Yes, they have.
    Ms. Foxx. OK.
    Mr. Seagle. No, ma'am.
    Mr. Flores. Would you rephrase that question please, 
Congresswoman?
    Ms. Foxx. Has anyone in a position of authority--and I am 
not going to try to name departments and that sort of thing--
asked you to make suggestions on how the systems within which 
you are working, how could they be made better so that we cut 
down on waste, fraud, and abuse, and certainly cut down on the 
potential for loss of life.
    Mr. Flores. Yes, ma'am.
    Mr. Chvotkin. Yes.
    Ms. Foxx. Then let's go back up here and see. Can you tell 
us briefly, have those suggestions been taken? Are they still 
in the mill? Tell me just a little bit about that, without 
going into too great detail.
    Ms. Ballard. Yes, ma'am. Several of the suggestions have 
been taken. As a result, over the years we have evolved 
significantly in our contracting operations in the theater. And 
the Army has also made a significant change in the structure. 
We have established the contingency contracting officer 
battalions that are under the Army Field Support Brigades, and 
this will enable our contracting officers to interface with the 
combatant commanders in the planning stages for contingency 
operations. So we have made several significant changes.
    Ms. Foxx. Let me followup real quickly. Has anybody from 
the Congress asked you for any suggestions before today?
    Ms. Ballard. No, ma'am.
    Ms. Foxx. No. OK. Would each one of you respond to that 
part as you go down the line. Let's see. Who else said yes? I 
am sorry. Who else said yes? Mr. Howell.
    Mr. Howell. Yes, Congresswoman. On hearing you restate that 
question, I can't say definitively that we have been asked, but 
I would say we've discussed that issue with one of our largest 
clients, and it has been more in the nature of us and the 
client seeking to provide the best protection possible for the 
folks that we are protecting and to agree on--our billing is 
closely scrutinized, and we make sure we are in agreement that 
the bills are correct.
    Ms. Foxx. But no one from Congress has asked you that 
question before today?
    Mr. Howell. No, ma'am.
    Ms. Foxx. Mr. Flores, did you say yes?
    Mr. Flores. No one from Congress has asked me anything 
about this, but a gentleman named Lawrence----
    Chairman Waxman. Before you get into details, the time has 
expired. You basically want to know if anybody in the Congress 
has asked?
    Ms. Foxx. Right.
    Chairman Waxman. And your answer is no. Does anybody have 
an answer in the affirmative that anybody in the Congress has 
asked? You essentially, Mr. Howell?
    Mr. Howell. Yes, for us. We worked closely with the House 
Armed Services Committee in 2005 to develop the oversight work 
that they were doing, the development of some legislation. 
Similar work with the Senate. And also, of course, this 
committee in the past years.
    Chairman Waxman. Thank you, Ms. Foxx.
    I do want to point out that now is the time Congress should 
be asking these questions. We should have been asking them in 
the past, and asking questions and trying to get accountability 
is not gotcha. It is trying to do our job, and I think we need 
to work together on a bipartisan basis to do that.
    Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    Mr. Howell, I am going to ask you some questions. You, in 
your comments, I think inferred the fact that you thought the 
gentlemen that went into Fallujah and lost their lives were 
outfitted and situated in such a way as warranted by the 
general conditions at that time. I want to ask you if you are 
aware of an agreement for security services dated March 8th, I 
believe, of 2004 between ESS and Regency?
    I would draw your attention to Appendix A of that document, 
second paragraph reads, ``Further, to Regency's analysis of ESS 
requirements and the current threat in the Iraq theater of 
operations, as evidenced by the recent incidents against 
civilian entities in Fallujah, Aramadi, Al-Taji, and Al-Halla, 
there are areas in Iraq that will require a minimum of three 
security personnel per vehicle. The current and foreseeable 
future threat will remain consistent and dangerous. Therefore, 
to provide tactically sound and fully mission capable 
protective security details, the minimum team size is six 
operators, with a minimum of two armed vehicles to support ESS 
movements.''
    Were you aware of those contract provisions, sir?
    Mr. Howell. Yes, I was.
    Mr. Tierney. Now, does that change your testimony earlier 
that you thought having two people per vehicle, with plated 
vehicles, as opposed to armored vehicles, was sufficient on the 
date in question?
    Mr. Howell. It does not, and there are a number of reasons 
why. First of all, this agreement is, as you said, was executed 
March 8th between ESS and Regency. On March 11th, during a 
meeting between Regency, ESS, and Blackwater, my understanding 
is ESS confirmed that armored vehicles were not appropriate or 
not expected, not requested for all missions.
    Mr. Tierney. So what you are saying is they told you 
verbally something that absolutely contradicts this statement 
here that ESS had requirements that for the current and 
foreseeable future threat will remain consistent and dangerous 
and recommending a minimum of six operators and a minimum of 
two armored vehicles? So 3 days after this contract was 
executed you say they said exactly the opposite thing?
    Mr. Howell. This contract was between Regency and ESS.
    Mr. Tierney. That is correct.
    Mr. Howell. Three days after that, my understanding is that 
ESS stated that was not required, and the requirement imposed 
by Regency on Blackwater was that it was not a requirement for 
armored vehicles.
    Mr. Tierney. Do you agree or disagree with the threat 
assessment as stated in that paragraph?
    Mr. Howell. That statement in the paragraph just reflects 
the fact that it was a dynamic and dangerous environment in 
Iraq. It is not a statement as to the specific conditions in 
any particular place on any given day.
    Mr. Tierney. Well, it talks about civilian entities in 
Fallujah, Aramadi, Al-Taji, Al-Halla. Those are fairly specific 
places. It talks about a consistent and dangerous threat 
remaining for the current and foreseeable future, and it talks 
about the type of capabilities they think are necessary to deal 
with those, a minimum team of six operators and a minimum of 
two armored vehicles. Do you agree or disagree with that 
assessment?
    Mr. Howell. I disagree with part of that, sir. It notes 
specific incidents to reinforce the general point that Iraq was 
a dangerous place, and, with regard to the armor requirement 
that is discussed in Appendix A of the Regency ESS contract, my 
understanding is that is with regard to personal protective 
services, which is a different mission than convoy operations.
    Mr. Tierney. Mr. Murray, do you agree or disagree with that 
threat assessment in that paragraph?
    Mr. Murray. I would like to make a couple of points, if I 
may.
    Mr. Tierney. No, I really just wanted your answer. I've got 
a limited time, so yes or no would be sufficient, thank you.
    Mr. Murray. Yes. I would agree with that.
    Mr. Tierney. Thank you. You do.
    Mr. Howell, I am aware that you asserted earlier that Mr. 
Powell's e-mail may have been speaking generally about 
conditions, but are you aware that e-mail was written at 1 a.m. 
on March 30th, which is, in fact, the morning of the day in 
which the gentlemen were sent out on their mission? Are you 
aware of that date?
    Mr. Howell. Yes, sir, I am aware of that.
    Mr. Tierney. OK. And are you aware that Mr. Powell is, in 
fact, the one that directed those men on those mission, he was 
their direct supervisor that day?
    Mr. Howell. Yes, sir.
    Mr. Tierney. And you still think that was only generally, 
that he was not contemplating those men and those conditions 
specifically on the morning when he wrote that?
    Mr. Howell. I can't know. I can't read his mind, sir, but, 
given what I know, the status of the program, the problems, I 
would say the challenges faced by the program were the same 
challenges faced by everyone in Iraq, which was acquiring 
enough equipment. But the fact that there--the question whether 
there was enough equipment for the program had it been fully 
manned that day is a very different question from whether the 
team was equipped.
    Mr. Tierney. Thank you. I yield back, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Tierney.
    Mr. Shays. Mr. Issa. Mr. Cannon.
    Mr. Cannon. Thank you, Mr. Chairman.
    Mr. Howell, when did Blackwater enter its first Government 
contract?
    Mr. Howell. I believe that was in 1998. I think we have 
contracts for training in the United States and contracts for 
security services overseas, and those are two different 
animals.
    Mr. Cannon. And that was under the Clinton administration 
then?
    Mr. Howell. Yes, sir.
    Mr. Cannon. And do you have staff or contracts with people 
who have been employed by the Clinton administration?
    Mr. Howell. I am sorry?
    Mr. Cannon. In a political capacity?
    Mr. Howell. I don't----
    Mr. Cannon. For instance, you are accompanied by counsel 
today. Do you know what is her name and what was her political 
experience?
    Mr. Howell. Yes, sir. Her name is Ms. Beth Nolan, and she 
was, indeed, part of the Clinton administration, to my 
understanding.
    Mr. Cannon. And do you know what her title was there?
    Mr. Howell. I am sorry, sir, I don't recall it at the 
moment.
    Mr. Cannon. That is fine. I guess my point is that you are 
not exactly what you would call a Republican company then, are 
you?
    Mr. Howell. No, sir. We have folks in our company of many 
persuasions.
    Mr. Cannon. And, therefore, it would follow that you are 
not an extremely Republican company, and at this point I would 
like, Mr. Chairman, to introduce or ask unanimous consent to 
introduce into the record a letter from Callahan and Blain 
dated December 13, 2006, to the Honorable Nancy Pelosi, wherein 
the----
    Chairman Waxman. Let me point out to the gentleman that 
letter is already part of the record.
    Mr. Cannon. Thank you. Then, referring to that letter that 
is part of the record, the lawyer who drafted that letter 
referred to you as an extremely Republican company and went on 
to demand that this committee proceed to investigate issues, 
presumably to help them with their discovery. They also accuse 
you of being profiteering from the war in Iraq, but your 
company existed before the war in Iraq came into being, did it 
not?
    Mr. Howell. Yes, sir.
    Mr. Cannon. And are you, in fact, profiteering from that 
war? Have you skimped on equipment?
    Mr. Howell. We have not skimped on equipment. No, sir.
    Mr. Cannon. Thank you. Let me just say here, Mr. Chairman, 
that I personally don't think it is wrong for committees to 
investigate issues where there is litigation. In fact, I think 
that is appropriate on occasion. but I think it is highly 
inappropriate to have the perception that this committee or any 
organ of Congress is used to beat up a company to discover 
information that lawyers can't discover in the ordinary course 
of litigation, and that the purpose of this committee should 
be, in fact, to find out what is wrong and then help fix those 
things that are wrong.
    I think it is absolutely clear that things have not gone 
perfectly well in Iraq, but to victimize any particular 
company, especially when that company is undergoing litigation 
under tragic circumstances, is, I think, just something we need 
to be very careful.
    Now, of course, this committee is not at fault for a letter 
written by a law firm, but I would hope that the committee 
would be extraordinarily careful to not be the instrument of a 
law firm like that.
    Now, Mr. Howell, you had five employees that were 
tragically killed recently. Would you like to talk a little bit 
about the circumstances, what they were doing that day, and 
what was behind the decision? Are there statements you would 
like to make so that we can understand that a little better?
    Mr. Howell. Yes, sir, I would very much like to discuss 
that, but I am unable to do so in an open hearing.
    Mr. Cannon. Because what they were doing was classified. 
The fact is, much of your work is very, very difficult, driven 
by sensitive information, by information that can't be made 
known. Thank you. I appreciate your being here and your 
undergoing these questions. War is difficult, especially when 
it is as expensive and complex and with so many issues at hand 
as we have in this war. I want to just let you know I 
appreciate your being here.
    I yield back the balance of my time.
    Chairman Waxman. I thank the gentleman for his questions.
    I do want to state to you that I strongly agree with that 
statement that it is not appropriate for committees to be 
getting information for private lawsuits. I resented it when I 
saw it take place when the Republicans were in charge of the 
Congress. That is the last thing this committee should be 
doing. But we need to ask questions, even if a lawsuit is 
pending, and, as I heard from the family members this morning, 
there is a lot of information that I think they are entitled to 
know. I have been working on this particular investigation for 
a couple of years. It is about time we got all the information 
out.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    I agree with the gentleman, but I think that part of the 
problem is that we've got this perception because Vice 
President Cheney's connections with Halliburton just put a 
flavor of, I don't know, complicity there, of, you know, a 
political one. Appropriate or not, it is there, so we just have 
to address it.
    Mr. Cannon. Would the gentleman yield? Is the gentleman 
suggesting that complicity is a term that means the Vice 
President----
    Mr. Lynch. Connection.
    Mr. Cannon [continuing]. Is involved with illegal dealings. 
I don't think that anybody in this hearing is----
    Mr. Lynch. Connection.
    Mr. Cannon. But connection to illegal activity?
    Mr. Lynch. I am sorry?
    Mr. Cannon. Is the gentleman suggesting improper illegal 
activity on the part of the Vice President?
    Mr. Lynch. No. I am saying that the perception of a 
connection between Republican efforts and some of the 
industrial complex, the military industrial complex is because 
of that perception. He is a former CEO. And so I think that 
flavor is just out there. It is something----
    Mr. Cannon. It is certainly something, if the gentleman 
would yield, it is something we ought to look at. I agree.
    Mr. Lynch. Reclaiming my time----
    Mr. Cannon. Complicity is not the word.
    Mr. Lynch. Mr. Howell, can I just say that I want to 
followup on Mr. Tierney's question. He referred to a document 
that indicated that between ESS and Regency there was a 
requirement that a minimum of three security personnel be added 
to each vehicle. It also refers to two armored vehicles to 
support ESS movements.
    Now, based on your earlier response, you were saying that 
between March 8th, the date that this document was executed, 
and in fairly rigorous detail, saying that the current and 
foreseeable future threat will remain consistent and dangerous 
on March 8th, I want to clarify something. You are saying that 
this document was changed after the 8th?
    Mr. Howell. I am not certain whether a subsequent contract 
was ever executed between ESS and Regency or not, sir. I don't 
know the answer to that.
    Mr. Lynch. But you were saying that was not the case on the 
11th? You referred to another meeting on the 11th. I am just 
asking, if you have documents that change this contract that we 
were given, then I would just ask you to produce it, that is 
all.
    Mr. Howell. My understanding is that the minutes of the 
meeting that I mentioned have been produced to the committee. I 
don't know if a subsequent written agreement between Regency 
and ESS exists.
    Mr. Lynch. OK. All right. I do want to refer to there was 
one audit that was actually produced. We asked for all audits, 
but there was one audit that was produced regarding the 
provision of security personnel. In this audit it indicates 
that there were duplication of labor costs in connection with 
personnel hired by Blackwater. What it essentially says here is 
that you were double billing. You were putting three people, 
including the driver, in some of these vehicles, and then you 
were charging the Government for a driver and three security 
people because a security person was driving. Do you get what I 
am saying? They are saying in here there were costs, $1.25 
million for drivers at $750 a day, but those costs were already 
included in the security contract, and they are saying that it 
is, in effect, a duplication of labor costs, and consequently 
they question the costs included in Blackwater's proposed 
dedicated overhead and total.
    What they say further on is that Blackwater applied profit 
to profit. In other words, you applied your percentage of 
profit to profit that had already been accumulated.
    Last, they indicate in this audit that the proposed profit 
by Blackwater represented 23.6 percent of total proposed cost, 
which is significantly higher than what we have seen for 
similar contracts in dealing with the Department of Defense, 
which is usually 1 to 5 percent profit margin, maybe 10 percent 
at the most.
    I just want to know, 23.6 percent profit on this, I just 
want to know do you think that is reasonable? Is that customary 
for the way you do business?
    Mr. Howell. First, with regard to production, I would just 
like to note that we are a small business and we have been 
seeking to produce as much as possible. In connection with the 
committee staff, agreement was reached to focus on the hearing 
today. We have produced close to 7,000 documents and we are 
continuing to produce documents. I don't know which if our 
audits you are referring to, so there is some speculation 
inherent here.
    Mr. Lynch. This is the State Department contract.
    Mr. Howell. OK. I came here prepared to talk about ESS, but 
what I can say about that audit that I know as of today is that 
when that report was issued it was not a final report. There 
were subsequent review of documents by the auditors and by our 
financial team, and when all of the concerns had been fully 
investigated, most of those concerns were determined to be 
based on misunderstandings.
    Mr. Lynch. Well, I understand my time has expired. I just 
want to say that the last time we had a hearing we were told 
that there was no contract between Blackwater and Regency and 
ESS, and that was confirmed by the Department of the Army, I 
believe. And now we come here today and we find out all that 
was wrong and that there were, indeed, contracts between the 
parties. So it is getting a little frustrating not getting 
straight information. I can tell you that. I don't know what we 
are going to hear at the next hearing. It may delete everything 
that we've heard here today.
    Mr. Howell. Sir, we are seeking to answer your questions 
today as best we can, and from what I know of the prior hearing 
I do not believe that the question of whether there was a 
contract between Blackwater and Regency was questioned. There 
was a contract, and I believe that was the understanding during 
the hearing. I can't answer for the other companies that would 
have been in the chain.
    Mr. Lynch. OK. I yield back.
    Mr. Van Hollen [presiding]. Mr. Issa.
    Mr. Issa. I thank the chairman.
    You know, I apologize if I don't ask enough questions to 
quite everyone on the panel, but this appears to be mostly 
about Blackwater, so I will focus my questions somewhat on 
them.
    Mr. Howell, I know that there is a lot of proprietary 
information, but I hope that you can at least answer a couple 
of questions related specifically to this contract.
    One, have you been paid on this contract?
    Mr. Howell. None of the invoices that we submitted to 
Regency were ever paid. There was an initial mobilization 
payment, but it was a small portion, relatively small portion 
of the overall work that we did.
    Mr. Issa. And how much have you spent on this contract, if 
you can tell us?
    Mr. Howell. I believe it was approximately $2.3 million, 
but that is a rough number.
    Mr. Issa. If you get paid some day?
    Mr. Howell. If we had been paid, I believe it would have 
been--the total billings were $2,290,000 and some dollars.
    Mr. Issa. And earlier there was a statement about a 35 
percent up-charge contractor fee, if you will, that gets marked 
up, not just at your level but at each level. To the extent you 
can, without revealing classified information or confidential, 
proprietary information, is 35 percent anywhere close to an 
accurate number?
    Mr. Howell. If we had been paid--and I can discuss this 
because it is a contract that is closed. The market has changed 
significantly and it doesn't affect our Government bids going 
forward. Had we been paid, our profit would have been 
significantly less than that. I have a pie chart that would 
show exactly where the payments to us that we didn't receive 
would have gone, and our profits were approximately--they would 
have been slightly over 1 percent.
    Mr. Issa. So if you got paid, it would have been slightly 
over 1 percent. If they pay you today without interest, you are 
in the hole for the amount, cost of the interest.
    I am particularly concerned about the allegations that in a 
strange way had nothing to do with the previous panel. You were 
in the audience for the previous panel?
    Mr. Howell. Yes, sir, I was.
    Mr. Issa. The previous panel seemed to say unequivocally 
that the four men who died in March 2004 were highly qualified, 
highly skilled professionals that you induced, offered $200,000 
roughly a year to come there because of their security 
expertise, their training, their Seal training and so on. But 
then they alleged that, in fact, you hire people from Africa 
for a few hundred dollars a month. can you tell us how--because 
they referred to it, but they didn't have first-hand knowledge. 
Tell us about how that would work and what they would be used 
for, if you do it.
    Mr. Howell. Yes, sir. It goes back to the issue of there 
being multiple tiers of security professionals. Some may be 
required that they are cleared in terms of security clearance, 
special forces veterans with a required number of years, all 
the way down to where the requirement may simply be for a third 
country national who has received training in firearms and 
security procedures and things like that.
    The level of training and the category within which a given 
individual will fit is specified by the customer. In terms of 
U.S. Government contracts, it is normally specified by tier, 
how many people by tier by the customer. So we are directed, 
effectively, to use some folks who are third country nationals. 
That being said, they are cleared and vetted by the U.S. 
Government and they have met the minimum required training 
standards.
    Mr. Issa. OK. So if you were using third party--and I guess 
we will kind of call them second or third tier, compared to 
these four men that we met with today, or their widows and 
parents and so on, you pay them less. Does the Government pay 
you less for them?
    Mr. Howell. Sir, I believe the category would be fifth 
tier, and fifth tier personnel, third country nationals, they 
are paid a different wage commensurate with the skills that 
they bring to the project, and the Government accordingly----
    Mr. Issa. Just recapping, lower skills, lower expectation 
because of home wages, and lower cost to the Government?
    Mr. Howell. Lower cost to the Government, and they are also 
used for fundamentally different tasks.
    Mr. Issa. Would these third country nationals, would they 
tend to be, you know, selected because they were Muslim, 
because they could speak Arabic, because they had sensitivity, 
and/or because they were not Iraqis and, as a result, would be 
less likely to align with insurgent groups? That is a combined 
question, but I think you get the gist.
    Mr. Howell. Yes, sir. I think it is very much driven by the 
contract. We do use some third country nationals to provide 
interpretation, interpreting services. That is a very complex 
question. It is difficult to answer briefly, sir.
    Mr. Issa. OK. I thank the Chair. Hopefully we can followup 
further. I yield back.
    Mr. Van Hollen. Thank you.
    Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    I would like to follow this whole tier billing system so we 
can get a clear picture of what this is costing the American 
taxpayer. We have some slides that we want to show to 
illustrate this.
    As we have all heard many times before, the initial level, 
the first level, we have four tiers of contractors, the 
individual contractor, Blackwater, Regency, ESS, and then KBR, 
and then finally the Army above that, so six tiers altogether. 
We know from the first, all the original testimony, that the 
individual contractor is being paid, in the one case we heard 
about earlier, $600 per day. And then in the next slide we will 
show that Blackwater billed $815 for that same $600 employee or 
contractor, which represents a 36 percent markup, and then 
Regency billed ESS $1,100 for that same contractor.
    Mr. Murray, ESS was paying $1,100 for the same contractor 
who originally was being paid $600, supposed to be paid $600 a 
day. That figure does not include housing, food costs, those 
types of support services; is that correct?
    Mr. Murray. First, in that $1,100 you referred to does not 
include accommodations, which would include food. It does not 
include fuel, as one of the items mentioned that is cost 
reimbursable, that is fuel. It did not include the d/b/a 
insurance that was a cost reimbursable item, itself. That 
$1,100 you see there refers to just the--I think that is a T-3 
perhaps security person.
    Mr. Yarmuth. Personnel. So essentially you paid $285 more 
to Blackwater than they paid the contractor. What does that 
$285 represent?
    Mr. Murray. Congressman, that----
    Mr. Yarmuth. Where was the value added for that $285?
    Mr. Murray. I had no visibility on the pricing between 
Regency and Blackwater. Our contract was clearly with Regency 
for security services, and that was the quoted rate that we 
obtained. Their rates with their subcontractor, Blackwater, I 
had no visibility of.
    Mr. Yarmuth. OK. Do you know what percent of your contract 
with KBR comprised labor costs?
    Mr. Murray. Pardon me, Congressman?
    Mr. Yarmuth. What percent of your contract with KBR 
comprises labor costs, the cost of personnel of the total?
    Mr. Murray. We provided a detailed letter to KBR on this. 
Approximately 45 percent.
    Mr. Yarmuth. So 45 percent. And do you know what percent of 
your labor costs are on security?
    Mr. Murray. Approximately 12.5 percent.
    Mr. Yarmuth. OK, 12.5 percent. So you are talking about 
probably somewhere around 5 percent of the total cost would 
have been represented on private security contracts?
    Mr. Murray. That is approximately right.
    Mr. Yarmuth. Does that have an impact on the price you can 
quote to a potential contractor?
    Mr. Murray. Congressman, our prices are, as we mentioned, 
fixed price, firm fixed price. During the time that this 
scenario developed, we were already involved in our contracting 
with all of our clients. This actually came in mid-term in our 
clients, so we had already budgeted our security costs.
    Mr. Yarmuth. I am saying is that an element that is an 
important element in your bidding, the construction of your 
bids and your competition for bids, the security costs?
    Mr. Murray. Is it an important element? Yes, it is a very 
important element.
    Mr. Yarmuth. And do you know has ESS ever lost a bid 
because of the difference in cost of security?
    Mr. Murray. Congressman, it is hard to say if we have lost 
a bid because of the difference in our security cost. We have 
certainly won and lost bids in Iraq. Bids are based on either 
the best value or, in some cases, the lowest price, so we have 
lost some business, but I can't tell you if it is attributable 
to our security factor or not.
    Mr. Yarmuth. As you go up that chain, is there a place 
where you can tell me, just based on your knowledge of the 
whole process of the industry, where there was any value added 
to that initial $600 paid to that individual contractor along 
the chain?
    Mr. Murray. Well, yes, I can, Congressman.
    Mr. Howell. Sir, I am the one best suited to answer that 
with regard to Blackwater, if I may.
    Mr. Yarmuth. Sure.
    Mr. Howell. There are two serious areas of possible 
misunderstanding on that slide. The first is the fact that the 
contract chain is reflected as being KBR on LOGCAP work. My 
understanding, which may not be correct, is that has not been 
definitively determined.
    More to your question, the numbers that keep coming up, the 
600 and 815, that is not the correct calculus, because the 
assumption that anything other than the amount paid in labor 
cost is pure markup and pure profit is wrong because this is a 
firm fixed price per day situation.
    The amount of profit out of the services----
    Mr. Yarmuth. Well, that is the question I was asking.
    Mr. Howell. Yes, sir.
    Mr. Yarmuth. Where is there value added to that $600 as it 
goes up the chain, because ultimately the taxpayer is paying a 
lot more than that.
    Mr. Howell. Yes, sir. I will try to answer your question 
directly. The 815 is not the right number because there were 
multiple labor rates involved. The average labor rate I think 
is more reflective because the costs were spread among 
different categories equally. So the blended labor rate of 
approximately $885 per day per man I think is a more useful way 
to discuss this. Out of that $885 per day that Blackwater 
invoiced to Regency, the average labor cost was $683 per day, 
and that went to the individual security professional, $51.78 
per day went to air fare. Blackwater was responsible for the 
initial movement, the initial mobilization of security 
professionals into Iraq. Supplies, including the personal 
weapons, ammunition, personal gear for our men, that sort of 
thing, was another $18-plus per day. Other costs, such as 
lodging and transportation in the United States--that would be 
from their home of record to Moyak--housing, and berthing while 
they were receiving training in Moyak, freight, Internet 
access, that sort of thing accounted for another----
    Mr. Yarmuth. Well, if I could interrupt you for a second, 
we had testimony that ESS didn't pay that. That was added cost, 
so not necessarily from you but along the whole chain housing 
costs and food wouldn't have been included. It might have been 
included at your level, but not subsequently.
    Mr. Howell. There are two different categories of housing 
costs, sir: that that Blackwater incurred for the men prior to 
their arrival in theater and that which was the responsibility 
of Regency after they were in theater.
    Mr. Yarmuth. My time has expired. Thank you.
    Mr. Van Hollen. Thank you, Mr. Yarmuth.
    Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    What I would like, Mr. Chairman, if I could--and maybe you 
could get some answers from staff for me, but I was reading the 
memorandum that we got today and I found it interesting. I am a 
little slow, but it says today's hearing provides an 
opportunity for the committee members to ask three basic 
questions about the extensive use about private security 
services. The first one says: Are private security contractors 
operating in Iraq doing an adequate job? I haven't seen anybody 
from any of the two panels that could really testify to that, 
and I don't think any of them have ever been protected by one 
of these private security companies. So I was wondering why 
that statement is in there.
    The second statement says: How much are they costing the 
Federal taxpayer? I haven't seen anybody from either panel that 
works for the GAO who would know the answer to that.
    And then it says: And is the Federal Government providing 
sufficient oversight, which I think the majority staff pretty 
much answered, itself. On page 3 it says, ``U.S. contract 
employees may be prosecuted under American criminal law.'' And 
then in the next line it says, ``All security contractors in 
Iraq are under the Uniform Code of Military Justice.''
    So I am kind of confused about the panels that we had today 
based on what the committee staff said we were supposed to find 
out. So if you could just find out those answers, I think it 
would help us all.
    Mr. Van Hollen. Well, we do have Ms. Ballard here today, 
who has actually been intimately involved in the issue of the 
use of taxpayer money, especially as it pertains to the 
contracts that we are dealing with today. In fact, there has 
been lots of correspondence between this committee and Ms. 
Ballard and the Secretary of the Army, including a number of 
letters that I have sent, that Mr. Waxman has sent, and others.
    The focus of this hearing has been to try to put a lens on 
these contracting issues by looking at this particular case, 
and so I think these are the appropriate individuals and 
witnesses to have to answer those questions.
    Mr. Westmoreland. OK. So the gentlelady from the Army would 
be who we would need to address the questions to as far as the 
cost? I am asking. Is that what I am hearing you say?
    Mr. Van Hollen. Feel free to address any question.
    Mr. Westmoreland. The other point I wanted to make--and I 
am glad you are in the Chair, because I wanted to continue on 
with what Mr. Cannon talked about. The letter from Callahan and 
Blain continually used the word profiteering. I thought it was 
also interesting that they did copy you, as the DCCC chairman, 
with the letter. I know that the chairman previously stated--
and I believe him--that these hearings have no political ties. 
And I found it interesting, as I was sitting here, I went to 
the waste, fraud, and abuse hotline and saw where the chairman 
had introduced a bill that was to do away with cronyism. As I 
look at this letter from this attorney and who he addressed it 
to and all the contributions that he had made and his former 
law partner, I can hardly wait until we get into those cronyism 
hearings.
    But I think that we are walking on very thin ice when we 
start having public hearings with panels that are both the 
defendant and the plaintiff in something that is in a civil 
action.
    But I have a question for Mr. Howell. In the letter I 
referenced--and it has been submitted for evidence--from 
Callahan and Blain they keep talking about profiteering. I was 
a contractor before I got into politics, in the building 
business, and I used many subcontractors. In fact, I have been 
a subcontractor before from another subcontractor. If I 
understand profiteering--and Blackwater was specifically picked 
out in this letter, and I am sure it was not for political 
reasons, even though it mentioned Blackwater as being a 
Republican company, and then the copy going to Mr. Van Hollen, 
the DCCC chairman, but it keeps talking about profiteering.
    Now, on this program contract the thing that I've got says 
the Federal Government contracted with KBR that then contracted 
with ESS Support Services that then contracted with Regency 
Hotel Services that then contracted with Blackwater. Now, being 
in the contracting business and talking about profiteering, how 
can the last person, or how can the person at the bottom of the 
totem pole be profiteering? Can you explain that to me?
    Mr. Howell. Sir, I don't see how they can be, and I also 
think that the notion of profiteering is inherently 
incompatible with a competitively bid contract.
    Mr. Westmoreland. What would your definition of 
profiteering be?
    Mr. Howell. My understanding of the definition under the 
English language is someone seeking to make an excessive 
profit, when the person desiring the services is somehow in 
dire straits, if you will.
    Mr. Westmoreland. OK. And I think that is a pretty good 
definition. As Mr. Issa was questioning you, I understand that 
you never got paid from Regency Services, is that true, on this 
particular contract? It was a little over $2 million?
    Mr. Howell. None of our invoices were paid. We did receive 
the initial mobilization payment.
    If I may, I forgot to mention earlier, would it be possible 
to make this chart that we discussed at length part of the 
record, just so it is clear. It has been previously provided to 
the committee.
    Mr. Van Hollen. Without objection.
    Mr. Howell. Yes, sir.
    Mr. Westmoreland. And just one further question. You are 
sitting there with your friend from ESS. Did they get paid?
    Mr. Howell. I am not certain, sir. I think they can answer 
that.
    Mr. Westmoreland. Did ESS get paid on the contract that 
specifically is mentioned so many times here today, where the 
four brave Americans lost their lives?
    Mr. Murray. Are you asking me if ESS brought value? I am 
not understanding your question, Congressman.
    Mr. Westmoreland. Did KBR pay you for the services rendered 
that you subcontracted to Regency Hotel Services who then 
contracted with Blackwater? Did you get paid for the services 
that Blackwater and Regency Hotel Services subcontracted from 
you?
    Mr. Murray. Congressman, I would like to address that kind 
of two-fold. No. 1, I think, understand our contract was with 
Regency to provide security services for ESS----
    Mr. Westmoreland. Did you get paid from Kellogg, Brown, and 
Root for that contract?
    Mr. Murray. That contract was not with Kellogg, Brown, and 
Root, so the answer to that would be no.
    Mr. Westmoreland. OK. So I got some bad information that 
KBR did not subcontract to you on that particular contract?
    Mr. Murray. On that particular contract I indicated earlier 
it was a contract we ran out of Taji, which was not a KBR 
contract.
    Mr. Westmoreland. I cannot hear you. Would you speak up? I 
am a little slow and hard of hearing.
    Mr. Murray. Yes. As I mentioned earlier, that particular 
contract was run out of Taji, and that was not the KBR contract 
that ESS had.
    Mr. Van Hollen. All right. We are going to have to wrap it 
up. I thank you.
    Are there going to be further questions for other members 
of the panel, because we are going to have to----
    Ms. McCollum. Mr. Chair, if you are not coming back again I 
would just like to----
    Mr. Van Hollen. No, we can come back.
    Ms. McCollum. But if we were not, you are not referred to 
as the DCCC Chair on this letter. You are a Member of Congress.
    Mr. Van Hollen. Thank you.
    Mr. McHenry. Mr. Chairman, I have been here for about 2\1/
2\ hours waiting for questions, so I would like to come back.
    Mr. Van Hollen. We will do that.
    Just for the record, let me say my understanding--and I 
hadn't seen that letter--that they essentially copied Members 
of the Democratic leadership, including Ms. Pelosi. And I am 
also informed apparently that this firm has contributed also to 
Republicans, as well. I just think it is important for the 
record to reflect that this hearing has been designed to get at 
the facts on the ground. I think it has done a good job of 
doing that. And to suggest that there is some sort of political 
motivation behind it other than trying to get to the truth of 
the matter I think is unfortunate.
    We will now recess the committee until after the voting. We 
will recess until 2:45.
    [Recess.]
    Mr. Waxman [presiding]. The meeting of the committee will 
come back to order.
    To continue questioning of this panel, the chair recognizes 
the gentleman from Maryland, Mr. Sarbanes, for 5 minutes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    We have heard a lot about the contracting, and I have done 
a fair amount of contracting in my life as an attorney, so I 
know when there is this multi-tier contracting it can get very, 
very confusing. It can be hard to pin down exactly what 
happened, and we are talking about cost-plus contracts, we are 
talking about fixed price contracts, we are talking about 
turnkey contracts, etc.
    Depending on what goes into developing a bid or how you 
load up a contract on the pricing side, whether profiteering or 
markups that are more generous than they should be is 
occurring, that can happen. I think the inquiry will continue 
on whether the particular contract that we are looking at today 
had those characteristics, or, more generally, whether the 
environment in which private contracting was being engaged in 
Iraq allowed for that kind of thing to occur. But that is 
actually what I am more interested in.
    I am more interested in the larger environment, because I, 
frankly, believe that a lot of the things that you do, 
Blackwater, ESS, Regent, whatever, are things that you should 
not be doing. I think that this is symptomatic of a situation 
in which the Secretary of Defense's ideology, philosophy, sort 
of new notions of tactical warfare were pushing this notion so 
that we were on a mad dash to slimming down our military, and 
most people agree that the initial response in terms of the 
number of troops in Iraq was inadequate. That meant that there 
was space that our military should have occupied that now had 
to be occupied by someone else, and that is when people turned 
to the private contracting community to fill that space, with 
the kinds of tragic results that can occur.
    So I really just have one question. I invite any of you who 
wish to answer it. Did you, yourselves, ever reflect on whether 
you were in a space where you didn't belong? Did you ever say 
to yourselves, ``We shouldn't be doing this? This is something 
that the armed forces should be engaged in. We are being put in 
an untenable position?'' Anyone can answer that if they would 
like. Maybe you would like to start, Mr. Howell.
    Mr. Howell. I think the best answer I can give is one based 
on my nearly 20 years as a Naval officer, informed, if you 
will, by my time at Blackwater. I have to say that it is 
ultimately a policy decision that is set by Congress, but I 
think that the idea of using contractors to supplement and to 
aid the armed forces is a valid one. We have a role to play. We 
have a contribution to make. There are certain functions that 
we can do at a cost efficiency when it is properly executed to 
the Government that free up soldiers to do--soldiers, Marines, 
airmen, and sailors--to do service member tasks.
    Mr. Sarbanes. I allow that there will be situations where 
you have an appropriate role. I guess I am asking whether you 
believe that in this situation at all times you think the role 
that you played was appropriate, not the way you executed it, 
because I understand that once you have the assignment you are 
going to try to execute it, and whether you executed it well or 
not has been a subject of the discussion today, but whether the 
assignments that you were being asked to execute were 
appropriate in this larger context of what our military should 
have been doing versus what the private contracting community 
should be doing.
    Mr. Howell. I believe that escorting personnel in convoys 
in a purely defensive role is an acceptable task for private 
security. That said, I believe and Blackwater supports 
appropriate Government control thereover. And if I could add 
one other thing that sort of slipped out of my mind, I had a 
massive amount of information that I tried to bring here today, 
and I don't want to not provide proper respect to Ms. Nolan, 
and I wanted to clarify she was a former White House counsel 
for the Clinton White House.
    Mr. Sarbanes. Does anyone else have a response?
    Mr. Chvotkin. Mr. Sarbanes, just to remind you what I said 
earlier--I don't know if you were here for that--the unusual 
situation taking place in Iraq today is three simultaneous 
actions. There is a military action, and the work that is 
supporting--the contractors that are supporting the military, 
accompanying the force. That has been longstanding, weapons 
system support, logistics support, traditional.
    There is the reconstruction activity, and that has usually 
followed a military activity. We are now doing that 
simultaneously. And an economic development or developmental 
assistance activity. All taking place in a very confined space. 
That has created some ambiguity about who is there doing what, 
for what purposes. I think that clarity is very important in 
your thought process about the appropriate role of contracts.
    Mr. Sarbanes. And do you agree that having that kind of 
ambiguity can create dangerous situations----
    Mr. Chvotkin. Absolutely.
    Mr. Sarbanes [continuing]. To people on the ground?
    Mr. Chvotkin. It absolutely creates difficult situations, 
confusion, unclear lines of authority and responsibility, and 
questions on both parts.
    Mr. Sarbanes. And confusion, would you agree, can lead to 
situations both where there is abuse, in terms of the way 
contracts and assignments come together, and clearly can also 
lead to situations where there is tragedy, as well?
    Mr. Chvotkin. There is clearly tragedy. I am not sure that, 
by definition, you have abuse. Confusion could create 
ambiguity, ambiguity could create a variety of situations that 
may not be abuse of the process.
    Mr. Waxman. The gentleman's time is up. Thank you.
    Mr. Sarbanes. Thank you.
    Mr. Waxman. Thank you, Mr. Sarbanes.
    Mr. McHenry.
    Mr. McHenry. Thank you, Mr. Chairman.
    Under Secretary Ballard, I have a simple question. I assume 
you will be able to answer this, because of your position. How 
many private security contractors are currently working for the 
U.S. Government in Iraq?
    Ms. Ballard. Sir, that is a very broad question and I am 
unable to answer that question. It is a very complex situation 
on the ground. There are many organizations over there that may 
have private security contractors. A lot of these security 
contracts are subcontracts under----
    Mr. McHenry. Thank you. There are approximately 60, 
according to the research we have done.
    I ask Mr. Howell, Blackwater is one of those 60 currently 
working in Iraq providing security services; is that not 
correct?
    Mr. Howell. We are currently providing security services in 
Iraq to the U.S. Government. Yes, sir.
    Mr. McHenry. All right. What year was the company founded?
    Mr. Howell. In 1997.
    Mr. McHenry. What year did the company receive its first 
contract from the U.s. Government?
    Mr. Howell. In 1998.
    Mr. McHenry. Who was in the White House in--pardon me. I 
know that is a bit ridiculous to ask. It was obviously William 
Jefferson Clinton, a Democrat. It seems that the questioning 
here today is that these are sort of a Republican scandal that 
we have contractors working for the U.S. Government, providing 
essential security services for us in war zones. It is actually 
something very common for the last 200 years working with 
firms, private security firms to provide needed resources for 
our military and for our diplomats overseas. So I apologize for 
asking that question, because it was obviously a Democrat 
administration that gave you your first contract.
    I think it is also ironic that there is a big discussion 
from the chairman of this committee and Democrat leadership 
about a company called Halliburton and how it is this 
Republican scandal that Halliburton is getting contracts from 
the U.S. Government.
    I think today Mr. Seagle, you work for what firm?
    Mr. Seagle. I work for KBR.
    Mr. McHenry. Which Kellogg, Brown----
    Mr. Seagle. Which is a subsidiary----
    Mr. McHenry [continuing]. And Root, which is a subsidiary 
of----
    Mr. Seagle. That is correct, of Halliburton.
    Mr. McHenry. Of Halliburton. How many questions have you 
been asked today by this panel?
    Mr. Seagle. One question, I believe.
    Mr. McHenry. One question. Was it just now?
    Mr. Seagle. No. It was a simple yes or no question that was 
earlier.
    Mr. McHenry. Very good. How long have you been here?
    Mr. Seagle. For about 3 hours.
    Mr. McHenry. Three hours. That is kind of interesting. I 
find a lot of vitriol is heaped on your organization, but there 
is not even a question asked of you.
    But back to you, Mr. Howell. I understand there is an 
ongoing lawsuit which Callahan and Blain have filed on behalf 
of families that were taken down in action. It is a very sad 
thing. I also know that a letter that has already been admitted 
to the record here refers to you and other contractors as 
extremely Republican companies. It is ironic, coming from a law 
firm that is extremely Democratic, and it is ironic that they 
send this letter to the Speaker of the House and cc the 
committee chair here, but also copy the Democrat Campaign 
Committee Chair. Well, it might not be ironic because, after 
all, this law firm has given over $60,000 to Democrats over the 
years, so this might be another pay to play prospect here in 
Washington, DC, where Democrat donors get the investigations 
that they wish in order to help their law firm win a lawsuit.
    So if you could comment, just in legal terms, about this 
idea of turning a private lawsuit into a legislative show 
trial?
    Mr. Howell. Sir, I think the best answer I can give is to 
refer to a U.S. Supreme Court case that has been around for a 
large part of the existence of our Republic. It is a case that 
is known by the name Kilborn. It goes back to 1880 and it 
established the longstanding principle that, in certain 
circumstances, congressional involvement in private litigation 
can be unlawful, and obviously it is a very complex issue, a 
lot of subsequent case law, but that is the general principle 
that I think you are asking about.
    Mr. McHenry. Thank you, sir. I think it is also interesting 
and important to note that this committee hearing that we have 
here today and the original--according to House rules, the 
minority side is entitled to receive notification about what 
the hearing is intended to be about, and then the night before 
we receive a supplemental document that completely changes the 
notion of this hearing. So I want to apologize to you 
individuals working in the private security and Under Secretary 
Ballard who works for the Government for having to waste a full 
day on a hearing that is nothing more than a show trial for a 
Democrat trial lawyer firm. I apologize to you for that. I 
think it shows that, you know, the new majority and the new 
leadership of this committee is intent on making political hay 
out of something that simply is not a valid point, and I 
apologize that you have to be brought in to be a part of this 
spectacle.
    Mr. Waxman. The gentleman's time has expired, and I must 
say that he just was so partisan in what you had to say, 
without a foundation for it. I have no idea who is a Democrat 
and who is a Republican. I know that the four people, four men 
who lost their lives, were Americans. I don't know whether they 
are Democrats or Republicans. I know Americans, Democratic and 
Republican, are paying taxes, and they don't want their taxes 
wasted. And I think Congress should be following up on these 
investigations and asking witnesses questions.
    I must say I am outraged at Ms. Ballard coming here to 
represent the Army coming here and not being able to give us an 
answer to the simple question of how many contractors and 
subcontractors have contracts with the Army. I mean, that is 
what this hearing was all about, and we couldn't even get an 
answer from that on that point.
    So I know the gentleman wants to look at partisanship under 
every rock, but I suggest that he return under that rock and 
look at his own reasons for trying to make everything partisan. 
This is not a partisan investigation nor it should be----
    Mr. McHenry. I think it is rather partisan for the Chair to 
say I should crawl under a rock.
    Mr. Waxman [continuing]. And I resent that you are going to 
make it one. I resent that you are trying to make it a partisan 
one.
    The gentleman from Ohio, Mr. Kucinich, is now recognized.
    Mr. Kucinich. Secretary Ballard, the President recently 
gave an order that was basically a shoot to kill order for 
anybody who was coming in from Iran who was thought to be an 
operative of the Iranian government. Does that order extend to 
the personnel hired by the companies who are here? Private 
contractors, are they given the authority to go and shoot to 
kill Iranian operatives in Iraq?
    Ms. Ballard. Congressman, those orders are Executive orders 
that deal outside my area, which is strictly contracting.
    Mr. Kucinich. OK. Well, this is contracting in a sort.
    Mr. Howell, we have heard from the families on the first 
panel that they had to sue Blackwater to get information about 
what happened to their relatives. Then we heard something else 
that I have to say astounded me in its callousness, and that is 
that Blackwater filed a countersuit against the families for 
$10 million. Now, Mr. Howell, you are the general counsel for 
Blackwater. Why did the company sue the families that lost two 
sons, a husband, and a father?
    Mr. Howell. First, let me say that, once again, extend our 
deepest condolences to the family, that their loss is----
    Mr. Kucinich. Is the lawsuit part of those condolences?
    Mr. Howell. The lawsuit was not against the families. We 
seek nothing from the families. We have sought to support them. 
The lawsuit was against a North Carolina attorney who 
established hollow estates that did not contain any assets of 
the fallen men, their homes, their cars. They were just shell 
estates established for the purpose of personal injury 
litigation, and the lawsuit--the claim against that attorney 
was for a violation of our agreements with the men.
    Mr. Kucinich. So you are saying that attorney violated your 
agreement? What did they do? Did they make a mis-statement? How 
did they violate your agreement?
    Mr. Howell. Our agreement with the men provided that any 
dispute that involved Blackwater would be resolved via 
arbitration, and that is where we are seeking to have this 
matter addressed.
    Mr. Kucinich. Did you have a contract with the men who 
fought for your company there? Did they have a contract with 
you that they had no right to sue, couldn't seek publicity, had 
to protect certain information, and that they would have to 
assume all risks of being shot, killed by a firearm, terrorist 
activity, hand-to-hand combat? Did you have a contract with 
them to that effect?
    Mr. Howell. The terms of the contract included a waiver 
regarding certain injuries or death in certain circumstances, 
and it also contained provisions regarding confidentiality.
    Mr. Kucinich. But aren't you, in effect, suing the estates 
of the decedents? Isn't that what you are doing?
    Mr. Howell. None of the property that is in the meaningful 
estates, the actual estates of the decedents, is involved in 
what we are----
    Mr. Kucinich. There is no connection whatsoever with the 
action you are taking and the decedents' property, their 
estates?
    Mr. Howell. The estates that are in issue in the Norton 
litigation, as I understand it, have no assets at all. They 
were established solely for the purpose of personal injury 
litigation.
    Mr. Kucinich. And could you tell me then, is it your 
position that this attorney you are talking about has violated 
an agreement, and that is why you are suing?
    Mr. Howell. As the shortest possible answer, that is a 
summary of the gist of the argument. Yes, sir.
    Mr. Kucinich. I would like to raise an issue regarding 
Blackwater's prior testimony in front of Congress, Mr. Waxman. 
Blackwater testified before a National Security Subcommittee of 
this committee, Blackwater testified on June 13, 2006, and I 
had asked questions about their contracts. The Blackwater's 
vice president testified that Blackwater charges $815 per day 
for the services of independent security contractor working in 
Iraq, and he testified that the $815 charge was fully burdened. 
Specifically, he provided the following response to me.
    I asked, ``In those contracts is it true you were paying 
your men $600 a day but billing Regency $815 a day?'' He said, 
``Per the presentation, Mr. Kucinich, $815 a day is the right 
figure, but it is a fully burdened figure that includes travel, 
training, gear, housing, food, the works, fully burdened 
number.'' But the documents obtained by this committee, Mr. 
Chairman, refute the claim that these were fully burdened. We 
received the contract between Regency and Blackwater which 
clearly provide information contrary to Mr. Taylor's claims: 
one, that housing costs were the responsibility of ESS, not 
Blackwater; two, that food, subsistence for the contractors, 
was the responsibility of ESS, not Blackwater; and, three, 
insurance was to be paid by ESS, not Blackwater.
    Now, Mr. Chairman, I know my time has expired. I think 
that, since I have information here that Mr. Taylor presented 
misleading testimony under oath to our committee, and I am 
going to ask that this committee look further into that to try 
to reconcile what he said and what the facts are, as this 
committee has been able to determine them.
    Mr. Waxman. The gentleman will permit, we will take a look 
at that issue with you and pursue further clarifications for 
the people involved.
    Mr. Kucinich. I think it would be good to get it clarified, 
because the exchange that we had really didn't leave a positive 
impression. It seems to me there may have been an effort by 
Blackwater to mislead or conceal relevant information from the 
Congress.
    I thank the Chair for his willingness to look at it 
further. Thank you.
    Mr. Waxman. Thank you.
    Mr. Howell. Mr. Chairman, if I may, I believe there is a 
grave misunderstanding here, that I would like just a moment to 
address. I respect the time constraints, but this is a 
fundamental misunderstanding.
    Mr. Waxman. We want to be fair. Go ahead and say what you 
have to say.
    Mr. Howell. If we could put up this graph that reflects the 
approximately $885 per man per day that was invoiced by 
Blackwater, if we could put that up on the overhead I believe 
it will help clarify this.
    The testimony that Mr. Taylor gave, as I understand it, is 
that Blackwater's costs, meaning things such as weapons, ammo, 
personal gear, to go directly to Congressman Kucinich's point, 
housing provided while at Blackwater prior to the men going in 
theater, food provided to men while at Blackwater, that sort of 
thing, those were costs that Blackwater had to pay. They came 
out of the $884.97 per day average daily rate that was invoiced 
to Regency, and the amount that was the markup or the profit, 
if you will, was approximately $10.61 per day out of that $885, 
so it is approximately 1 percent.
    There are basically two different categories of expenses, 
if you will. There are in-theater expenses, which Mr. Kucinich 
is absolutely correct in stating that Regency was responsible 
for providing housing, food, things like that when the men were 
in theater, but there were similar expenses that were incurred 
by Blackwater prior to the men going in theater--for example, 
when they were receiving training in Moyak--that were 
Blackwater costs that were borne by Blackwater or incorporated 
into our invoices, although, again, the invoices were never 
paid.
    Mr. Kucinich. Mr. Chairman, I am asking unanimous consent 
to be able to have 5 minutes of time to continue the 
questioning, because he said something that does not square 
with some facts here, and I would like to just know if I could 
have a unanimous consent to ask some questions.
    Mr. Waxman. I'd like to see if the gentleman can handle it 
in 3 minutes, and if not----
    Mr. Kucinich. Fine.
    Mr. Waxman. Mr. Shays has been kind enough to reserve his 
opportunity for questioning until you have completed yours.
    Mr. Kucinich. I thank you. I thank the Chair.
    I would just like to ask Mr. Murray, did ESS pay for the 
housing costs?
    Mr. Murray. Congressman, ESS was responsible for the 
housing----
    Mr. Kucinich. Did ESS pay for the housing costs? Could you 
answer yes or no?
    Mr. Murray. ESS paid for the housing costs----
    Mr. Kucinich. Did ESS pay for the food costs?
    Mr. Murray. While they were in theater, yes.
    Mr. Kucinich. Did ESS pay insurance?
    Mr. Murray. Yes.
    Mr. Kucinich. OK. Mr. Chairman, that doesn't square with 
the impression Mr. Howell is trying to give this committee.
    Now, Mr. Murray, the same contract also shows that Regency, 
not Blackwater, paid the cost of rotation travel; is that 
correct?
    Mr. Murray. I can't answer that. I am not aware of that.
    Mr. Kucinich. The same contract shows that Regency, not 
Blackwater, paid for the individual body armor, heavy weapons, 
vehicles, navigational devices, and personnel radios; is that 
correct?
    Mr. Murray. Congressman, our contract was with Regency. 
ESS' contract was with Regency, not with Blackwater. We had 
turnkey service with Regency to provide all of our security 
services except for those few items that were cost reimbursable 
or those items that ESS would provide. ESS would provide the 
accommodations and food.
    Mr. Kucinich. Right.
    Mr. Murray. While in theater. We pay for the d/b/a 
insurance and we pay for fuel and a few other items that were 
cost reimbursable. All of the services were turnkey services.
    Mr. Kucinich. Thank you for answering that. And the point 
is that, Mr. Howell, it does not appear that Mr. Taylor's 
testimony was accurate. You know, he said $815 per day charge 
was so high because Blackwater had to pay for housing and meals 
and insurance, when, in fact, this was not the case, according 
to the contract documents. What made it worse was that Mr. 
Taylor was given a chance to go back and consult with the 
company, provide a followup response in writing, and when he 
did so, he sent a letter dated July 14, 2006, reaffirming his 
testimony stating, ``$815 is what is known as the fully 
burdened rate.'' Now, Mr. Howell, do you know why Mr. Taylor 
would continue to insist on this information which appears to 
be erroneous and misleading, twice in communicating with this 
committee?
    Mr. Howell. Sir, Blackwater incurred housing costs, 
subsistence costs, travel costs, and things like that that were 
properly its expenses under the contracts. The Blackwater 
Regency contract did provide that Regency would pay for some 
housing, some subsistence, some travel, but Blackwater also 
paid for some of those expenses.
    For example, the initial deployment of the personnel into 
Iraq was Blackwater's responsibility, so Blackwater did pay for 
some travel, and I believe that is clear from the contracts.
    Mr. Kucinich. Mr. Chairman, I don't think that is 
responsive. You know, I would just like to conclude by saying 
that, you know, they only got paid when the troops were in 
theater, and I think it is important to keep that in mind, 
because it goes back to the question of whether, in fact, the 
taxpayers of the United States have been overcharged.
    Thank you, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Kucinich.
    Mr. Shays.
    Mr. Shays. Thank you, Mr. Chairman.
    Mr. Chairman, I really appreciate your having this hearing, 
and I have a lot of questions pretty much because I don't 
understand certain relationships. But what I do understand is 
this: we need contractors. They enable our troops to focus on 
being the tip of the spear and not setting up housing, not 
manning the kitchens, and contracted out, so that part makes 
sense to me. And I understand that Kellogg, Brown and Root, 
their LOGCAP contract that they were under during this phase of 
the war was actually negotiated under the previous Presidency; 
is that correct?
    Mr. Seagle. That is correct.
    Mr. Shays. So that contract--and I hate to say it. It is 
the kind of contract I see with FEMA. In other words, you are 
contracted, and when an emergency arises you are on board and 
you take over. There is logic to doing that. So let me 
understand this. When you negotiate a contract, it may involve 
a lot of work or not all that much work. You never know; is 
that correct?
    Mr. Seagle. That is correct.
    Mr. Shays. How long do the contracts usually last, Mr. 
Seagle?
    Mr. Seagle. This contract was a 1-year base contract with 
10 option years.
    Mr. Shays. So you had the right to roll it over for 10 
years?
    Mr. Seagle. No, the Army has the right to continue.
    Mr. Shays. So they contracted it under the Clinton 
administration, but it was renewed under the Bush 
administration; is that correct, if you do it every year?
    Mr. Seagle. Yes, correct.
    Mr. Shays. OK. I understand why, if you hire someone for 
food service, they may want to engage someone who has a service 
that they don't provide, like security, so I can understand the 
subcontract there, and I understand in the LOGCAP that they 
have to eat that cost; is that correct, that ESS, for instance, 
would have to eat the cost of security if it is a LOGCAP 
contract?
    Mr. Seagle. LOGCAP contract states that the military will 
provide our force protection. We think----
    Mr. Shays. And you don't think it is being provided 
adequately and you choose to get security, contract out 
security, you are allowed to do that, but then you have to pay 
the cost?
    Mr. Seagle. We haven't asked any subcontractors to 
subcontract for security.
    Mr. Shays. Well, let me understand----
    Mr. Seagle. We ask for a turnkey price to provide a 
service.
    Mr. Shays. OK. Now, when you subcontracted--when ESS 
contracted with Regency, Regency then negotiated with 
Blackwater, correct?
    Mr. Seagle. I don't know, sir. We contracted with ESS for a 
turnkey job. It was not an itemized bid.
    Mr. Shays. OK. I understand you don't know, but it is not 
comforting, because what it is like is you can be Pontius 
Pilate and wash your hands of it. In other words, you contract 
with someone else, they get the job done, and it is their 
responsibility and not your responsibility? That is what you 
are saying?
    Mr. Seagle. We certainly don't wash our hands. It is a 
competitively bid project.
    Mr. Shays. Right, but they bid the contract and then it is 
theirs, but it was yours, and you sub-bid it, correct? You 
subcontracted?
    Mr. Seagle. Yes, sir, we subcontracted.
    Mr. Shays. You subcontracted to ESS?
    Mr. Seagle. Correct.
    Mr. Shays. Then ESS subcontracts to Regency to provide----
    Mr. Seagle. Any service they need to meet those contract 
requirements.
    Mr. Shays. And then Regency then engaged Blackwater?
    Mr. Seagle. I don't know who our subcontractors determine 
they need to perform the contract. They give us a----
    Mr. Shays. I understand you don't. I am going to just tell 
you what I think. I think you should know. I think the system 
should somehow require it. I think there should be some 
responsibility to it. My analogy of Pontius Pilate is you just 
wash your hands of it. It is not your responsibility. I just 
can't believe that if I were doing a contract for a building 
and I was subcontracting that I would be oblivious to who my 
subcontractors were dealing with. So it just strikes me as 
something I am surprised by. That is all. Maybe I shouldn't be. 
Maybe that is the way it works. But we did good things with 
contractors and we did some bad things with contractors, and 
the bad things have given the good concept a bad name.
    Ms. Ballard, I am surprised that you can't give us an idea 
of the number of contracts and number of contractors in 
theater. Is that because you just hire out from the first and 
then from then on you don't feel you have an interest in or 
responsibility to know who was subcontracted? In other words, 
once you put out that contract, whoever is subcontracted is not 
your interest or responsibility?
    Ms. Ballard. I can tell you how many contract actions have 
been awarded in Iraq. How many subcontracts you are correct, 
the prime has responsibility for the subcontract. We do not 
have privy of contracts with the subs.
    Mr. Shays. And so you don't know who they hire, you don't 
know the quality of who they hire, and so on?
    Ms. Ballard. We have with the primes a quality surveillance 
plan and a quality plan that is monitored by the Defense 
Contract Management Agency to ensure that----
    Mr. Shays. I don't know what that means. I honestly don't 
know----
    Ms. Ballard. We have quality plans in place that are 
monitored to ensure that the prime is doing what he committed 
to do in terms of monitoring his subcontractors.
    Mr. Waxman. Would the gentleman yield?
    Ms. Ballard. We don't actually monitor the subs.
    Mr. Shays. I will yield.
    Mr. Waxman. You say you do know the number of prime 
contracts you have?
    Ms. Ballard. I know how many actions that we had in Iraq. 
In JCCI in fiscal year 2006 we had 26,994 contract actions. I 
can't tell you that those were all security contract actions. 
In fact----
    Mr. Waxman. Can you tell us whether they are all prime?
    Ms. Ballard. Those are all prime contract actions.
    Mr. Waxman. So 26,000?
    Ms. Ballard. It is 26,994 actions out of JCCI, the Joint 
Contracting Command Iraq.
    Mr. Waxman. Actions means a contract?
    Ms. Ballard. Yes.
    Mr. Waxman. So you had close to 27,000 contracts, and then 
you don't know how many of those contractors had 
subcontractors?
    Ms. Ballard. Correct.
    Mr. Waxman. And you don't know how many of those 
subcontractors had subcontractors?
    Ms. Ballard. Correct.
    Mr. Shays. I mean, tell me why I shouldn't be concerned by 
that. I mean, maybe you could tell me. Tell me. You are 
smiling, but it is a concern to me.
    Mr. Chvotkin. You should be concerned. A contract action is 
not a contractor, so there may be--my guess, and Ms. Ballard 
would know, there are fewer contractors, many of whom are 
receiving multiple transactions, so the number of contract 
actions does not equal on a one-to-one basis the number of 
contractors. The subcontract relationships, there is elements 
of transparency, elements of visibility on the ground. Some of 
that may not be known in a data base where it is easily 
obtainable, either at higher level or at headquarters or here.
    Mr. Shays. Well, let me just conclude. What I know is this: 
that this would be something I would recommend to the 
subcommittee on Government Reforms Oversight for National 
Security, because I think, you know, just a few Members who 
could ask questions for 10 or 15 minutes, we could get a better 
understanding. But I was always left with the feeling that our 
Government would know who the contractors were, who were the 
subcontractors, who got a subcontract from a subcontractor. I 
just thought it would be intuitive that we would know how many 
people, and so on. And the fact that once the major contractor 
subcontracts, they don't care who is subcontracting that is of 
concern to me, and it tells me that we are not going to have 
good quality control and that we are going to have pretty 
serious mistakes.
    I would just add to this that if, in fact, anybody who is a 
contractor was told he had better get his butt out there, even 
without proper protection, weapons, and so on, I think the 
company has to be held responsible.
    Ms. Ballard. Congressman Shays, if I may, I don't want to 
leave you with the impression that we don't have any visibility 
at all of the subcontracts. We do have a consent to subcontract 
process, and there are clauses in the contract that require the 
contractor to notify us when they are taking certain 
subcontract actions at certain dollar thresholds. But that 
regulation is very clear as to what that information will be, 
and it says specifically that we are not, in our consent to 
that subcontract, consenting to the terms and conditions of 
those contracts, the price of those subcontracts, or the 
allowability of cost under those contracts. But the contractor 
does come to us and tell us that they are subcontracting based 
on what the contract specifically asks.
    But to my knowledge, we don't have any system where we 
automatically keep track of then every subcontract that a 
subcontractor or a prime contractor lets.
    Mr. Shays. Thank you, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Shays.
    This point leads into some questions I had, so if the 
gentleman from Maryland would allow me to go ahead, I will.
    The question of oversight over the activities of the 
private security contractors, this problem is illustrated by 
the clear indications that there was unauthorized private 
security work under Government contracts with the Defense 
Department, and prime contractors were not even aware of it or 
did nothing to address it.
    Mr. Flores, Fluor Corp. has a similar provision in its 
contract with the Air Force, contractor force protection. The 
U.S. Government will provide for the security of contractor 
personnel in convoys and onsite commensurate with the threat 
and in accordance with the applicable theater anti-terrorism/
Fluor protection guidelines.
    Do you agree that this provision bars not just Fluor but 
its subcontractors from using private security contractors?
    Mr. Flores. In the case that you are speaking of and in all 
those cases where we have to use Government for those security 
requirements, we have never acquiesced to our subs to have 
private security, at least on the site and working with us in 
getting that particular task done.
    Mr. Waxman. What would you do if you determined that one of 
your subcontractors had violated this provision? Would you 
report it to the Army or to the Defense Department?
    Mr. Flores. What we would certainly do, I think a good 
example was at Taji. We recognized that the Army was having 
trouble supporting ESS, and Lourens Baddenhorst coordinated 
with our project director, and we went back to the Army and 
said it is not working, we are anxious to get this bid down 
project completed for soldiers so that we will improve their 
quality of life on this base. But the Army said no, you can't 
use private security on this.
    We kept beating on the Army because of this, but if the 
Army determines that their soldiers are living in certain 
conditions and they don't have the personnel, or other missions 
come up that preclude them from providing that convoy escort, 
we are not going to go past the provisions of our contract and 
suggest to our subs that they need to get private security.
    Mr. Waxman. In a letter to Congressman Shays dated July 14, 
2006, the Secretary of the Army stated, ``Under the provisions 
of the LOGCAP contract, the U.S. military provides all armed 
forces protection for KBR, unless otherwise directed. 
Additionally, the LOGCAP contract states that KBR personnel 
cannot carry weapons without the explicit approval of the 
theater commander.'' In your written testimony, Mr. Seagle, you 
acknowledge that KBR contractors have used private security 
contractors. Doesn't that violate the terms of the LOGCAP 
contract?
    Mr. Seagle. To clarify, I said we had other non-LOGCAP 
contracts in which we subcontracted for armed security. KBR has 
never directly subcontracted for armed security under the 
LOGCAP contract. KBR has never directly subcontracted for armed 
security under the LOGCAP contract.
    Mr. Waxman. You have done it through ESS, though?
    Mr. Seagle. We have not required or directed any of our 
subcontractors to subcontract for security, either.
    Mr. Waxman. Well----
    Mr. Seagle. The majority of our contracts are firm fixed 
price, competitively bid. We award them on best value to the 
Government, fully understanding that----
    Mr. Waxman. Are you now aware that you did subcontract with 
ESS for private security?
    Mr. Seagle. Was I aware that ESS had--at this time I 
understand. When we initially had this conversation with the 
Army we were focused on had Blackwater ever worked for KBR, to 
which the response was no. We were initially told by ESS and 
Blackwater, both, that Blackwater was not contracted to KBR.
    Mr. Waxman. Well, let me ask you about this. James Ray of 
KBR wrote this e-mail on June 3, 2004, and it says, ``We should 
not attempt to effect a material change in our contract with 
the Government by hiring a company that we know uses armed 
escorts. That company is an agent of KBR, and if anything 
happens KBR is in the pot with them. Even with lipstick, a pig 
is a pig.''
    Ms. Ballard, there seems to be a disagreement here on 
whether the Defense Department prohibits the use of private 
security contractors on these contracts. Why is there so much 
confusion about such a simple issue?
    Ms. Ballard. Contracts contain different provisions. In the 
case of the LOGCAP contract, there was a specific provision 
that prohibited the use of private security contractors. There 
are others, the design/build contracts, for example, that 
expressly say that the contractors would be providing their own 
security, and the proposals included those security costs.
    Mr. Waxman. Well, LOGCAP has an agreement they won't have 
these private security people, but they did it. Now what 
happens?
    Ms. Ballard. What happened when we had all the data that 
demonstrated that they had, in fact, incurred these costs and 
passed them on to the Government, the contracting officer 
issued a payment adjustment and yesterday withheld $19.6 
million. I am sorry, they didn't withhold it, they removed it 
from the KBR payments.
    Mr. Waxman. It seems to me that the Defense Department and 
the prime contractors sometimes don't seem to have an idea of 
what is going on lower down on the contracting chain, and it 
may be acceptable not to have any oversight over subcontractors 
who provide paper clips, but it is not acceptable when the 
subcontractors are putting armed forces in the field. That is 
my big concern. I think it should be all of our concern. If the 
contracts don't allow it, those contracts need to be enforced.
    Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman. And let me thank 
all of our witnesses today. You covered a lot of the material I 
was going to go over, and so I am not going to go back over it 
in great detail, but, as you know, we sort of launched on this 
effort many, many months ago in terms of looking at some of the 
subcontracts, and it began as an effort to try and determine 
whether, from the taxpayers' perspective, some of this layering 
of subcontracts, cost-plus subcontracts, was a good deal for 
the taxpayer or not a good deal for the taxpayer, because there 
did appear to be lots of markups that accumulated, and with a 
big price tag at the end of it.
    During that process, we looked into whether or not the 
contracts between KBR and the others in the subcontractor chain 
permitted the contracting for private security personnel. As 
was testified to by Ms. Ballard, the contracts with KBR 
prohibited, essentially, both KBR and, as I understand it--and 
correct me if I am wrong--your view also remains that it also 
prohibits subcontractors under that prime contract from 
essentially engaging private security; is that right, Ms. 
Ballard?
    Ms. Ballard. That is correct.
    Mr. Van Hollen. OK. And it was on that basis that you made 
the decision, as I understand, just yesterday to at least 
withhold or--did you withhold it or you took back $19.6?
    Ms. Ballard. We took back $19.6 million.
    Mr. Van Hollen. And that was your estimate, I take it, of 
the amount of moneys under this KBR LOGCAP contract that had 
gone for the private security component; is that right?
    Ms. Ballard. Yes.
    Mr. Van Hollen. OK. I am just trying to get a better sense 
of the Blackwater. Was that most of it going through this 
process to the Blackwater private security?
    Ms. Ballard. What we relied on was a letter that was 
referred to earlier from ESS to KBR that said there was a 
factor applied to their direct labor costs, and our analysts 
then did the climate changes against that to take the funds 
back from KBR.
    Mr. Van Hollen. OK. So that was done through your 
discussions with ESS?
    Ms. Ballard. It was KBR that notified us that this had 
occurred.
    Mr. Van Hollen. OK. With respect to the Blackwater private 
security folks, you were operating under this in your contract. 
Did you understand that you were operating under the LOGCAP 
contract with KBR?
    Mr. Howell. No, sir. We have not been certain which 
contract applied. What we did know was two key facts: we were 
subcontracted to Regency, and ultimately we were providing 
services to the U.S. military.
    Mr. Van Hollen. OK. So the personnel whose family members 
we heard from earlier you hired pursuant to your contract with 
Regency, right?
    Mr. Howell. Yes, sir.
    Mr. Van Hollen. OK. And I guess for the Regency 
representative here, was that contract, the KBR contract that 
we are talking about today, that LOGCAP contract?
    Mr. Murray. Well, Congressman, I don't think there is a 
representative from Regency.
    Mr. Van Hollen. I am sorry.
    Mr. Murray. I am with ESS.
    Mr. Van Hollen. I am sorry.
    Mr. Murray. We contracted Regency to do our security 
services. Turnkey service we contracted for all of our 
contracts. It wasn't targeted for KBR or non-KBR. It was across 
all of our contracts, both with KBR direct with the military 
and commercial contracts. When we had a security mission going 
to one of those camps or sites, Regency would carry that 
mission for us.
    Mr. Van Hollen. Right. But let me just make sure I 
understand. The $19 million that was withheld yesterday, or 
taken back yesterday, was essentially part of the funds that 
you initially charged the Government under this contract; is 
that right?
    Mr. Murray. I am not aware of that, Congressman. I am not 
aware of the withhold or the action the Army has taken.
    Mr. Van Hollen. OK. Well, let me ask, I guess, Ms. Ballard. 
Was that pursuant to this chain of contracts that we have been 
talking about today?
    Ms. Ballard. Yes, sir, it was.
    Mr. Waxman. And if I might further inquire on that, may I 
assume that has to do with the fact that you were going to be 
coming before this hearing today, and therefore punitive action 
was warranted and you took it?
    Ms. Ballard. No, sir. We received our positive confirmation 
on January 30th, and from then until yesterday we accumulated 
the documentation to solidify our decision. We consulted with 
counsel and other agencies that bear upon that decision, and 
then we were able to take action. This was important because 
KBR has the right to dispute this, so it was important that we 
have our facts in order before we take action.
    Mr. Waxman. Well, I am pleased that you have your facts in 
order, you took action, but I haven't heard too much action 
taken by the Defense Department in actually denying money to 
KBR and some of these contractors. So, even if you don't want 
to acknowledge this, I think that the fact we are holding this 
hearing today might have saved the Government $20 million.
    Mr. Van Hollen. Thank you. I again appreciate the letter we 
received yesterday. I think Mr. Waxman and I both received a 
letter yesterday.
    With respect to the KBR contract here, is the reason that 
the U.S. Government takes the position that they cannot 
subcontract out for private security services because the 
expectation is that the U.S. military will provide for that 
security?
    Ms. Ballard. The clause in the contract does stipulate that 
the U.S. military will provide that security.
    Mr. Van Hollen. OK. To your knowledge, did any of the 
entities, the subcontractors in this chain of subcontracts we 
are talking about today, did they request that the U.S. 
military provide security?
    Ms. Ballard. We have in writing from KBR that they nor any 
of their subs ever requested in writing for this security.
    Mr. Van Hollen. OK. Thank you, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Van Hollen.
    Mr. Kucinich had just one question he wanted to ask and get 
an answer for the record.
    Mr. Kucinich. Yes, Mr. Chairman. I am going to submit for 
the record a story that was in the January 11, 2007, edition of 
the Pilot Newspaper. The headline says, ``Iraq Killing 
Contractor Could Test Laws.'' The question is this: Mr. Howell, 
are you familiar with a December 24th shooting involving one of 
your employees who shot and killed an Iraqi security officer? 
Are you familiar with that?
    Mr. Howell. I am familiar with some aspects of it, yes, 
sir.
    Mr. Kucinich. Did your company order that man back to the 
States?
    Mr. Howell. That gentleman, on the day the incident 
occurred, he was off duty. Blackwater did bring him back to the 
United States and our client also understandably directed that 
he be off the project immediately. His security clearance was 
revoked, and there is other activity going on, sir.
    Mr. Kucinich. Is he going to be extradited back to Iraq for 
murder? And if not, why not?
    Mr. Howell. Sir, I am not law enforcement. All I can say is 
that there is currently an investigation by, as I understand 
it, the FBI and the Department of Justice of the incident that 
day, and we are fully cooperating and supporting that 
investigation. What action they will take, sir, I can't say.
    Mr. Waxman. Thank you, Mr. Kucinich. Mr. Welch has been 
waiting. If you have further questions, if you would submit it 
in writing, and we would appreciate responses in writing.
    Mr. Kucinich. Mr. Waxman, I appreciate your indulgence, and 
I just want to point out that there is a question that could 
actually make their corporate officers accessories here in 
helping to create a flight from justice for someone who has 
committed a murder, and so that is why I feel it is important 
that we get these answers. Thank you.
    Mr. Waxman. Well, let's get the answers before we make the 
charges. We would certainly welcome further responses to 
questions that either Mr. Kucinich or any member of the 
committee may further want to ask, and have you respond to in 
writing for the record. We will keep the hearing record open 
for another week.
    Mr. Welch, you are going to conclude the questioning.
    Mr. Welch. Thank you, Mr. Chairman.
    Mr. Howell, Blackwater has multiple contracts with the 
Federal Government, including the Defense Department, State, 
and other agencies, and it has contracts, of course, with other 
companies. I want to ask you about whether Blackwater will be 
getting any additional contracts in the hear future. And 
specifically, to your knowledge is Blackwater currently under 
consideration for any sole source or no-bid contract from the 
Defense Department or any other Federal agency?
    Mr. Howell. Not to my knowledge, sir. At any given time we 
have a number of business initiatives in progress, including 
U.S. Government work, and to my knowledge no, but we may. I 
can't say definitively, sir.
    Mr. Welch. So you will confirm yes or no and get back with 
a specific answer?
    Mr. Howell. Yes, sir. And if I could caveat, if we could 
make it with regard to unclassified matters?
    Mr. Welch. Has Blackwater had any communications with the 
Defense Department or any other agencies in the past several 
months regarding a contract to provide emergency evacuation 
services?
    Mr. Howell. I don't know, sir.
    Mr. Welch. And you will check?
    Mr. Howell. I will check.
    Mr. Welch. And does Blackwater currently own any 
helicopters that are designed for defensive purposes or for 
evacuating people quickly?
    Mr. Howell. A helicopter designed for defensive purposes, 
as I as a military person understand it, would be like an 
Apache attack helicopter. We don't own anything in that nature. 
In terms of evacuation, any utility helicopter that would be 
normally used for personnel movement would be suitable for 
evacuation.
    Mr. Welch. And has Blackwater been trying to raise capital, 
to your knowledge, to purchase or lease helicopters of this 
sort in order to potentially provide services to the United 
States Government?
    Mr. Howell. Mr. Congressman, answering that question 
necessarily would harm a competitive U.S. Government bidding 
process that is underway. I am happy to answer it, but I would 
ask that, in the interest of preserving competition, we do so 
in a closed session or in writing.
    Mr. Welch. You will do that in writing?
    Mr. Howell. Yes, sir.
    Mr. Welch. I want to ask you about the Fallujah incident. I 
heard you testify about Blackwater's concern for its employees, 
members of the team, and all of us take seriously the 
genuineness of that statement. But you heard the four women who 
were here, and they had a question about what happened and why. 
My understanding is that your company has done an incident 
report.
    Mr. Howell. As I understand it, there was more than one 
inquiry into the events of that day.
    Mr. Welch. So your company has done an inquiry, not just 
one but several, correct?
    Mr. Howell. I was not referring solely to Blackwater, sir.
    Mr. Welch. Well, I am asking you about Blackwater. You are 
Blackwater?
    Mr. Howell. Yes, sir.
    Mr. Welch. And I am asking you about Blackwater. Have you 
done an incident report?
    Mr. Howell. There was an investigation. Yes, sir.
    Mr. Welch. Is my question complicated? Have you done a 
report or not?
    Mr. Howell. No, sir. I am just trying to be clear. Yes, 
sir, we have done a report.
    Mr. Welch. And you understand that--you were a member of 
the military?
    Mr. Howell. Yes.
    Mr. Welch. And obviously when the military loses one of 
their sons or daughters, they provide information to the 
family, as much as they have, about what happened, correct?
    Mr. Howell. With one important caveat, sir, that there are 
instances where the military does not, and I can discuss that 
not in a public forum.
    Mr. Welch. Well, the military takes seriously its ability 
to help families who are grieving come to terms with their loss 
by doing one of the most basic and human steps that an 
organization can take, and that is to provide as much 
information as they can, correct?
    Mr. Howell. Yes, sir.
    Mr. Welch. What is the problem about answering the question 
to these four people who lost their loved ones by telling them 
everything you know about what happened and how it happened so 
they can have the one thing they are requesting, and that is 
the truth?
    Mr. Howell. Sir, some of the facts of that day were 
classified by the Government and we are not permitted to 
discuss them.
    Mr. Welch. Well, let me ask you this. This committee has 
requested copies of that report or reports, correct?
    Mr. Howell. Yes, sir.
    Mr. Welch. Will you turn over to this committee those 
reports?
    Mr. Howell. Sir, we cannot turn over classified 
information. It would be a criminal act.
    Mr. Waxman. If the gentleman would permit, that is not an 
accurate statement. We are entitled to receive classified 
information in this committee. This was requested in our 
document request to you, and we are expecting to receive that 
information from you.
    Mr. Howell. I understand, sir.
    Mr. Welch. Ms. Ballard, are you aware of whether there was 
a report that was done in the Pentagon concerning this 
incident?
    Ms. Ballard. No, sir, I am not.
    Mr. Welch. Is that anything within your knowledge that you 
could respond to questions from me about, or do I have the 
wrong person here?
    Ms. Ballard. Wrong person, sir.
    Mr. Welch. OK. Thank you.
    Mr. Chairman, I just want to be certain I understand. You 
have made it clear that this committee has requested the 
Fallujah incident reports from Blackwater.
    Mr. Waxman. We have. Mr. Howell was not fully responsive to 
my statement that we are entitled to receive information even 
if it is classified, and we want you and expect you to turn 
over that document to us. Will you comply?
    Mr. Howell. I want to ensure that we comply with the law, 
sir, and I want to fully respond to the committee as much as 
possible. We will turn over everything that we are permitted to 
without affecting attorney/client privilege and Government 
classification interests, and if that is not a sufficient 
answer I would have to provide one in writing, sir.
    Mr. Waxman. Well, let me suggest this to you, in case there 
is any vagueness of the law.
    Mr. Howell. Yes, sir.
    Mr. Waxman. We will supply you with the information about 
our entitlement to information, notwithstanding its 
classification, and that should eliminate the objection that 
you have raised to us. Attorney/client privilege, we will talk 
further about that, but matters that Congress are entitled to 
receive, we expect to receive unless you have some argument 
against it that fits into exceptions that are recognized.
    Mr. Howell. Yes, sir.
    Mr. Waxman. We will both look at that together.
    Mr. Shays. Mr. Chairman.
    Mr. Waxman. Yes, Mr. Shays?
    Mr. Shays. If I could just make a comment or two and just a 
question?
    Mr. Waxman. Sure.
    Mr. Shays. One, I don't have a lot of sympathy, frankly, 
for the position of Blackwater right now, but I do have a 
concern and I just want to express it. If information is 
provided to the committee that is important for the committee 
to know, is it then transferred to the parties that are in a 
lawsuit, and then does it become available to either side? And 
is that a role we should be playing?
    Mr. Waxman. Absolutely not. It is not a role we should be 
playing and it would not be transferred for purposes of 
litigation, especially if it is classified information.
    Mr. Shays. And then, just if I could make a closing comment 
about this hearing, I just think it really has set the stage, I 
think, for a very real dialog about a lot of things. For 
instance, I just didn't know the disinterest of one contractor 
of the Government contracting out and then subcontractors, and 
then the further down the chain you get there doesn't seem to 
be this interest, either by the original contractor or by the 
Government, in my judgment. That concerns me.
    And I would also like to know what is the policy of our 
Government? I consider contractors who die in Iraq as much 
heroes as anyone else who has risked their life in Iraq. They 
are contractors. And it just strikes me that the family should 
have the same courtesies that exist for military families. I am 
struck by the fact that we may want to get into providing 
advice, counsel, whatever, in the course of our hearing as to a 
uniform practice that should be provided, because I am left 
with the impression from our first four witnesses that they 
were treated in a very shabby way, and I would like to think no 
one would be treated like that. That is the impression I am 
left with.
    I thank my chairman for allowing me to close with those 
comments.
    Mr. Waxman. I appreciate your comments. I certainly feel 
that way. They expressed a great deal of emotion and very 
powerful testimony today.
    Mr. Shays, I am pleased that you stayed here for the whole 
hearing. You, more than any other Member of Congress in the 
last Congress, actually actively got into many of these issues, 
and we look forward to working with you and Mr. Davis on a 
bipartisan basis. These are not partisan issues. I resent it 
when people try to make this into a partisan issue, and I 
particularly resent it when it suggests that the family members 
came before us as partisans. It is such an outrage. They are 
the ones who lost people in Iraq, and we have no idea what 
their party affiliation, nor do we have any interest in knowing 
what their party affiliation is.
    To this panel, I thank you very much. We will have possible 
questions----
    Mr. Murray. Excuse me, Chairman Waxman?
    Mr. Waxman. We will have possible questions for the record, 
and we would ask you to respond.
    Yes, Mr. Murray?
    Mr. Murray. Yes. I would like to just make, if I may, one 
clarification----
    Mr. Waxman. Yes.
    Mr. Murray [continuing]. On comments that were discussed in 
the earlier session. There were discussions around our 
contract, ESS' contract with Regency, which is dated March 8th, 
and a subsequent meeting to that on March 11th whereby ESS and 
Regency and Blackwater attended a joint implementation meeting. 
I just wanted to advise the committee that our contract dated 
March 8th did not change. None of the terms or none of the 
conditions of that contract changed as a result of that meeting 
or any other reason. The contract on March 8th stood as it is.
    Mr. Waxman. We appreciate that clarification.
    Thank you all. You have been very helpful to us and we 
appreciate your being here and giving of your time and your 
answers to us.
    That concludes our hearing. We stand adjourned.
    [Whereupon, at 3:55 p.m., the committee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]
[GRAPHIC(S) NOT AVAIALBLE IN TIFF FORMAT]


                                 
