[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
[H.A.S.C. No. 110-59]
PROCUREMENT OF NAVY BOAT BARRIERS
__________
HEARING
BEFORE THE
SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JUNE 6, 2007
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SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE
GENE TAYLOR, Mississippi, Chairman
NEIL ABERCROMBIE, Hawaii ROSCOE G. BARTLETT, Maryland
JAMES R. LANGEVIN, Rhode Island KEN CALVERT, California
RICK LARSEN, Washington TERRY EVERETT, Alabama
MADELEINE Z. BORDALLO, Guam JO ANN DAVIS, Virginia
BRAD ELLSWORTH, Indiana J. RANDY FORBES, Virginia
JOE COURTNEY, Connecticut JOE WILSON, South Carolina
JOE SESTAK, Pennsylvania
Will Ebbs, Professional Staff Member
Heath Bope, Professional Staff Member
Jenness Simler, Professional Staff Member
Jason Hagadorn, Staff Assistant
C O N T E N T S
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CHRONOLOGICAL LIST OF HEARINGS
2007
Page
Hearing:
Wednesday, June 6, 2007, Procurement of Navy Boat Barriers....... 1
Appendix:
Wednesday, June 6, 2007.......................................... 27
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WEDNESDAY, JUNE 6, 2007
PROCUREMENT OF NAVY BOAT BARRIERS
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Bartlett, Hon. Roscoe G., a Representative from Maryland, Ranking
Member, Seapower and Expeditionary Forces Subcommittee......... 2
Taylor, Hon. Gene, a Representative from Mississippi, Chairman,
Seapower and Expeditionary Forces Subcommittee................. 1
WITNESSES
Betro, Thomas, Director, Naval Criminal Investigative Service
(NCIS)......................................................... 4
Riddick-Brown, Cathy, Deputy Assistant Director for Acquisition
and Logistics, Naval Criminal Investigative Service (NCIS)..... 8
Williams, James A., Commissioner, Federal Acquisition Service,
General Services Administration (GSA).......................... 9
APPENDIX
Prepared Statements:
Betro, Thomas................................................ 31
Williams, James A............................................ 40
Documents Submitted for the Record:
[There were no Documents submitted.]
Questions and Answers Submitted for the Record:
Mr. Bartlett................................................. 48
Mr. Taylor................................................... 47
PROCUREMENT OF NAVY BOAT BARRRIERS
----------
House of Representatives,
Committee on Armed Services,
Seapower and Expeditionary Forces Subcommittee,
Washington, DC, Wednesday, June 6, 2007.
The subcommittee met, pursuant to call, at 2:45 p.m. in
room 2212, Rayburn House Office Building, Hon. Gene Taylor
(chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM
MISSISSIPPI, CHAIRMAN, SEAPOWER AND EXPEDITIONARY FORCES
SUBCOMMITTEE
Mr. Taylor. The subcommittee will come to order.
I would first like to make an observation to my colleagues
that we have received a unanimous consent from the full
committee to meet while the full committee is meeting, so in
case anyone is questioning the legitimacy of this subcommittee
meeting.
Today the subcommittee will receive testimony from senior
officials at the Naval Command Investigative Service, or NCIS,
or the General Services Administration, GSA, on the acquisition
of floating barriers, which, along with other measures, help
protect Navy ships and installations from the specific threat
of small-boat attack.
Testifying before this committee today we have Mr. Thomas
Betro, Director of NCIS; Ms. Cathy Riddick-Brown, Deputy
Assistant Director for Acquisition and Logistics at NCIS; Mr.
James Williams, Commissioner of the General Services
Administration, GSA. On behalf of the members of the
subcommittee, I thank you for coming and look forward to your
testimony.
After the tragic suicide bombing of the USS Cole in October
of 2000, the Navy correctly recognized that additional security
measures must be taken to protect our ships pierside and at
anchor. The NCIS was given the task to lead the effort in this
vital force protection initiative.
Unfortunately that effort appears to have been beset with
contractual irregularities which have caused significant
additional costs to our Nation's taxpayers. Make no mistake,
this subcommittee fully supports force protection measures.
This subcommittee under both the chairmanship of Mr. Bartlett
and continuing today has led the fight to up-armor Humvees,
expedite improved body armor and helmets, and, most
significantly, increase the rate of production of mine-
resistant, ambush-protected vehicles, commonly known as MRAPs.
Our main concern is with cost and schedule overruns in Navy
and Marine Corps programs. Unfortunately, I am hard pressed to
point to a single significant acquisition program which is
currently progressing on budget or on schedule.
Members of this subcommittee are determined to provide to
our Navy and Marine Corps the best ships and equipment in
sufficient numbers that the Nation can provide, but we will
continue to be frustrated as program after program reports cost
overruns and schedule delays.
It is not the concept of installing force protection
barriers which brings us here today. In fact, I applaud former
Chief of Naval Operations (CNO) Admiral Vern Clark with
recognizing that our Nation has a vulnerability and moved
quickly to solve it. I am sure he expected his organization
would execute his orders with the proper level of
professionalism.
Today we on this subcommittee, with the full support of our
full committee and Chairman Ike Skelton, are attempting to fund
the construction of 313 ships for our United States Navy for
our current CNO Mike Mullen. We will not be able to accomplish
this goal if the service itself cannot adequately handle
routine acquisition projects. Every dollar wasted is a dollar
that cannot go to buy a ship or an aircraft or right now an
MRAP.
This issue is particularly troubling since our committee
was first made aware of possible waste of taxpayers' money by
reading on the front page of the Washington Post. I was not
briefed, nor do I believe that any of the members of this
subcommittee were informed by the Navy that there had been
irregularities in contracting.
Based on the information available to this committee, it
appears that the acquisition program violated a number of
standard procedures. These include the improper use of the
governmentwide GSA services contract which was designed to
provide IT support to government agencies; the use of multiple
invoices to stay below contract price thresholds; and
authorizing unnecessary contractor fees. These are serious
irregularities, possibly criminal.
What is of interest today are the questions: How did this
happen, where was the oversight, why did it take two years for
the improper practices to be revealed, and, most importantly,
what have you done to fix the internal problem?
Finally, I would like to remind the members of this
subcommittee that an ongoing criminal investigation into these
matters is in practice. It is not the intentions of this
hearing to jeopardize that effort. I understand that the NCIS
and the GSA have continuing efforts to resolve all issues
relating to these contracts. I further understand that based on
this event, the NCIS and the GSA have reorganized departments
and have accomplished other internal changes to prevent this
type of issue from occurring again. I look forward to the
witnesses' testimony concerning these changes.
I will now turn to my friend, the gentleman from Maryland,
Ranking Member Roscoe Bartlett.
STATEMENT OF HON. ROSCOE G. BARTLETT, A REPRESENTATIVE FROM
MARYLAND, RANKING MEMBER, SEAPOWER AND EXPEDITIONARY FORCES
SUBCOMMITTEE
Mr. Bartlett. Thank you, Mr. Chairman.
Good afternoon, ladies and gentlemen. I wish I could say we
were here today to applaud the Navy's responsiveness to an
urgent force protection requirement that emerged after the
attack on the USS Cole in Yemen on October 12, 2000. This is a
personal and important issue to me. It may seem unimaginable,
but 2 of the 17 sailors who were killed on the USS Cole came
from small towns in Washington County, Maryland. U.S. Navy
Seaman Craig Wibberley from Williamsport, and Fireman
Apprentice Patrick Roy of Keedysville were both 19.
What I will always remember, and this was before 9/11, were
the hundreds and thousands of people who lined the routes to
Craig Wibberley's grave at St. Mark's Episcopal Church in
Booneboro and Patrick Roy's grave at Antietam National
Cemetery. The Civil War hallowed ground was reopened by the
National Park Service at the request of Patrick's family.
Unfortunately, the good work the Navy did do to ensure our
sailors and marines were protected from small-boat attacks
while they were at port or anchored have been overshadowed by
the recent article in the press headlining the millions of
dollars apparently wasted on this important effort. So for the
record, let me echo Chairman Taylor's remarks and emphasize
that in comparison to the amount of time it typically takes the
DOD to procure a new capability, the speed of this program was
indeed impressive. From the time of the attack, the fleets's
requirements for barriers were identified and the funds
provided within three months. A solution was found and tested
within five months after that, and orders were being placed
within five months after testing.
By the time allegations of procurement irregularities
surfaced two years ago, most of these systems were installed
and protecting our men and women. That is good news. Sadly, we
now know that this program had its share of bad news. I am
interested in the testimony from our witnesses today because I
believe there is more to this story than appeared in the press.
I am hopeful that we will learn that the system responded
appropriately and addressed any wrongdoing that may have been
found. But whether the story represents another example of
systemic problems with our defense acquisition system, or
whether this is merely a case of a few bad apples, those are
two important takeaways.
First, Mr. Taylor is right. The first time I learned of
this was when I read the paper a couple of weeks ago. While I
understand that an investigation is ongoing, and it would be
inappropriate to reveal too many details publicly, I would
strongly encourage the Navy to keep us informed about these
matters. It does a disservice to the good work of our
acquisition personnel who perform every day on behalf of the
warfighter and taxpayer for Congress to remain in reactionary
mode in responding to incidents after they are first reported
in the media.
Second, we have another lesson in the need for thorough
acquisition workforce training and understanding contractual
issues not only within acquisition programs, but also within
the investigative services and the prosecutor's office.
Clearly, it is possible that a more thoroughly trained
acquisitions staff within NCIS might have caught these issues
earlier or better, yet kept them from happening in the first
place. This committee is strongly supportive of keeping
inherently government functions within the government, in part
to avoid the cost of contractors who provide little value added
to the procurement process. I sincerely hope the Department of
Defense and the Congress can work together to stem the erosion
of these critical functions within the government.
Again thank you to our witnesses, and thank you, Mr.
Chairman. I hope we learn from valuable lessons today.
Mr. Taylor. The Chair now recognizes Mr. Thomas Betro.
STATEMENT OF THOMAS BETRO, DIRECTOR, NAVAL CRIMINAL
INVESTIGATIVE SERVICE (NCIS)
Mr. Betro. Thank you, Mr. Chairman, Ranking Member
Bartlett. It is a pleasure to be here today to try to address
this issue of procurement of boat barriers. I had submitted a
statement for the record, but if it pleases the committee, I
would like to summarize that statement orally today.
Mr. Taylor. Mr. Betro, it is the custom of this committee
to have a five-minute rule. It has been the custom of this
subcommittee to allow the witness to speak as long as he would
like as long as we don't find ourselves in a filibuster. So
with unanimous consent, we will waive the five-minute rule and
allow you to speak freely.
Mr. Betro. Thank you, Mr. Chairman.
My name is Thomas Betro, and since January 2006 I have
served as Director of the Naval Criminal Investigative Service.
With me is Cathy Riddick-Brown, who is our Deputy Assistant
Director for Acquisition and Logistics.
We very much appreciate the subcommittee's sensitivity to
the fact that the matter before us today remains the focus of
an ongoing criminal investigation. There will be some
limitations, I believe, on what we can discuss in an open
hearing, but we understand the subcommittee's desire to receive
information, and we will be as responsive as we can to those
desires.
As the element within the Department of the Navy that has
primary responsibility for investigating procurement fraud, we
are acutely sensitive to the fact that every time a Navy dollar
is wasted, it means one less dollar to support our warfighters.
As we speak today, approximately 120 NCIS personnel are
deployed to Iraq, Afghanistan, the Horn of Africa and elsewhere
in support of the global war on terror. We understand that lost
dollars may mean the difference in NCIS's ability to properly
train and equip our own personnel before we send them in harm's
way.
I would like to start today by highlighting some of the
things that NCIS has done relative to the reported
improprieties associated with the boat barrier procurements.
In June 2003, NCIS initiated a criminal investigation into
these matters following the receipt of allegations of
improprieties. We initially tasked the NCIS inspector general
to look into these matters, but upon determination that there
may be some criminal involvement, the case was transferred to
our Washington, D.C., field office where they initiated a
criminal investigation.
From the outset, NCIS has included the Defense Criminal
Investigative Service, which is the felony investigative arm of
the Department of Defense Inspector General, in all of our
investigative efforts. This includes interviews,
interrogations, and even polygraph examinations of former NCIS
employees. All 24 NCIS investigative reports associated with
these matters have been provided to both DCIS and the GSA
Inspector General's Office. We also sought out and received
audit support from the Defense Contract Audit Agency. We have
shared information fully with our partners in this joint
criminal investigation.
Moreover, NCIS and DCIS have jointly presented this case to
three separate U.S. Attorneys for potential prosecution and
civil action starting in April 2004. NCIS has been diligent in
pursuing both prosecution and civil remedies. The case remains
pending before the U.S. Attorney for the District of Columbia.
Additionally, upon determining that these improprieties
occurred, NCIS made major structural and process changes. In a
moment Ms. Riddick-Brown will address procurement reforms we
have implemented.
I want to note that in October 2003, NCIS divested itself
of the mission of technology validation, procurement and
installation of physical security equipment, including the boat
barriers in question. We have also disestablished the NCIS
department that had been responsible for these procurements.
Because we divested ourselves of these operations and
disestablished this department, we have had to reconstruct many
of the events described today from our investigative case files
and from the recollection of those who worked in that
department but not directly involved in the Waterside Security
Systems. None of the individuals who were directly involved by
those procurements are currently employed by NCIS.
Let me turn now to the areas that the subcommittee
specifically inquired about. First, what was the requirement
for these barriers, and how did NCIS become the lead
organization for their procurement? The requirement was
identified in the aftermath of the USS Cole in October 2000.
Within weeks of that event, each of the fleet commanders was
tasked by the Chief of Naval Operations to identify measures to
boost force protection. Several fleets identified the need for
boat barriers.
The NCIS Law Enforcement Physical Security Department, at
the time known as NCIS Code 24, was tasked to execute the
funding identified for these measures. At the time, Code 24 was
responsible for program management of a number of Navy physical
security systems stemming from additional CNO staff
responsibilities held by the Director of NCIS, as the Special
Assistant to the CNO for Naval Investigative Matters and
Security.
Prior to the Cole attack, Code 24 had the responsibility
for DON electronic security system design and installation, as
well as other security systems, though not boat barriers. In
the immediate wake of the Cole bombing, Code 24 and contractor
personnel conducted site surveys and worked to identify boat
barrier options. In the interest of urgency, to deploy boat
barrier capability as soon as possible, attention focused on
commercial off-the-shelf, or COTS, solutions. The Dunlop boat
barrier, a British system already in use by the Royal Navy in
Scotland, was identified as the only COTS option.
Full-scale tests of the Dunlop boat barrier system were
conducted in San Diego in May 2001 with the help of the Naval
Facilities Engineering Service Center. In May 2001, the Navy
established new security standards, including requirements for
the use of water barriers where appropriate and/or practical,
especially for strategic assets.
In August 2001, NCIS Code 24 was identified as the Navy
boat barrier program manager by the CNO's staff element
responsible for antiterrorism and force protection. From
September 2001 to February 2003, Code 24 was involved in buying
667 Dunlop barriers. After NCIS's original purchase of 667, 30
more boat barriers were procured by other Navy commands.
According to the Naval Facilities Engineering Command, NAVFAC,
these barriers today remain in use at five CONUS and five
OCONUS sites, with 535 deployed and 75 spares in the Navy
inventory. Thus, some 90 percent of the barriers are still
deployed or available for use.
Based on the records we have, NCIS estimated that the costs
associated with Code 24's procurement of these 667 barriers was
$30.7 million. This is a slight downward revision from the
estimate provided in my formal statement. Of this amount we
estimate that some $2.6 million was applied toward contractor
and subcontractor administrative fees.
NCIS estimates that the cost of installing these barriers
was some $24.1 million, including up to $2.1 million of this
amount in similar administrative fees. I should note that we
never have received any allegation of illegality with regard to
the installation of the barriers.
NCIS's Code 24 initiated boat barrier procurements in
September 2001. It engaged GSA, which had previously supported
NCIS security systems procurement on this acquisition. Several
irregularities occurred thereafter. First, Code 24 sought to
use the same GSA contract vehicle it has previously used for
other security work. However, this contract vehicle, a small
business set-aside Governmentwide Acquisition Contract, was
created strictly to enable firms to provide information
technology solutions to GSA's government customers. Code 24
improperly sought to use this IT contract vehicle to purchase
boat barriers, and GSA improperly agreed to this.
Second, the boat barrier orders were improperly structured
by Code 24 and approved by GSA so as not to exceed the $3
million each. In this manner, those involved sought to
circumvent competition requirements.
Finally, a security consultant utilized by Code 24 to
advise on boat barrier requirements, a single individual doing
business as P-CON, was also directly responsible as a
subcontractor for purchasing boat barriers on behalf of prime
contractor Northern NEF. As the liaison between the vendor of
boat barriers, Dunlop, and Northern NEF under the GSA contract,
P-CON received a fee for each task order handled. In essence,
P-CON both helped specify the requirements for affected
installations and profited from the purchase of barriers slated
for those installations. In March 2002 P-CON was removed from
the middle of this arrangement, but P-CON had already earned a
fee on the procurement of the first 317 of the 667 boat
barriers ordered by Code 24.
Code 24 initiated its last purchase of boat barriers in
February 2003, supported by RMES, which by then had succeeded
Northern NEF as the prime contractor. In May 2003, NCIS
received allegations of potential illegalities associated with
the boat barrier procurements. The NCIS IG was tasked to look
into these matters, and at the same time NCIS was told by GSA
that an audit had identified irregularities with these
procurements. Upon determining that criminal violations may
have occurred, the NCIS IG referred this matter to our
Washington, D.C., field office in June of 2003. Also in June,
NCIS asked DCIS to participate in the investigation and first
briefed the assistant U.S. Attorney heading the Criminal
Division for the District of Maryland on this matter.
In July 2003, NCIS met with the GSA OIG to obtain
preliminary audit findings. These findings heightened NCIS's
concerns, and in August of 2003 the manager of the NCIS boat
barrier program was polygraphed twice by NCIS. In September
2003, he resigned. That same month the P-CON security
consultant was escorted out of NCIS headquarters.
At this time, NCIS leadership made a determination that the
agency did not have the capacity to handle this burgeoning
acquisition program. For context, in fiscal year 2000, Code 24
received $4.4 million to execute physical security equipment
responsibilities for the entire Navy. In fiscal year 2001,
following the Cole attack, this number quadrupled to over $17
million. The next year following 9/11, the figure grew
astronomically to $106 million. Moreover, the new requirements
were for equipment that was generally different from that which
Code 24 had historically purchased.
In August 2003, NCIS proposed divesting itself of these
responsibilities in favor of a naval command better able to
manage these requirements, and NCIS voluntarily transferred
this mission to NAVFAC in October 2003.
In sum, Mr. Chairman, it is recognized that in the interest
of providing a rapid solution to protect Navy vessels, a small
number of NCIS employees took improper actions. Shortcuts were
taken to meet urgent fleet requirements, the expectation of
Navy seniors, and fiscal deadlines. These actions were wrong. I
neither excuse nor condone them. With adequate oversight, I do
believe that these improper actions would not have occurred.
Importantly, upon learning of these irregularities, NCIS
took remedial measures. We investigated actively and realigned
functions, and we undertook major process reforms. In the end
the barriers that were procured were sufficient to satisfy the
Navy's physical security requirements for ships in port. They
have been in place for several years, and the vast majority of
them are still in service.
The purpose of the barriers was to deter and prevent small-
boat attacks similar to the attack on the USS Cole. We do not
know whether such attacks would have occurred had these
barriers not been installed, but the barriers undoubtedly have
provided a deterrent.
With that, let me ask Mr. Riddick-Brown to offer some brief
comments on our acquisition reforms. Thank you.
[The prepared statement of Mr. Betro can be found in the
Appendix on page 31.]
STATEMENT OF CATHY RIDDICK-BROWN, DEPUTY ASSISTANT DIRECTOR FOR
ACQUISITION AND LOGISTICS, NAVAL CRIMINAL INVESTIGATIVE SERVICE
(NCIS)
Ms. Riddick-Brown. Mr. Chairman, Mr. Bartlett and
distinguished Members, I am Cathy Riddick-Brown. I am a GS-15
supervisory contract specialist at NCIS. I joined the
organization in July of 2004, and in this capacity, I serve as
the Deputy Assistant Director for Acquisition and Logistics.
I would like to highlight a few things that Director Betro
shared earlier and talk about the measures that we have taken
to improve our acquisition process.
First of all, we did divest ourselves of the function to
procure, to assess, and to install any equipment or processes
in Waterside Security Systems. That now is handled by NAVFAC.
Equally important, we disestablished Code 24 that used to
manage that program.
Additionally, with the creation of my department, the
Acquisition and Logistics Department, we have put in place
acquisition professionals with currently combined 70 years of
procurement experience. Currently, our acquisition process, we
manage about $30 million. Also very importantly is we have in
the department created a training program for Contracting
Officer's Representatives, also known as CORs, and in this
training program the responsibility of a COR is to have the
technical expertise on contracting matters, whatever they may
be. This is required not only by DOD and the Department of
Navy, but it is required for the Federal Government if you are
going to have a contract that requires technical oversight.
These individuals are trained and certified and recertified
once every three years as the programs are currently managed.
Additionally, we also ensure that we are following the
Federal Acquisition Regulations, the FAR; we are following the
DFARS, the Defense Federal Acquisition Regulations Supplement;
and also Navy's internal process, Navy Marine Corps Acquisition
Regulation Supplement. We follow those; our teams are trained
in those requirements. We follow those processes.
Also most recently, DOD and the Department of the Navy
revised their policy from 2002 that talked about if you have
requirements that exceed $100,000, and you plan to use non-DOD
contracting assets, you must have what is called an acquisition
strategy. The revision to that legislation talks not only to
services, but it also talks to supplies. Further, any DOD
organization that will have requirements that will exceed
$100,000, be it a service or supply, must have an acquisition
strategy, must go to the comptroller for review, and also a DOD
contracting officer, and we do follow that practice.
Mr. Chairman, I do believe had these mechanisms and
practices been in place and adhered to before 2004 when I
arrived, we wouldn't be here discussing this matter.
I gladly will respond to any questions you might have
regarding our reform and our contracting acquisitions. Thank
you very much.
Mr. Taylor. Mr. Williams, do you have a statement?
Mr. Williams. Yes, I do, sir.
Mr. Taylor. Would you like to begin?
STATEMENT OF JAMES A. WILLIAMS, COMMISSIONER, FEDERAL
ACQUISITION SERVICE, GENERAL SERVICES ADMINISTRATION (GSA)
Mr. Williams. Good afternoon, Chairman Taylor, Ranking
Member Bartlett and committee members. I am Jim Williams,
Commissioner for the Federal Acquisition Service within the
U.S. General Services Administration. I am pleased to appear
before this subcommittee to testify on GSA's role in the 2002-
2003 procurement of floating security barriers designed to
protect U.S. Navy ships in port or at anchor.
GSA is the central acquisition agency in the Federal
Government, and its Federal Acquisition Service leverages the
government's buying power on behalf of Federal agencies by
acquiring products, services and solutions at best value in
support of agency missions.
Over the last five years, GSA set out a program to address
and carry out significant changes in the management and
execution of its acquisition and contract management policies,
procedures and practices. GSA and the Federal Acquisition
Service have made significant positive management and financial
changes to our procurement operations over the last five years
to ensure our customers get best value for their contracting
requests.
Several years ago GSA senior management reviewed our
contracting activities, including GSA's Office of the Inspector
General, performing audits of contracting practices throughout
GSA. One of the serious problems found was the purchase of boat
barriers made by GSA's then Federal Technology Service on
behalf of NCIS, which began shortly after the terrorist attacks
of September 11, 2001, and in the aftermath of the attack on
the USS Cole.
The original contract request was for floating security
barriers designed to protect American men and women serving on
our Navy ships. In 2003, after becoming aware of the ongoing
GSA IG audit and the issues identified on the boat barrier
projects, GSA terminated for the convenience of the government
all remaining work on this matter.
GSA recognizes serious contracting irregularities that
occurred and moved swiftly and aggressively to fix the problem
and prevent it from happening again. GSA made the corrective
action in the Federal Technology Service the top priority for
the agency. The OIG also recommended several areas that needed
to be improved, and GSA senior management agreed with those
audit findings and recommendations and took action to address
them.
GSA created an initiative entitled Get It Right to
specifically address acquisition concerns. Our Get It Right
initiative made GSA a better, more effective and compliant
contracting agency. I would like to specifically highlight
several key areas implemented under the Get It Right program
where GSA is a better agency as a result of the hard lessons
learned years ago.
Strengthened management controls: GSA instituted a review
process for preaward task orders over $1 million using contract
review boards, which includes senior managers in that review.
In addition, GSA has a policy that all task orders over $5
million must be reviewed by GSA legal counsel prior to award.
The agency also conducts procurement management reviews
annually by a team of GSA procurement experts external to the
area reviewed.
Training for GSA's contracting and program officers: GSA
has worked aggressively to provide core training in
appropriations law, the proper use of schedules and
governmentwide acquisition contracts, and project management
training and certification.
Customer relationship management: We have implemented a GSA
working group that meets weekly to address GSA DOD acquisition
issues and concerns from both agencies, and we have recently
signed a joint memorandum agreement with the Department of
Defense that further outlined our commitment to ensure a sound
and compliant acquisition process.
Contractual results: In December of 2006, GSA's Office of
the Inspector General published the results of a second series
of audits of the Federal Acquisition Service. I am proud to
report that the OIG's findings showed GSA had significantly
addressed weaknesses previously found in our contract
management practices. Specifically, the OIG said that FAS was
providing acquisition services with proper management and
internal controls in place. We take management and internal
controls seriously at GSA, and the time to improve our
controls, train our employees, and develop improved customer
relationship management has resulted in significantly improved
contract management practices.
In summary, GSA recognizes that we have a responsibility to
provide sound acquisitions for our Federal customers. Our
employees are inspired to help our customer agencies be better
stewards of taxpayer dollars and more effective and efficient
in meeting their missions every day by providing best value
products services and solutions in compliance with Federal laws
and rules.
Thank you, Mr. Chairman. I welcome any questions you or the
committee may have.
[The prepared statement of Mr. Williams can be found in the
Appendix on page 40.]
Mr. Taylor. Thank you, and I want to thank all of you for
appearing. The motto of one of our service academies is: Deeds,
not words. I have got to tell you after hearing your testimony,
I think you would have failed to fulfill that. I am hearing a
lot of strong talk, but the fact of the matter is that
according to what I can see, NCIS made a series of blunders.
Again, from published reports, no one was told by NCIS to
hire P-CON Consulting of Alexandria, someone who was already
working for NCIS. Apparently people were paid millions of
dollars of fees for doing absolutely nothing, and
subcontractors to them were paid additional millions of dollars
for apparently doing nothing.
Four years later, yes, it is great that none of our vessels
have been attacked from the sea as the Cole was. But four years
later I am not convinced that this was the only solution. I am
certainly not convinced this was the most cost-effective
solution. I did not see a sense of urgency there. The Cole was
bombed in October. The testing was not done until the following
May. And so if there was any sense of urgency, why the first 6-
month delay, 8-month delay? And then apparently in a move to
catch up, contracts were issued, it would certainly appear to
be, through favoritism. And then a series of contracts and
invoices are issued for slightly under the $3 million limit
including--again, according to published reports, multiples of
up to six on one day were issued for slightly under $3 million,
and no one in NCIS finds this unusual? No one at GSA finds this
unusual? This goes on for some time.
And I have got to believe if I would have heard that
testimony five years ago, I would have heard the same thing,
that you have strong procedures in place to keep this from
happening. Well, apparently you did not. And what is most
troubling of all, apparently there has been some criminal
wrongdoing. The taxpayers are out of a heck of a lot of money,
and I don't see charges being levied against anyone. Your name
is Naval Criminal Investigative Service. Why aren't you doing
it? Again, you were the wronged party. I would think you would
have the resources to look into this. And I would like to hear
what you have to say to that.
Mr. Betro. Well, Mr. Chairman, as I indicated, we
definitely recognize there were breakdowns in oversight at NCIS
at the time that allowed these things to occur. The small group
of folks who were handling the procurements for that particular
code at the time certainly were not experienced enough to be
able to adequately carry out this large acquisition.
Mr. Taylor. Mr. Betro, no one in the system found it
unusual that on one day six contracts were let for slightly
under $3 million? No one thought to think that maybe someone is
trying to skirt the law?
Mr. Betro. Sir----
Mr. Taylor. No one in the whole system found that unusual?
Mr. Betro. The only folks in the NCIS system who were
providing any oversight to those particular statements of work
were the individuals doing it themselves. They were--our
processes at the time----
Mr. Taylor. Is that a good business practice?
Mr. Betro. It is not a good practice. It is a terrible
business practice, one that we have corrected since then. The
individuals who were performing the acquisitions were not even
contract specialists. They were budget technicians who had been
previously responsible for $800,000 worth of procurement.
Mr. Taylor. Let's back up a little bit. Obviously you have
looked into this. Did anyone at that time when tasked with this
responsibility--is anyone on record of contacting anyone in the
Navy chain of command and saying, I am not so sure we are the
right people to be doing this?
Mr. Betro. No, sir, not until after we noticed or were
alerted to these improprieties.
Mr. Taylor. At no time did someone step forward and say, we
are not the right people, this is out of our level of
expertise?
Mr. Betro. No sir, at no time did we step forward prior to
the improprieties being surfaced to senior leadership.
Mr. Taylor. Yes, sir?
Mr. Williams. I would just like to add that I agree with
you, Mr. Chairman, that what was done was wrong. There were not
proper internal controls in place. We do agree with that. I do
believe that we did not perform this in the most cost-effective
manner either. However, we have also instituted the reforms,
and it was something that GSA found the problem, worked with
our IG to identify what had gone wrong, and took quick action
to fix it.
Mr. Taylor. Are you prohibited by law, is NCIS prohibited
by law from doing an internal criminal investigation?
Mr. Betro. No, sir.
Mr. Taylor. Since you have told me--I thought I heard you
say we have identified wrongdoing.
Mr. Betro. That is correct.
Mr. Taylor. Why haven't you done so?
Mr. Betro. Sir, we did initiate both a criminal--first an
administrative review, which very quickly, within the first 30
to 45 days, identified the potential for criminal wrongdoing.
We did immediately initiate a criminal investigation into those
matters.
Mr. Taylor. And what became of it?
Mr. Betro. It is still ongoing. We have presented findings
of that investigation first to three separate U.S. Attorneys'
offices, first in the District of Maryland in 2004. Their
response was essentially that this was part of a larger
investigation, and they believed it should be handled
administratively potentially for civil remedies, and they
suggested a new venue of Kansas City. We then took the case, we
continued to work the case based on their review, and we did
not go to Kansas City. At the time we believed we had proper
venue in Virginia, the Eastern District, and we began dialogue
almost immediately with the U.S. Attorney's Office in the
Eastern District of Virginia pursuing both civil and/or
criminal remedies for this investigation.
Eventually that U.S. Attorney's office decided formally
that another venue would be better, either Kansas City or
Washington, D.C. We did eventually--and that is where it
remains today--have been working with the United States
Attorney's Office in Washington, D.C., continuing with the
investigation, because we weren't satisfied to let it go with
the first declination from the first U.S. Attorney's office in
2004. We persisted in investigating and persisted in trying to
seek justice by presenting the case to a second and now a third
U.S. Attorney's office. We still have the potential of going
all the way back to Kansas City to that venue if the U.S.
Attorney's Office in Washington, D.C., also declines
prosecution or civil remedies.
Mr. Taylor. According to the Washington Post article, and I
am quoting now, Northern was told by NCIS officials to hire P-
CON Consulting of Alexandria. Who were those officials?
Mr. Betro. Those officials were the same individuals who
remain the focus of this criminal investigation, an individual
who no longer works for NCIS that resigned in 2003 shortly
after these improprieties were surfaced. There does appear to
be a preexisting relationship. And that is, as we mentioned,
part of the details of our criminal investigation which we
would request that we could address in--potentially in a closed
session.
Ms. Riddick-Brown. Sir, if I may?
Mr. Taylor. Yes, ma'am.
Ms. Riddick-Brown. It is not uncommon for a customer to
say, I want to go to a particular venue. But it is the
responsibility of the contracting officer to say, what is in
the best interest of the government? So the record shows that
an official said, go to a particular company, but as a
contracting officer I must ensure that what I am doing is in
the best interest, cost-efficient, et cetera. So the client can
make all kinds of recommendations, but the contracting officer
bears the burden of the decision.
Mr. Williams. The contracting officer was at GSA after the
joint decision was made between NCIS and GSA to move this under
the small business thresholds for competition, which was wrong.
Then they it put it into the sole source, legitimate sole
source. Had it been legitimate, we would have named a small
business company to do it. It was not legitimate to split the
orders, to put it underneath that $3 million threshold.
Mr. Taylor. How much money do you think would have been
saved----
Mr. Betro. Well, Mr. Chairman----
Mr. Taylor [continuing]. If all the barriers had been
purchased in one purchase order rather than in a series of
small purchases? You have got to have some experience in that
field.
Mr. Betro. Yes, I think, as I mentioned in my statement, we
would look at some of the administrative fees that were charged
or provided to the contractors and subcontractors for their
efforts in this procurement. There are fees; that is acceptable
to charge some level of fee. We would probably say the fees in
this case were excessive, should not have been accepted by us
at NCIS, but they were not mentioned in any way as being
excessive. That was about $4 million total between the
procurement and the installation of the barriers.
There is no way for us to tell on the actual base cost of
the systems themselves. At least I certainly can't, and maybe
our colleagues from Naval Facilities Engineering Command could,
to say what would have been the cost. They were a COTS
solution, we were going for a COTS solution. This is the one
found, the only one known to be available in all likelihood. I
guess if there was a sole source done legitimately, sole-source
contract, they may still have ended up being the provider of
those barriers.
But the administrative fees that I mentioned, a little over
$4 million that we would point to somewhere in there, I would
say would represent the excess and potentially the wasted
expenditure of money.
Mr. Taylor. What are the names of the NCIS officials? Who
directed Northern to hire P-CON Consulting?
Mr. Betro. Mr. Chairman, I would respectfully request that
we, if possible, address that in a closed session for the
interest of the matter being an ongoing criminal investigation.
Mr. Taylor. I understand you saying that, but I would also
tell you that this is not the only acquisition program going on
in our Nation. I would sure hate for another agency being
bilked out of money by the same people as we speak. They have
not been convicted of anything, but they certainly are under
some suspicion of mismanaging the citizens' money. This is not
the only wasteful thing going on in the Navy. The Littoral
Combat Ship (LCS) program comes to mind. And I would hope that
one or two things comes out of this today. Number one is that
we are sending the message that we are going to take care of
our troops. The second part is that this is not carte blanche
for contractors to defraud our Nation in the process.
And after reading these articles in the Post, I certainly
have reason to believe that we have been defrauded, and it
looks like an inside job. And I would like the message to be
that those people are going to be brought to justice, and that
steps are being taken so that this won't happen again, and that
the message being sent is that if you use your position to
enrich yourself or your friends, you are going to pay for it
criminally. That has not happened yet.
Mr. Betro. No, sir. And we will endeavor and have been
endeavoring to continue to pursue the criminal charges
complaints against the one or two or three individuals
involved. And like I say, we are currently in the United States
Attorney's Office in the District awaiting a decision.
Mr. Taylor. I would like to request for the record--it is
my understanding that U.S. Attorneys cannot talk about ongoing
investigations, but it is also my understanding that those
people who have approached a U.S. attorney are free to say, I
have approached that U.S. Attorney and asked them to look into
this subject. And for the record, I would like the names of the
United States attorneys that have been approached, and what
days they were approached, and what information was given to
them.
[The information referred to can be found in the Appendix
beginning on page 47.]
Mr. Taylor. The Chair yields to the gentleman from
Maryland.
Mr. Bartlett. Thank you very much.
Had this been competed on a fast-track basis, how much
longer would it have taken?
Ms. Riddick-Brown. Possibly, sir, three to nine months,
depending on the venue. If we decide to stay in a sole-source
venue, sole sources tend to go quicker than a competitive
venue. At a minimum three to nine months.
Mr. Bartlett. You are all familiar with the article in the
Washington Post. Are there any errors in that article?
Mr. Betro. Sir, I would say there are not any latent errors
that I can speak of, just information we mentioned that was not
included in the article because they were not aware of. It was
information that the authors of the articles were not aware of
that we shared today, but generally the information in the
article is accurate.
Mr. Williams. I would say, sir, the information is
accurate. I don't think it noted that while things were done
wrong, this was a different time frame. This request came to us
to help out one week after September 11th. There certainly was
a sense of urgency. It still does not excuse or condone the
wrongdoing that happened, but it was a different time, and,
frankly, it is a different time now. I believe we have fixed
those problems so they won't happen again under my watch.
Mr. Bartlett. If another request like this came, how would
the procurement proceed differently?
Ms. Riddick-Brown. One, sir, we would put together a team
that consists of both the requirements team, the comptroller's
team and the contracting team within, in our case, NCIS. We
would look at all the venues within DOD. It is always better to
use existing contracts which can save time in that venue. You
look at within the DOD structure what is available, you look at
what is in the marketplace. We assess what that looks like, and
if it, in fact, does meet our needs, we then go to either an
existing vehicle, we either can go sole source, or we can
compete. And there are enough venues in the acquisition arena
that we could hopefully choose the venue that best works for
the government.
Following that, if, in fact, we had a competition, there
would be an evaluation of the potential offerers, those who are
proposing. If there was even a sole source within a small
business venue, we could actually even compete within the small
business venue. So there are various avenues one could take be
it small business, be it sole source, be it competitive in that
arena.
But the one challenge that we always have in the arena is
putting another adequate statement of work that reflects our
needs so we will know where to go and get the resources to make
our purchases, be it a service or supply. The evaluated
contractor who is a potential offerer we then make
determinations what is the best value to the government, and we
then make the award.
Mr. Bartlett. Certainly there will be occasions when time
is of the essence, which it was deemed to be here. And we need
to proceed very rapidly. This was a fair-sized procurement. The
regulations as they were interpreted required that these
contracts be let in amounts of less than $3 million. There were
a large number of those let, sometimes several in one day, a
clear, clear attempt to skirt the requirements.
Recognizing that there may be times when instances--when
time is of the essence, and we need to move very quickly, and
we really can't wait 6 to 9 months for a competition, how can
we structure that kind of procurement to avoid the problems
that we had here? Clearly we just ignored the rules, and you
have got to have it real quickly, so you can't spend more than
3 million in one contract, so we will let three contracts in
one day, each of them less than $3 million. That is an obvious
ruse to get around the regulation. But recognizing that there
may be times when we need to move very quickly, how can we do
that without the kind of problems we created here?
Mr. Williams. I think, sir, there are legitimate ways to do
that within the Federal Acquisition Regulation. Other shortcuts
were taken here that shouldn't have been taken. But where you
have in this particular case an urgent and compelling need and
a single source, I believe it could have been easily done by
either NCIS, or as we do at GSA--we help agencies do their
acquisitions--it could have been done right, and it could have
been done fast under the existing regulations.
Mr. Bartlett. Dave Nelson from Northern said he did not
have any idea why NCIS selected his company. He apparently did
not feel that he had the kind of credentials which would have
recommended him for that contract. Why do you think the company
was selected?
Mr. Betro. I believe, sir, that he was inappropriately
selected because the individuals involved tried to use an
existing vehicle that they had been using to make other
procurements for a while. Clearly improper. And in their
interest to expedite and to use a system that was familiar to
them, they used an improper vehicle, and his company was an
8(a) set-aside.
Mr. Bartlett. What company?
Mr. Betro. Small business.
Mr. Bartlett. 8(a)?
Ms. Riddick-Brown. Yes.
Mr. Bartlett. Why was he directed to hire P-CON, which
apparently was one man already fully employed?
Mr. Betro. Yes, sir. P-CON, he had been an employee--P-CON
had been a subcontractor for NEF working for NCIS as a security
consultant before the barrier procurements ever came up, and it
was definitely a focus of our investigation as to why an
individual in NCIS would have further recommended that
individual to NEF to participate in the boat barrier
procurements.
As mentioned before, it is not necessarily that unusual
that a preference or a recommendation would be made. In this
instance we believe there was potentially some irregularities
based on prior relationships that the individuals had which is
a focus and a subject of our criminal investigation.
Mr. Bartlett. When you investigated this, was there any
value added by the Navy hiring both Northern and P-CON? What
they did couldn't the Navy buyers have done directly? Now, I
have trouble understanding what value is added to this
procurement process by hiring these two companies. They did not
do anything except let contracts to somebody else, which is
what I thought our buyers did.
Mr. Betro. Sir, as I mentioned, the Navy could have gone
directly through different vehicles to Dunlop, and there is no
question that the individuals who were involved in this took
improper action. But clearly there was another venue or vehicle
that we could have used to go directly without using NEF or P-
CON industries.
Mr. Bartlett. When you say were improper, do you mean dumb
or criminal?
Mr. Betro. Sir, I think it could be one or the other or
both, and I think that is what we are waiting for the U.S.
attorney's ruling or judgment on the merits of the criminal
investigation. Clearly the inferences there raised our concern
that it did meet the threshold of criminal violations.
Mr. Williams. If you don't mind, sir, I believe the
splitting of the procurements under the competition rules was
wrong. Then picking any company to be the prime contractor as
Northern was with the understanding that they were not going to
do any work was wrong. So you start with splitting the award
was wrong, and then the GSA contracting officer agreed to that.
That was wrong. Then picking any company, and under this
particular 8(a) set of contracts there were 165 contractors, if
you picked any one of them by throwing a dart at the wall and
saying, we want you to be the prime, you don't have to do any
work, it is just a passthrough, that was wrong.
Mr. Bartlett. It says in the article that the auditors
wanted to question NCIS officials about the boat barrier
project, but NCIS officials declined to discuss it. Why would
your people decline to discuss it with the auditors if our
intent is to get to the truth?
Mr. Betro. Sir, I am not aware of any NCIS officials
declining to discuss.
Mr. Bartlett. I thought you said the article was factual.
Mr. Betro. I said generally I thought the article was
accurate. That is one of the specifics that I have not been
able to find out who might have refused. As I said, we worked
with DCIS and GSA's OIG office almost immediately from the
outset and have worked closely with them from that time until
now.
Mr. Bartlett. NCIS agents said they were conducting an
investigation of their own and wanted to take over the case.
GSA agreed?
Mr. Williams. My understanding is the GSA officer and
inspector general did agree with that.
Mr. Bartlett. And that was four years ago?
Mr. Williams. I believe, sir.
Mr. Bartlett. And we still are investigating it?
Mr. Betro. Yes, sir, still open investigation today.
Mr. Bartlett. Seems incredible to me that that
investigation could take more than four months let alone four
years.
Mr. Betro. Well, any procurement investigation does. There
are some complexities, sir, involved with contract reviews and
trying to find records and task orders. But we did present it
to the first U.S. Attorney in the May time frame of 2004. So at
that point we had investigated enough where we thought there
was sufficient information enough for a U.S. attorney.
We could have stopped. We could have closed our
investigation in 2004 with that U.S. Attorney's declination,
but we did not. We took the information they provided with what
the weaknesses were in the case from a criminal prosecutive
standpoint, and we continued to investigate. We continued to do
lots more interviews, records reviews until we thought we had
enough additional information to bring it to another U.S.
Attorney's office, which we did.
Likewise, that U.S. Attorney's office chose not to
prosecute the case. We did not stop there. We could have
stopped at that particular point in time, but we did not. We
have continued to investigate these allegations and
improprieties, and currently we are at a third U.S. Attorney's
office. We also did this fully jointly with the Defense
Criminal Investigative Service in addition to the GSA OIG. So
it is three different investigative organizations with full
visibility on this investigation, all sharing information and
sharing each other's reports, jointly presenting these cases to
the various U.S. Attorneys' offices.
But I recognize in hindsight, now that it has come to my
attention, there might be some things in the investigation we
could have done more rapidly. But I do believe we have carried
out due diligence in continuing to pursue the criminal and
civil remedies that might be available.
Mr. Bartlett. Mr. Chairman, I think that this case is
instructive enough that it would be useful--I am not desirous
of identifying specific people to be hung for this. That is not
my goal. I am sure mistakes were made. I am sure each step--I
hope that each step the person thought they were making the
right decision; in hindsight they clearly did not.
But I think this could become a textbook study on how to
really screw up a procurement so that we wouldn't do it again.
And I would like to see this not kind of swept under the rug
and some people administratively disciplined or whatever. I
would like to see this--and you can call them employee A, B and
C if you wish, but I would like to see this exposed in the
clear light of day, because I think there were enough things
that went wrong here that this would be an excellent case study
for looking at contracting in urgent situations like this so we
did not repeat these mistakes.
Can you get that kind of information to us so that we can
see what we might do with that?
Mr. Betro. Sir, we actually have an investigative time line
that we were prepared to share if we were to go into a closed
session and leave with the committee. It just outlined broadly
the investigative steps and chronologies. We could make that
available for the committee.
[The information referred to can be found in the Appendix
beginning on page 48.]
Mr. Bartlett. I have a couple of questions for the record.
Mr. Chairman, thank you very much.
Mr. Taylor. Sure. Before going to Mr. Larsen, I would be
curious, what is the name of the CEO of Northern NEF on or
about the date of September 28, 2001?
Mr. Betro. Excuse me, Mr. Chairman, I will try to find that
name.
Sir, I believe the president was Ken Dyer.
Mr. Taylor. How do you spell the last name?
Mr. Betro. D-Y-E-R.
Mr. Taylor. Okay. With that, the Chair yields to Mr.
Larsen.
Mr. Larsen. Thank you, Mr. Chairman.
Mr. Betro, the article says that the cost for the program
was at least $100 million, I think. But you have testified that
at least in the procurement of the boat barriers, NCIS
estimates that the cost will be 30.7- after adjustment. Why
that discrepancy? What is being counted in the article that you
are not counting?
And second, you also mentioned in terms of fees and costs,
fees of $2.6 million and some other costs of 24.7- leaves about
27.3 million that you have accounted for of your 30.7-. Where
did that other 4.4 million go to? Can you address that for me?
Mr. Betro. First, I believe that I was trying to address
the total cost of the boat barrier program. The $100 million I
can only surmise might have referenced our overall budget for
Waterside Security Systems, which included several other things
in addition to the boat barriers. So I am surmising that this
article might have referred to that amount.
The boat barrier program, as best we can reconstruct, is
just under the total of $60 million, which included both base
costs of the materials and installations. It also included
those miscellaneous administrative fees which I referenced, I
believe, totaled a little over $4 million.
Mr. Larsen. And you are saying the procurement part of that
60-plus million was 30.7 million?
Mr. Betro. That is correct.
Mr. Larsen. And then you talked about some of the fees
associated with that procurement which still left, by my math,
$4.4 million left unaccounted for, which I would like you to
account for. Maybe you can account for the record.
Mr. Betro. Yes, sir. I have it here in terms of where the
4.4 or so million dollars went broken down between Northern
NEF, P-CON. Those fees would be--I believe that P-CON received
a total of $1.1 million in fees for participating as a
middleman between Dunlop and Northern NEF, and that NEF
received $1.5 million in fees associated with the procurement
activity, and then in the installation piece was the remainder
of the 4.4-, which is 1--I am sorry--$1 million in fees that
went to a company called ITA, which was responsible for the
installation of the boat barriers. So if I got this correct it
is $1.1 million to P-CON, $2.6 million to NEF and $1 million to
ITA, and I have a total of 4.7-.
Mr. Larsen. So beyond the other $2.6 million for otherwise,
that is not doing much.
Actually, honestly, what is that, 6 million, 7 million out
of 30.7 million for fees to procure the program--to procure the
boat barriers?
Mr. Betro. I believe, sir, that is out of 56.7.
Mr. Larsen. Okay. About 12 percent or so; 12 to 15 percent.
Some questions with regards to the attorneys' offices. I
don't quite understand it. You said that USAO Maryland declined
prosecution, and in your oral testimony you said it was because
it was part of a larger investigation so they wanted to move it
to Kansas City? Is that what I heard you say?
Mr. Betro. It was presented jointly with a larger case of
kickbacks--alleged kickbacks, which, when this first came up,
some of the companies were the same, and so they were brought
under a worn umbrella for ease of understanding who the
companies and individuals were. We did subsequently break out
the boat barrier one pure and simply by itself, but by that
time the entire package, including P-CON and NEF and the boat
barrier issue, were declined by the U.S. attorney's office in
Maryland saying basically that the P-CON issues are deemed more
administrative, and that the appropriate venue for that could
be Kansas City where the GSA office which was the contracting
office for those particular acquisitions.
Mr. Larsen. Is that a determination that NCIS agreed with,
or did not agree with but had to live with?
Mr. Betro. We had to live with, but didn't agree with. That
is why we went on to the Eastern District of Virginia believing
that P-CON, the company that was middleman in this, was
incorporated in Virginia, so we thought potentially that was a
better venue.
Mr. Larsen. And their determination--your written testimony
says they asked you to explore other options, which is a
different way of saying they declined prosecution.
Mr. Betro. They did not formally decline; they recommended
that they were not the appropriate venue and wouldn't consider
the case any further.
Mr. Larsen. Nobody says no in this business. So they were
not going to pursue an investigation. Can I ask, was P-CON and
Northern NEF part of this broader investigation that USAO
Maryland declined, or was this a clean break, to your
knowledge?
Mr. Betro. For us it was a clean break. The other case
involved, sir, grand jury and other related materials.
Mr. Larsen. Maybe that can be discussed in a different
venue.
Then so now you are at DCAO, and there actually has been no
determination from them whether or not a crime has been
committed, whether or not there has been a determination that
this needs to go any further; is that correct?
Mr. Betro. That is correct. We have no kind of final
determination, civil or criminal, from the U.S. Attorney's
office here in D.C.
Mr. Larsen. Is there an expectation when that would occur
from your end?
Mr. Betro. They did not give us a specific date. And so we
will continue to make contact with them.
Mr. Larsen. Can I--that is somewhat disconcerting. I am not
an attorney, and some of us are up here, and some of us aren't,
but it sure sounds like things happened that were extremely bad
and extremely illegal from a layman's point of view.
Can I just suggest--and I don't want this to sound smart-
alecky, but I would rather hear from you the results of the
U.S. Attorney's office of D.C. determination rather than read
it in the Washington Post.
Mr. Betro. Yes, sir.
Mr. Larsen. So certainly, I don't know how we can set that
up or if we can even do that, but it would certainly be
appropriate.
Mr. Betro. We can certainly be sure that happens, sir.
Mr. Larsen. I think Mr. Bartlett asked some questions about
this convoluted relationship between P-CON Consulting and
Northern NEF and the other side of the security consultant
contract within NCIS. But just one more question, Mr. Chairman.
It does not look like you are keeping time, but I know that Ms.
Bordallo is here.
For Mr. Williams, on page four of your testimony, you say
that--this is just trying to define terminology. It says
specifically the OIGs--the FSA was providing compliant assisted
acquisition services with proper management. What is the
definition of ``compliant assisted acquisition services''?
Mr. Williams. Well, assisted acquisition services means
that when other agencies need help doing their acquisition,
they come to GSA with a statement of work. We then do an
acquisition plan. We may do the competition or do the award for
them and help them with postaward management.
What they found, the IG, when they came back to us after
looking at it--after they initially helped us identify these
problems, they came back and reviewed us again and said that we
had proper internal controls, and we were doing these assisted
acquisitions, helping other agencies with their procurements,
in a compliant manner, compliant with the Federal Acquisition
Regulations.
Mr. Larsen. Okay. One more point to make, Mr. Chairman. I
have to step out for a meeting, and I will be right back in for
the remainder of questioning from other Members, but just a
quick review. From what I can gather, on the $56 million or so
in a procurement, about 12 to 14 percent or so went to fees of
some sort, sounds like; that we don't have a determination yet
from the U.S. Attorney's office in D.C. on whether or not there
will be--at least from their view, there is enough there to say
there is either a civil violation or a criminal violation took
place. I mean, from my understanding, we are waiting to see if
these folks get off the hook essentially. I don't know if there
is anything else to go beyond that, unless we go to the U.S.
Attorney's office of Peoria, Illinois, or some other venue.
Mr. Betro. Kansas City.
Mr. Larsen. The final point I want to make is this whole--
this thing started in some ways because obviously there are
individuals there who were not the folks we want in those kinds
of positions. The second is I have seen this before, and maybe
we could dig into this one broader issue about something we
might call procurement migration. That is using a program that
is not designed at all, but is available because someone sees
it as available, so they use it for something that it was not
designed to be used for; in other words, using a technology
program--it has a tangential relationship with security, it is
physical security, not technology security, but it has the word
``security'' in it, so let's use that to pursue this other
program. And whether you call it procurement migration or some
other term, there are other examples of that that we have seen
in the past several years that don't end up with the same
extreme result, but end up with money being wasted because we
are using things that were not designed to be used for. And
that may be something that warrants us looking into as well.
Thank you, Mr. Chairman.
Mr. Taylor. I would like to thank the gentleman. If I could
do a quick follow-up.
Who paid P-CON the million dollars? Was it--did they get a
check from the United States Government? Did they get a check
from Northern? Did they get a check from Dunlop?
Mr. Williams. It would have been made by Northern their
prime contractor. They were a subcontractor to Northern.
Mr. Taylor. So this is a cost of doing business that
Northern had?
Mr. Williams. Yes.
Mr. Taylor. Just as a matter of curiosity, what is the time
that a former naval uniformed person would have to wait before
they could have gone to work for Northern under the law?
Ms. Riddick-Brown. Well, it depends, sir. If it is $10
million or more, then there is usually a--has to be a direct
correlation with the program you just left than simply knowing
about the program.
Mr. Taylor. Are the employees or the management of Northern
former Navy personnel.
Mr. Betro. Not to our knowledge, sir.
Mr. Taylor. The Chair yields to Mrs. Bordallo.
Ms. Bordallo. Thank you, Mr. Chairman, and thank you for
calling the hearing today on such an important issue.
Unfortunately, today our full committee heard testimony about
another force protection issue and that was on body armor, and
the news that members of our Armed Forces in harm's way may not
have the best body armor they need to meet the best operational
requirements.
And in this case today, it seems our sailors and marines in
the wake of the USS Cole bombing had their protection
compromised for the sake of expediency and favoritism.
I have, Mr. Betro, I have some questions that I think
were--some of the members here were leading up to, and I would
like to get more information.
How could the Navy's own inspector general and internal
auditing units allow the prime contractors to bill one major
contractor into many separate invoices always totaling under
the $3 million threshold. Is this what put up the red flag?
Mr. Betro. Ma'am, no red flags were raised internally by
us. There was no detection of those improprieties. It wasn't
until it was brought to our attention by the Program Integrity
Office of the Department of Navy as one way, plus the GSA audit
was indicating that there was some improprieties, and those
both surfaced roughly in the spring of 2003.
Regrettably, there was no oversight on to the actions of
the individuals who were orchestrating.
There were two ways this could have been caught at the
time. Our employees certainly should have known better and
shouldn't have done it, and certainly our next was our
contracting officer also potentially should have advised or
known that this shouldn't have occurred.
So we clearly stand up and say the folks at NCIS took
improper actions and we are trying to again further investigate
that now.
Ms. Bordallo. What was the time frame when you finally
caught it?
Mr. Betro. It was in roughly April-May of 2003.
Mr. Williams. If you would like a little background from
GSA, GSA's management had actually identified some problems in
another region of GSA, and we essentially have 11 regions all
doing similar work. They then decided we should have an audit
done of all of the 11 regions. The original irregularities
occurred in another GSA region, but then when they looked at
our region out of Kansas City, that is when our Office of
Inspector General identified the problems with the boat barrier
project.
Ms. Bordallo. Now on the investigation, I think Mr.
Bartlett brought up the idea that it has been four years; is
that correct?
Mr. Betro. Yes, ma'am.
Ms. Bordallo. The principals involved, were they
reprimanded or put on leave, or how did you handle that?
Mr. Betro. The government employee involved resigned in the
immediate kind of wake of us initiating this investigation and
beginning questioning of that individual, and some polygraphs.
There is a subcontractor we have discussed earlier, P-CON,
who was escorted out of the building, and his work with NCIS
was terminated at that time.
Those are the only kind of immediate--under our control,
individuals that we took some action on immediately.
Ms. Bordallo. Inasmuch as this investigation is ongoing and
has been ongoing, and I find it very unusual for an
investigation to be stretched out into a four-year period--and
I don't know how much longer--is there a statute of limitation
here? Would that kick in?
Mr. Betro. Five years.
Ms. Bordallo. How hard are you pushing this investigation?
Mr. Betro. A lot harder right now.
But honestly, there are lots of procurement cases that the
U.S. Attorney's offices are taking. We are presenting the
information to various U.S. Attorneys offices in hopes of
getting--exhausting any final decisions regarding prosecution
that we can get. We are continuing to pursue that. That is why
we are at our third office. We know at least potentially there
is at least one more venue that we could approach. But we have
tried to persist in getting a determination on either the civil
or prosecutive or criminal remedies for this particular case.
Ms. Bordallo. Mr. Chairman, there is not much time left.
Mr. Williams, I have a question for you. It seems that the
Navy leadership was hasty to find a solution and they took
advantage of the GWAC loose contracting guidelines. What steps,
beyond additional training, has GSA taken to clarify the rules
governing issuance of governmentwide acquisition contracts
known as GWACs?
Mr. Williams. We have done training in that area. We have
also instituted management controls where we do reviews now
that weren't done before. We did have a lack of proper
management controls. We did take action across all of our 11
regions to put in the training, the management controls, sign
the agreement with DOD on how we were going to improve that. We
monitor on a regular basis.
I would say that we also ask our IG to come back in and
check up on have we put those proper management controls in
place.
For these assisted acquisition services where we help other
agencies, we feel like we are now on solid ground. We still do
help all Federal agencies when they need help with their
acquisitions. We don't want them to come to GSA thinking we
take shortcuts to help them. We want them to come to us knowing
we can help their mission in a compliant way.
Ms. Bordallo. Thank you. Thank you very much, Mr. Chairman.
Mr. Taylor. Mr. Williams, I find several things curious. I
would ask for your intelligence on this.
I was here for September the 11th. The Cole was built in my
congressional district. It was brought back to my congressional
district for repairs. Two of my local newspaper editors, who
are both Vietnam veterans, brought it to my attention that they
had gotten within 50 or so yards of the Cole on the other side
of the Pascagoula River, undetected. Just walked up. Both
Vietnam veterans said if we had another RPG, we could have put
another hole in it.
I remember at another hearing bringing that to the CNO's
attention. But I also remember going to the home port at
Pascagoula and the shipyard and the Coast Guard station
adjacent to it, because after they brought it to my attention,
I felt like I had to do something. So I go to the Coast Guard
station. Who has got responsibility for the watershop
application of the Cole? Well, the Navy does. So I went to the
Naval Station. Who has got responsibility of the watershop of
the Cole? The shipyard does. Went to the shipyard. The Coast
Guard did.
So about the time line that this procurement is being
issued, September 28th of 2001, it again--it is almost a year
since the event of the attack on the Cole, and really nothing
has happened. And I think someone could draw the conclusion
that it wasn't until the events of September the 11th that some
people within the Navy said, Go do something and do something
in a hurry.
The reason I say all of that is, Mr. Williams, now that
someone has lit a fire under someone at the Navy to do
something almost a year after the attack on the Cole, if they
had come to the GSA and said we need to do something, we need
to do something really fast, under the normal procedures could
GSA have been tasked to buy these barriers and how quickly
could they have done it under the normal rules? Or are there
expedited rules that would have gone into place?
Mr. Williams. Well, I believe we could have done the task.
We had people who received this request from the Navy a week
after September 11th. They did a task but they broke the rules.
I believe we could have done it within the rules and done it
fast, given that, as Director Betro said, this is really a
single source. I believe you also had an urgent and compelling
situation and the Federal acquisition regulations allow you to
move fast when you have both an urgent and compelling
situation.
Mr. Taylor. How fast?
Mr. Williams. Maybe not as fast as we did it. But probably
if we did everything right, I think we probably could have done
it within a couple of weeks, or maybe a month. But we did
this--we can do an urgent, compelling, in 30 days or less. I
believe we could have done this, and it would have been
appropriately justified, and we could have done it in under a
month. And we do this to the tune of several billion dollars a
year for all Federal agencies. We now do it right. We just did
it wrong.
And, again, there were people who didn't have the proper
oversight, they probably didn't have the proper training. They
tried to break the rules to help the Navy with their urgent
mission. It was wrong what they did, but I believe we could
have done this in a correct manner and we could have done it
fast.
Mr. Taylor. Playing devil's advocate, is there any evidence
that the rules were broken? I realize a year has gone by since
the Cole was first attacked. Or very close to a year. But is
there any evidence in your--from what you can see, that the
rules were broken to expedite the purchase? Or do you feel like
the rules were broken to enrich someone?
Mr. Williams. Well, let me answer both questions. The rules
were broken to expedite the purchase.
When the Navy came to us after having already tested the
boat barriers in May of 2001, then they came to us in
September. Then went to our contracting officer, decided it was
okay to split these procurements, which was wrong.
And whether somebody enriched themselves, I think that is
part of the ongoing investigation. And I think Director Betro
has already talked about what he saw in that regard.
What came to us was, as we agreed to do this under the
small--under the threshold for competition for an 8A, to do it
in a sole source manner, we then got a request to go to
northern NEF and to P-CON.
Mr. Taylor. Mr. Betro, I am curious. As Mr. Williams
mentioned, the tests were conducted in May. It is June, July,
August, almost all of the month of September passes, apparently
nothing was purchased.
Two weeks after the events of September 11th, someone gets
a fire lighted, probably in the proximity of their body parts,
and decides to move. Is there any evidence between May and
September that any movement at all took place?
Mr. Betro. I really can't answer that. I can't say NCIS
wasn't designated until August of 2001 as being responsible for
the program of boat barriers. And we did not--I believe the
report was not done until August of 2001. Which suggested that
these barriers met the minimum requirements for the intended
purpose.
So it was August, about 2001, when we had a program manager
identified NCIS; the test results came back to us saying yes,
it met the minimum threshold of requirements, and the first
procurement was in October.
Mr. Taylor. But that certainly in my mind gets a little
confusing, when in all of this time apparently there is only
one supplier, so there really should--it is not a competition
any longer. So it is a question of whether or not that one
supplier made a product that was adequate. Is that what took
this long to decide, made the determination by August?
Mr. Betro. The combination of site surveys and examinations
of what was available commercially did come down to Dunlop, and
then the tests were conducted and the results of the test that
came back in August of 2001 said even though they were the only
manufacturer, we now had some confirmation that that
manufacturer could meet the minimum basic requirements. It is
about the same time as, well, that NCIS was then designated as
the program manager.
There were things going on but until we knew we had the
requirement met minimally at least, we weren't going to extend
any money to procure any technology, at least boat barriers.
Mr. Taylor. Because the Washington Post raised the issue
and you mentioned that about 90 percent of the barriers are
still available, was there a significant problem with the
barriers leaking and sinking, or was that just something that
happened to a few of them?
Mr. Betro. I have some colleagues from Naval Command here.
We divested on the program back in 2003 and so we would not
have been tracking, and I don't have information available.
Mr. Taylor. But you started buying them in September of
2001. I would imagine by now there is a sense of urgency. So
those deliveries were in a month or two of that, and I would
have hoped that you would have known early on if you had
problems on them.
Mr. Betro. I had no information available to us.
Captain Samuels. I am Mark Samuels. I am the commanding
officer of Naval Facilities Engineering Service Center, which
is technical agent for NAVFAC. Like my other dynamic pieces of
equipment that is maintained and that has to be done, we have
been involved in some of this maintenance, but most of that has
been done at the local bases. And I am not prepared right now
to talk about any of those specific patterns or problems that
may exist.
Mr. Taylor. If you would, Captain, for the record, since
you have been identified as a program officer, if there have
been a--when I say ``substantial,'' over ten percent of them
having problems with leaks or other quality effects that have
lead to a premature life diminishment, I would like you to get
back to this committee.
Captain Samuels. Yes, sir.
Mr. Taylor. If there is anything consistent that was
causing this problem that could be pointed to as a
manufacturing problem.
Captain Samuels. Yes, sir.
Mr. Taylor. Mr. Bartlett.
Mr. Bartlett. Thank you. I don't have any further
questions.
Mr. Taylor. If I may, I think Mr. Betro has offered to give
us a time line of what he feels are the criminal events. That
would have to be done in closed session. And I would, if Mr.
Betro is prepared to do that today, I would be open to doing so
today if that fits your schedule.
With that in mind, I am going to call this hearing to a
close and announce a ten-minute recess, and then ask our
panelists to come back at that time so we can receive testimony
in closed session.
I would also like to ask unanimous consent for Mr. Ron
O'Rourke to attend that hearing in his capacity.
Mr. Bartlett. So moved.
Mr. Taylor. The hearing is adjourned.
[Recess.]
[Whereupon, at 4:20 the subcommittee proceeded in Closed
Session.]
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A P P E N D I X
June 6, 2007
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June 6, 2007
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QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD
June 6, 2007
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QUESTIONS SUBMITTED BY MR. TAYLOR
Mr. Taylor. You mentioned that about 90 percent of the barriers are
still available, was there a significant problem with the barriers
leaking and sinking, or was that just something that happened to a few
of them?
Mr. Betro. Prior to installing the Dunlop Anti-Boat Barrier (DABB)
system, a full-scale test was performed by the Naval Facilities
Engineering Service Center (NFESC) on the existing commercial-off-the-
shelf (COTS) 6-foot diameter units. Testing demonstrated DABB's
effectiveness in stopping the threat for which they were designed.
NFESC recommended to NCIS the implementation of a larger diameter
unit to deter the widest range of expected small boat attacks. The
larger diameter unit required modification of the existing COTS 6-foot
diameter design and was put into production very rapidly in the
immediate wake of the 9/11 attacks. Operational verification testing
was conducted in Norfolk, VA in early 2002 on initial DABB units. The
units were found to be susceptible to leakage around and through the
end flanges. Upon Navy notification, Dunlop pursued modifications,
improving both lifecycle and performance capabilities. By the end of
the production run in late 2003, leakage issues had been minimized.
In October 2003, the Navy designated the Naval Facilities
Engineering Command (NAVFAC) as manager of the AT/FP program. NAVFAC
tasked NFESC to manage the Navy's Waterside Security Systems. In this
capacity, the NFESC has established standardized maintenance,
inspection, and operation procedures for the Dunlop barrier systems. A
centralized storage and maintenance depot for the Dunlop barriers was
established. This pneumatic design requires adjustment of the air
bladder from daily thermal expansion and contraction. Depending on the
site and range of temperature differentials this can impact regular
maintenance actions. As early production units show leakage problems in
the field, they are removed from service and returned to the depot for
refurbishment. New units from the end of the production run are issued
from the depot to replace the leaking units.
In our experience, the maintenance requirements are typical for
this type of structural system when operating in a marine environment.
As noted in the NCIS testimony, roughly 90 percent of the DABB units
purchased by the Navy remain deployed or in the NFESC depot available
for deployment today.
Mr. Taylor. It is my understanding that U.S. Attorneys cannot talk
about ongoing investigations, but it is also my understanding that
those people who have approached a U.S. attorney are free to say, I
have approached that U.S. Attorney and asked them to look into this
subject. And for the record, I would like the names of the United
States attorneys that have been approached, and what days they were
approached, and what information was given to them.
Mr. Betro. Below is the list of all Assistant United States
Attorneys (AUSAs) briefed and the date of declination/referral, or, in
the case of DC, the last meeting on this topic:
______
QUESTIONS SUBMITTED BY MR. BARTLETT
Mr. Bartlett. You mentioned that about 90 percent of the barriers
are still available, was there a significant problem with the barriers
leaking and sinking, or was that just something that happened to a few
of them?
Mr. Betro. Prior to installing the Dunlop Anti-Boat Barrier (DABB)
system, a full-scale test was performed by the Naval Facilities
Engineering Service Center (NFESC) on the existing commercial-off-the-
shelf (COTS) 6-foot diameter units. Testing demonstrated DABB's
effectiveness in stopping the threat for which they were designed.
NFESC recommended to NCIS the implementation of a larger diameter
unit to deter the widest range of expected small boat attacks. The
larger diameter unit required modification of the existing COTS 6-foot
diameter design and was put into production very rapidly in the
immediate wake of the 9/11 attacks. Operational verification testing
was conducted in Norfolk, VA in early 2002 on initial DABB units. The
units were found to be susceptible to leakage around and through the
end flanges. Upon Navy notification, Dunlop pursued modifications,
improving both lifecycle and performance capabilities. By the end of
the production run in late 2003, leakage issues had been minimized.
In October 2003, the Navy designated the Naval Facilities
Engineering Command (NAVFAC) as manager of the AT/FP program. NAVFAC
tasked NFESC to manage the Navy's Waterside Security Systems. In this
capacity, the NFESC has established standardized maintenance,
inspection, and operation procedures for the Dunlop barrier systems. A
centralized storage and maintenance depot for the Dunlop barriers was
established. This pneumatic design requires adjustment of the air
bladder from daily thermal expansion and contraction. Depending on the
site and range of temperature differentials this can impact regular
maintenance actions. As early production units show leakage problems in
the field, they are removed from service and returned to the depot for
refurbishment. New units from the end of the production run are issued
from the depot to replace the leaking units.
In our experience, the maintenance requirements are typical for
this type of structural system when operating in a marine environment.
As noted in the NCIS testimony, roughly 90 percent of the DABB units
purchased by the Navy remain deployed or in the NFESC depot available
for deployment today.
Mr. Bartlett. It is my understanding that U.S. Attorneys cannot
talk about ongoing investigations, but it is also my understanding that
those people who have approached a U.S. attorney are free to say, I
have approached that U.S. Attorney and asked them to look into this
subject. And for the record, I would like the names of the United
States attorneys that have been approached, and what days they were
approached, and what information was given to them.
Mr. Betro. Below is the list of all Assistant United States
Attorneys (AUSAs) briefed and the date of declination/referral, or, in
the case of DC, the last meeting on this topic: