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


 
    THE COSTS OF MILITARY OPERATIONS AND RECONSTRUCTION IN IRAQ AND  
                              AFGHANISTAN 

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, JULY 31, 2007

                               __________

                           Serial No. 110-17

                               __________

           Printed for the use of the Committee on the Budget


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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
JIM COOPER, Tennessee                J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine               JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania    SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
ROBERT E. ANDREWS, New Jersey        JOHN CAMPBELL, California
ROBERT C. ``BOBBY'' SCOTT, Virginia  PATRICK J. TIBERI, Ohio
BOB ETHERIDGE, North Carolina        JON C. PORTER, Nevada
DARLENE HOOLEY, Oregon               RODNEY ALEXANDER, Louisiana
BRIAN BAIRD, Washington              ADRIAN SMITH, Nebraska
DENNIS MOORE, Kansas                 [Vacancy]
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
[Vacancy]

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                James T. Bates, Minority Chief of Staff


























                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, July 31, 2007....................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................     1
    Hon. Paul Ryan, ranking minority member, House Committee on 
      the Budget.................................................     8
    Hon. Gordon England, Deputy Secretary of Defense.............    10
        Prepared statement of....................................    13
    Robert Sunshine, Assistant Director for Budget Analysis, 
      Congressional Budget Office................................    46
        Prepared statement of....................................    48
    Stuart W. Bowen, Jr., Special Inspector General for Iraq 
      Reconstruction.............................................    63
        Prepared statement of....................................    66
    Hon. Joseph Saloom, Ambassador of the United States and 
      Senior Transition Advisor, U.S. Department of State........    69
        Prepared statement of....................................    71
    Hon. John A. Gastright, Jr., Deputy Assistant Secretary of 
      State for South and Central Asian Affairs, U.S. Department 
      of State...................................................    75
        Prepared statement of....................................    76
    Hon. James P. McGovern, a Representative in Congress from the 
      State of Massachusetts, Congressional Progressive Caucus 
      Issue Report No. 1, ``Iraq War Cost Tradeoffs''............    93
    Hon. Robert C. ``Bobby'' Scott, a Representative in Congress 
      from the State of Virginia, Oct. 9, 2002, letter entered 
      into the Congressional Record..............................    96
    Hon. Earl Blumenauer, a Representative in Congress from the 
      State of Oregon, and Congressman McGovern, questions for 
      the record and responses...................................    97


                  THE COSTS OF MILITARY OPERATIONS AND
                 RECONSTRUCTION IN IRAQ AND AFGHANISTAN

                              ----------                              


                         TUESDAY, JULY 31, 2007

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:00 a.m., in room 
210, Cannon House Office Building, Hon. John M. Spratt, Jr. 
(Chairman of the committee) presiding.
    Present: Representatives Spratt, Edwards, Allen, Schwartz, 
Beceerra, Doggett, Blumenauer, Boyd, McGovern, Scott, 
Etheridge, Hooley, Baird, and Smith.
    Chairman Spratt. I would like to welcome our first panel 
Deputy Secretary of Defense, Gordon England; the Under 
Secretary of Defense, Tina Jonas; General Sattler the J-5, all 
to discuss the cost of our operations in Iraq and Afghanistan.
    This is the third time that Secretary England and Under 
Secretary Jonas have agreed to testify before the Budget 
Committee. You have accepted all of our invitations and frankly 
we very much appreciate your willingness to field our questions 
so that we can get a better grasp, a better idea of the cost of 
our operations in Iraq and Afghanistan.
    We also have a second panel of excellent witnesses; Robert 
Sunshine of the Congressional Budget Office; Stuart Bowen who 
is the Special IG for Iraq reconstruction; Ambassador Joseph 
Saloom; and Deputy Assistant Secretary John Gastright from the 
State Department.
    The purpose of this hearing as I said is to get a better 
handle, a better grasp, a better idea of the cost of military 
operations and reconstruction in Iraq and Afghanistan to date. 
And as equally important if not more important how much in 
future cost we are facing. In particular we would like a better 
understanding of how the requirements or assumptions that 
underlie the President's budget may have changed over the last 
several months and how these changes may affect the cost of 
operations next year and beyond.
    Much has happened since the submission of the President's 
budget. The surge has been implemented, the 2007 War 
Supplemental has passed, the President's bench mark report has 
been submitted, the Walter Reed Commission, amongst other 
things, has been just released and this is to name only a few.
    Since February the monthly burn-rate has already increased 
from $10 billion to $12 billion. We are here not just to count 
beans. We are here to ask some fundamental questions because 
what we are dealing with in our estimation of the cost are 
constructs that are given to us by GAO, CBO, OMB--well not OMB 
because that is one of the things we are going to question for 
today. But we have several different constructs of cost which 
tend to converge on each other, but we would like to know are 
these approximations correct.
    And secondly, we would like to know does the Department of 
Defense keep some similar sort of financial constructs of the 
cost of operations both historic and future. Do you have any 
way of projecting or do you project in your assemblage of the, 
FYDP, the future years defense plan, what likely costs are 
going to be for our deployment in Iraq and Afghanistan?
    CBO has an estimate that model which has been upgraded, I 
will be using their old numbers. CBO said when we asked them, 
``What is the cost of staying there into the future?'' CBO 
said, ``If you draw down your forces in the theater, and that 
is Afghanistan and Iraq, to about 75,000 additional troops a 
remaining force of 75,000 troops, by the year 2013. And if you 
maintain that steady level of troops through 2017 the ten year 
cost is $845 billion.''
    Now add that to the cost we have already incurred, it is 
$1.1 to $1.2 trillion. That is a substantial sum of money and 
lots of trade offs and much needed things involved in 
appropriating that level of funding. And we would like to know 
if you could regard that as a reasonable approximation of what 
the future costs are likely to be.
    We understand that about $44.5 billion has been spent or at 
least appropriated and remains to be obligated for 
reconstruction in Iraq. We would like to know if that number is 
correct and if we have the facilities to show for that sort of 
substantial outlay, $44.5 billion. In addition, we understand 
that the Iraqis have allocated $37 billion for reconstruction 
of their country, but they have yet to spend substantial sums 
of this money including $10 billion put aside in a fund, it was 
one of the bench mark objectives in determining whether or not 
the government was getting underway with projects it needs to 
do.
    These are the sort of questions we would like to ask you 
today, we would like to explore with you today. We will receive 
testimony after your testimony about a number of projects there 
that have not been completed and yet the contractors have 
essentially spent 100 percent of the funds allocated to those 
projects. We would like to find out, number one, if these 
allegations are true. And, number two, if there are any 
consequences for the contractors who have spent fully the 
amount allocated but have not completed the facility. That 
includes seven or 12 health clinics, eight of 20 hospitals, a 
number of public facilities that have not been completed 
despite the fact that the budgeted amounts of money have been 
spent.
    Let me just quickly take a minute to show you the numbers 
that we are talking about so that we are singing to some extent 
off the same sheet of music, or you at least know what we are 
talking about. Jose could you start with the series of charts. 
We will just run through these quickly.


    That is our estimation of difference in defense cost since 
the Bush Administration took office. The ten year budget at 
that time by CBO's forecast was $3.6 trillion, today it is $5.7 
trillion. That is a substantial sum of money. We understand 
there are reasons for it, but it is a substantial sum to 
accommodate in any budget if you are trying to bring it to 
balance.
    Next chart.
    
    
    Here is our layer cake showing the different components of 
the increase in the Defense budget since the year 2000. And you 
can see that the war supplementals constitute a substantial 
part of that particular budget and whether or not they have to 
continue indefinitely into the future clearly has an impact on 
our Defense Program.
    Next chart.
    
    
    To date by our estimation with CBO's help and GAO's help 
and CRS's help Operation Iraqi Freedom has cost $450 billion, 
Operation Enduring Freedom Afghanistan, $127 billion, Operation 
Noble Eagle $28 billion. War funding provided to date is over 
$600 billion by the calculation of those who have like CBO and 
CRS.
    Next chart.
    
    
    Even though the war has gone on for in its fifth year now, 
it steadily increases. Instead of moving towards a conclusion 
where we spend less as we achieve our objectives, we are 
actually spending more and more each year. Now these numbers 
then the year 2009 fall off completely because there is no 
place over after that for national defense, but as you can see 
there is an ominous indication that the cost is continuing to 
increase, it has increased steadily for each of the last five 
years.
    Next chart.
    
    
    This is just a way of figuring out the cost of keeping one 
troop and an expeditionary force in a theater like Iraq or 
Afghanistan. It is very, very substantial, $390,000 per troop. 
By a simple back of the envelope calculation, dividing the 
number of troops into the amount spent within that theater.
    Next chart.
    
    
    And this is another calculation of the cost of Iraqi 
Freedom, which is $450 billion total cost of U.S. budget to 
date per the numbers provided as by CBO and CRS.
    Next Chart.
    
    
    Total cost $135 billion 2007. Cost per month comes out to 
be $11.3 billion. The cost per day $370 million. A substantial 
sum of money any way you cut it.
    Next chart.
    
    
    And this is CBO's chart which is out of date because we 
have just gotten a new estimation but I referred to it in my 
opening statement earlier. CBO says, ``If you began drawing 
down your forces such by the year 2007--you would have by the 
year 2013, you would have about 75,000 troops in theater. The 
cost and if you then extended that force level of 75,000 troops 
in theater out over the next five years, the cost over ten 
years will be $840 billion.'' Now that is a consequential 
number. It has real trade offs and that is why we are here 
today.
    We will refer to these charts again in the course of our 
hearing today, but I simply want to put them on the wall to let 
you know what we are working against. If you disagree that is 
part of the purpose of this hearing is to understand where you 
disagree and to improve our understanding, our grasp per the 
cost of the war.
    Before proceeding with your statements, let me turn to Mr. 
Ryan our Ranking Member for his opening statement. Mr. Ryan.
    Mr. Ryan. Thank you, Chairman. Deputy Secretary England it 
is nice to have you back with us again. I think this is your 
third time here this year. I also wanted to say to Inspector 
General Bowen and my friend Joe Saloom, the last time I saw you 
two gentleman was in Baghdad a few months ago. And it is nice 
to have you here and I look forward to your progress reports as 
well.
    Of the many pressing issues this Congress faces, none seems 
more urgent than our operations in Iraq and Afghanistan as the 
Chairman just mentioned. And it is obvious from the many 
debates we have had this year here, there are a series of 
members in both sides of the aisle and on different sides of 
the issues who recognize that whatever we do over the next 
several months will have a profound and lasting implication.
    So it is important for all of us to measure our steps 
carefully to avoid over simplifications, to get away from the 
bumper sticker phrases and accusations and to keep in earnest 
debate about the real stakes involved in our decisions that we 
are going to make. And I know that is the intention of Chairman 
Spratt and all of our members here today.
    It is also obvious that when we discuss the cost of these 
operations we mean a great deal more than what can be measured 
in dollars. Nevertheless it is fitting to the Budget Committee 
should examine this part of this subject. The most tangible 
actions in this matter that Congress has taken, and will take 
again, involve budget related matters. Specifically providing 
funds for these operations for the troops themselves, for their 
equipment, supplies, support, and so on. So the Budget 
Committee should evaluate what we have spent so far, how we 
have spent it, and what lessons can be learned from our 
choices.
    Early on in these operations the spending bills were truly 
supplemental, they were added on top of the President's budget. 
At the urging of this Committee, the President began including 
the estimated supplemental amounts in his annual appropriation 
submissions and we are very pleased to see the DOD and OMB 
moving in this direction. This year, the President's 2008 
supplemental request is again included in the budget proposed 
in February. Unfortunately, the supplemental is not being 
considered as part of the DOD appropriations bill on the floor 
this week which will make it very difficult for the troops to 
receive their funding at the start of the fiscal year, a 
concern that we should serious consider at this hearing.
    In addition, as a measure of credibility, Congress and the 
Administration should continue to include future war cost in 
the regular budget process. In estimating what those costs will 
be it is up to DOD to provide accurate and timely reporting of 
the monthly costs associated with the war and I hope that that 
will be the case.
    If it is as the Chairman's charts suggest, then we should 
know it and we should budget for it. Administration has 
presumably learned from both successes and mistakes this period 
including its reconciliation in reconstruction efforts. We 
should insist that today's witnesses explain what they have 
learned and what they have done to ensure that any mistakes of 
the past will not be repeated. We are not going to answer every 
question about Iraq at this one hearing today, but we are not 
going to resolve all the many issues, but we should be looking 
into the budget ramifications and that is what we are going to 
be taking the course today.
    But certainly we can make this hearing a useful 
contribution to the debate that is going on in Congress. I hope 
that is the case will all the members here today. And Deputy 
Secretary England, I think you know the general take of the 
interest we have here in the Committee, and I look forward to 
your testimony. I also look forward to hearing what mistakes 
that have been made have been corrected and how we are going to 
prevent those mistakes from being from happening again. And we 
also want to know how we are going in the next 12 months. Where 
things are going from a funding perspective, and how reliable 
the funding streams you may or may not have as we consider the 
supplemental and the appropriations bill.
    And with that, Mr. Chairman, I thank you for your 
indulgence.
    Chairman Spratt. Thank you, Mr. Ryan. Secretary England, 
the floor is yours, but before you take it let me say that we 
can take your prepared statement and make it part of the record 
so that you can summarize it. Thank you, sir.

STATEMENT OF THE HONORABLE GORDON ENGLAND, DEPUTY SECRETARY OF 
DEFENSE; ACCOMPANIED BY: TINA JONAS, UNDER SECRETARY OF DEFENSE 
(COMPTROLLER); LIEUTENANT GENERAL JOHN F. SATTLER, DIRECTOR FOR 
          STRATEGIC PLANS AND POLICY, THE JOINT STAFF

                  STATEMENT OF GORDON ENGLAND

    Mr. England. Good. Mr. Chairman, thank you and 
Representative Ryan thank you. Members of the House Budget 
Committee, it is a pleasure to be back again. Some of those 
questions rather daunting questions I am not sure we can answer 
all those, but perhaps we can provide some clarity, or at least 
our thinking on some of those subjects. So we will do the best 
we can, Mr. Chairman.
    First if all, I am very pleased to have back with me Tina 
Jonas who is our Comptroller. Also this time to have Lieutenant 
General John Sattler. He is the Director of Strategic Plans and 
Policy. And I believe he can be helpful in some of these 
discussions also today.
    I do want to say I am very pleased to see you have the 
second--the second panel here today. I think that will be very 
helpful. And Stu Bowen who is a Special IG for Iraq deals with 
me directly and he has done a very excellent job. And as you 
mentioned, Joe Saloom, also John Gastright. So people who work 
with the Department pleased that they are here also for their 
panel, War Cost.
    We do have a commitment. You know the Secretary is fully 
committed to a fully open and transparent dialogue with the 
Congress. We do provide the Congress our monthly cost of war 
reports. The last one we provided, this month in July, and it 
covered all the expenses from September 11, 2001 through May 
2007.
    Mr. Chair, we can discuss the dollars. Once in a while they 
get a little confusing, because I believe you deal with the 
entire federal government, we deal with only the DOD aspect. 
That said, our latest report through May, Congress had 
appropriated $549 billion for GWOT, of which we had obligated 
$438 billion as of May. So, again, the reports we turn in 
monthly and I think they are clear and hopefully they are clear 
and if not we will certainly clarify them for this Committee.
    Our request this year is $141.7 billion. And as we 
commented, that is for the GWOT. As we commented in our last 
two hearings, that is literally extrapolating the current war 
costs for 2007 into 2008 because by the time we put the budget 
together, and frankly still at this time, that request will 
evolve and we will get additional insight when the President's 
September report on the Iraqi benchmarks comes forward. Also 
there is various assessments underway that all come about that 
time. So there are adjustments to fiscal year 2008. We can talk 
some of that today, but frankly it is going to be based on 
insights, the situation on the ground, the President's 
decisions, time lines, etcetera. I mean basically we respond to 
the President's direction in this regard.
    Now the last time I met there were questions about 
contracts and I think a number of members had questions about 
contracting in Iraq. And as of April 2007 if I can just give 
you the latest numbers. At that time there were 129,000 
contractor personnel in Iraq. Twenty-one thousand were U.S. 
citizens. So about 16 percent are U.S. citizens. Forty- three 
thousand or 33 percent were third country nationals. And sixty-
five thousand, which is what you like to see keeping the local 
Iraqis employed, 65,000 or 51 percent were the local Iraqi 
nationals.
    You mentioned the and representative Ryan specifically in 
terms of oversight and accountability, we do have an number of 
processes in place. First of all, the DCAA, the Defense 
Contract Audit Agency they did over 35,000 reviews in fiscal 
year 2006. Reviewed about $345 billion in contracts and that 
effort saved about $2.3 billion. There is also the DOD IG they 
had a 34 GWOT related projects worth about $91 billion. And 
then you will here from Stu Bowen the Special IG Inspector for 
Iraq reconstruction and I will let him cover his, but he also 
has extensive coverage of contracts.
    Regarding abuse, I mean we do everything we can, obviously, 
to prevent abuse but like every other part of society you can't 
prevent all of it, but you can uncover it and you can punish 
people who do not play by the law. And that is a deterrent when 
we find people who are doing things wrong, we do what everybody 
else does. We prosecute them. The DOD IG investigations have 
led to 17 convictions. The Special IG for Iraq reconstruction 
they have over 65 ongoing investigations and their efforts have 
led to five convictions. And I view that as good news because 
when people do bad things we want to catch them and we want to 
convict them as a deterrent to other people to live by the 
rules.
    A few initiatives, IEDs. We have talked about this in the 
past. Improvised explosive devices, that is the reason most of 
our people are killed and injured. We spend about $4.4 billion 
and that is our recommendation as I believe for fiscal year 
2008. In the past we have included MRAP vehicles, the new 
vehicles for specific kinds of threats in Iraq. We will be 
asking for additional funds that Congress just reprogrammed 
$1.2 billion and I thank the Congress for that.
    We now have that $1.2 plus $4.4 for MRAPs, different than 
the IED but happens to be the same number, $4.4. So that $5.6 
billion is being used to order 6,400 of these vehicles and we 
will be requesting another $5.8 so there will be an additional 
request that we know of today of--pardon me $5.3 because there 
is already $440 billion in the budget. So there will be $5.8 
billion additional for MRAPs in the fiscal year 2008 and that 
is to buy additional vehicles and also all the support to go 
with those vehicles.
    A comment. We do have a task force for business and 
stability operations in Iraq. As you probably know 40 percent 
of the Iraq population is under the age of 15, so jobs are 
very, very important and very important that we have economic 
development in Iraq. We have assessed 64 factories, commerce, 
DAID, agriculture, Iraqi ministries, DOD, also some other 
countries supporting us. And so there is a significant effort 
underway in terms of job creation. CERP fund very important, 
Commanders Emergency Response Program. General Sattler can talk 
more about that, but again it is a way to employ Iraqis and 
show direct benefits.
    Training and equipping, obviously important. Iraqi forces 
we are prepared to discuss that also with you in terms of the 
status and that is very important. Obviously, they need to come 
up to being able to take over the job so that we can, frankly, 
leave at some point. It is important that we have them up to 
speed and that is a major effort of the Department.
    Lastly, I returned just a week or so, two weeks ago from 
both Iraq and Afghanistan. And I will tell you I was struck by 
the significant progress since my last visit. Yesterday I was 
also struck by an article in the New York Times by Michael 
O'Hanlon and Ken Pollack. And they were, ``surprised'' by the 
gain they saw. I mean they had a very positive article 
yesterday. They said our troops the moral is high. I can tell 
you that is the case, both Iraq and Afghanistan. And for the 
Iraqi security forces, their quote, ``things look much better 
than before.'' That was also my observation. Things were 
obvious on a very positive slope in Iraq and also Afghanistan.
    I did meet with many of the men and women who serve our 
military, who protect and defend this great nation every day 
and on behalf of them I do thank you and I thank the Congress 
for the support you provide us that we can therefore provide 
them.
    So with that, Mr. Chairman, we would be pleased to take 
your questions and we will try to provide as much clarity as we 
can, but I will tell you the future is still quite hazy out 
there in terms of the total direction and, therefore, it is 
going to very hard to be definitive with you today, but to the 
extent we can be helpful, we certainly will be.
    [The prepared statement of Gordon England follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Spratt. Thank you very much, Mr. Secretary. I 
believe you have to leave at twelve o'clock?
    Mr. England. Yes, I do, sir.
    Chairman Spratt. And I think we have votes just before 
then, so that converges our program our agenda converges with 
yours. That means I will sort of ride the gavel pretty closely 
up here to see that everyone gets their fair chance but that 
several then we also move along.
    I failed to ask unanimous consent that all members be 
allowed to submit an opening statement. At this point in the 
record, if they care to do so, without objection, is so 
ordered.
    Mr. Secretary, the numbers we show they are $610 billion 
for Iraq and Afghanistan and enhance North American security. 
Four-fifty of that going to Iraq and $127 billion of that going 
to Afghanistan. Do these comport with your own constructions of 
what the cost has been?
    Mr. England. Let me to turn it over to my Comptroller. I 
think she has, you know, the specific numbers. So, Tina, if you 
can address the specifics.
    Ms. Jonas. Thank you. Mr. Chairman, I believe the numbers 
that you are using the $610 or what CBO is recording. That 
includes State Department figures, I believe, and other 
government numbers. We would, as the Secretary said in his 
opening statement, our cost of war reports again this is for 
the Department of Defense only, we record $438 billion--point 
four billion dollars as having been spent; $332.6 on Iraq, 
$78.1 on Afghanistan and another $27.7 for Operation Nobel 
Eagle which of course is our Homeland Defense.
    Chairman Spratt. And that is the Department of Defense.
    Ms. Jonas. That is the Department of Defense.
    Chairman Spratt. The Pentagon itself. If you add in the 
State Department, I believe they may be including Veterans' 
Administration expenses, incremental expenses as well.
    Ms. Jonas. Yes, sir.
    Chairman Spratt. All inclusive it is a bigger number. Do 
you have any notion of whether or not the $610, the $450, and 
the $127 are rough approximations of all inclusive cost?
    Ms. Jonas. Again I would defer to you on that and I have 
not looked at the State figures myself. I would say that within 
the amounts that CRS has noted there is some disagreement on 
their figures including the fact that they have included $2 
billion of base housing allowance housing money in that 
estimate.
    So we have some minor disagreements, but I would say it is 
a rough order.
    Chairman Spratt. What about the surge itself, which 
involves the introduction of about 10,000 additional troops 
that have been over then. What is your estimation of the annual 
cost, the one year cost of the surge?
    Mr. England. We in the budget we had as I recall $6.5 
billion that was the cost of the surge and that was until 
October 1. So we funded the surge until October 1 of this year, 
so that is six and a half billion dollars. We have no funding 
past October 1 for the surge. And we have no funding in the 
GWOT fiscal year 2008 cost of war.
    Chairman Spratt. Now I wanted to ask that question. Let me 
just stop you and not to interrupt you, but to get this point 
clear, because this emerged from our last hearing as well, I 
believe.
    We have no money in the supplemental or the Department of 
Defense Appropriations bill for the surge beyond September 30?
    Mr. England. That is correct. That is correct. The decision 
was made to fund it through September 30. We did not include 
any cost in the fiscal year 2008 GWOT pending progress on the 
ground, because we did not know, one, how long the surge would 
last. It is a surge, remember this now goes back some period of 
time, Mr. Chairman, these costs were first put together. And so 
we did not know what the level of activity would be past 
October 1, so we have nothing in the budget.
    And at this point, frankly, we will delay providing a 
budget amendment, frankly, as long as we can until we get more 
clarity in terms of exactly what the commitment will be in Iraq 
in terms of those added cost.
    Chairman Spratt. Well if the decision is to extend the 
surge for additional months, will there have to be a 
supplemental request on top of the supplemental still pending 
and the Defense Appropriations bill? Will there have to be an 
additional supplement request to pay for it?
    Mr. England. I would expect there would be an amendment of 
some sort to the current GWOT supplemental. So that GWOT 
supplemental, $141.7, I don't know what the mechanism will be, 
but yes there will be a delta cost. And I and in fact there 
definitely will be a delta cost, because quite obviously at 
this point, I mean, all those troops will not be out on October 
1. I mean it would be physically impossible to do that. So we 
know there will be some increased costs. I don't know what the 
mechanism will be to handle that, Mr. Chairman. I don't know if 
that is an amendment. I will let people more familiar with that 
decide.
    Chairman Spratt. Let me turn to contractor experiences in 
that theater in Iraq in particular. There have been all kinds 
of reports of projects started, budgets fully spent, projects 
partially completed and the contractors seem to have been 
exonerated. Seem to have walked away with impunity. Is that the 
case?
    We don't hear the consequences of these contractor 
overruns. These contractor apparent violations, breaches of 
contract. Are there any consequences for these contractors who 
don't complete jobs within the budgeted cost of which they have 
contracted?
    Mr. England. I would say contracts with DOD we definitely 
track the contractors and if people don't perform, if nothing 
else has an effect on their next contract. So past performance 
is certainly a criteria in awarding contracts in the future. I 
think each one of those you would have to look at individually. 
And of course again I think the Special IG can comment better 
than I can.
    I mean a lot of these contracts are under extraordinary 
difficult situations and terms and conditions change I expect 
in a lot of cases just because the conditions on the ground. 
But Mr. Chairman, I think it would be better, frankly, to 
discuss that with the Special IG, because every one of those 
circumstances is a different situation.
    Chairman Spratt. One last question to you and or to 
Secretary Jonas. We just received this morning a calculation by 
CBO using their model for projecting future cost of our 
engagement in Iraq and Afghanistan. And the projection they 
gave us shows that military operations between 2008, 2017 ten 
year period of time, meaning incremental outlay of probably 
$845 to $931 billion. With an indigenous security forces, they 
have, this is not the right chart. I don't think you have this 
yet because I think we got it this morning. You do? Okay.
    Chart number 18.
    
    
    Military operations at $845 to $931 billion, indigenous 
security forces, $50 billion, foreign aid and diplomacy, $16 
billion, veterans services, $13 billion. Obviously, there is 
some clear estimates there that are not firm numbers, but 
nevertheless they come up from an approximation of the ten year 
cost of remaining--of maintaining a presence of 75,000 troops, 
building down to that over five years. And then for five years 
maintaining that level between $924 billion and $1 trillion 
dollars.
    Do you do any sort of forecast yourself as you look at the 
course that we are likely to take? Does the Pentagon turn to 
your shop, Secretary Jonas or turn to you Mr. Secretary and 
say, ``Give us your best take, your best estimate of what 
staying here one year, five years, and ten years is likely to 
be so we can factor it into our decision making.''
    Mr. England. I would say, Mr. Chairman, we don't because 
that bottom line up there is an assumption. I mean it depends 
on what your assumptions are. That is a long way in the future 
to have those assumptions and then to predict cost. So----
    Chairman Spratt. It is an extrapolation from existing cost 
and we have got five years of experience so they are 
extrapolating from that, not just pulling an assumption out of 
the air. They are extrapolating from known cost to what future 
costs are likely to be at certain force levels.
    Mr. England. Yes, sir. I mean that is the assumption is 
those force levels and of course that is the driver in the 
assumptions. So when you are talking 2008 to 2017, I mean the 
assumption is there is 75,000 troops I guess on the--and on 
this assumption for that entire period of time. I mean we don't 
have that sort of assumption. I don't know if that is valid or 
not. Obviously, you make an assumption whatever those costs 
are, but I can't tell you if that is a valid assumption. I 
don't think anybody can, Mr. Chairman. I mean that is a long 
time in the future to be assuming a troop level and I am not 
sure we know what that troop level will be in a year, frankly, 
much less all the way out to 2017.
    So the final numbers, obviously, a function of what that 
assumption is, but I would think lots of people would have a 
different assumption in terms of those troop levels. So I don't 
know how we can help you with that, Mr. Chairman.
    And we don't have that sort of an assumption going out to 
that period of time. I mean we look through a FYDP, so we are 
only looking at a five year period, and that is for our base 
budget where we actually know and predict the size of our 
force. I mean we know by law the size of our force. We know 
what are normal deployments are. We know what our equipment and 
maintenance, we know what is being procured. So we estimate 
that over a five year period. We do it with a reasonable degree 
of certainty but we don't do that with war cost, because we 
don't have that degree of certainty, certainly.
    Chairman Spratt. Thank you, sir. Mr. Ryan.
    Mr. Ryan. Secretary, I wanted to ask you about just the way 
we do the supplementals here. We have, you know, and from this 
Committee's perspective we have long been saying give us the 
supplementals early so we can plan for the full fiscal year 
ahead and you did that. And that was helpful. You submitted the 
fiscal year 2007 and fiscal year 2008 supplemental back in 
February with the budget itself. It took us until about June to 
get the fiscal year 2007 supplemental done.
    The DOD approps bill is on the floor this week. It had been 
our hope that the fiscal year 2008 supplemental would be on the 
floor this week with the DOD approps bill, but that doesn't 
seem to be the case. Can you, you just mentioned in your answer 
to the Chairman that you do not have funding for fiscal year 
2008 beginning October 1 for Iraq funding. Is that correct?
    Mr. England. That is correct.
    Mr. Ryan. So we have this----
    Mr. England. We do not--pardon me. We have fiscal year 
2008----
    Mr. Ryan. Surge, yeah.
    Mr. England [continuing]. Funding but not for the surge.
    Mr. Ryan. That is what I mean.
    Mr. England. Yes. Right.
    Mr. Ryan. And so we know that we are still going to have 
these troops here. We know that on October 1 this is going to 
occur. The question I want to get at is, what reprogramming 
authority do you have if you don't get the funding in time? How 
much latitude do you have, number one. Number two, what 
efficiencies are lost, what are the cost associated with doing 
this piecemeal, incrementally?
    I believe that, you know, we are losing a lot of 
efficiencies by doing this on a drib and drab standpoint and 
just doing this like we have done before in a month at a time 
or something like that.
    Can you go to the cost that are involved with having to 
reprogram these funds away from other priorities into pressing 
priorities and not having that sort of predictability that 
getting a full years worth of appropriations give you.
    Mr. England. So it is very, very disruptive and Congressman 
Ryan you are right, in the fiscal year 2007 which came very 
late there was a lot of debate about the 2007. Everybody said, 
``Well you can last until such and such a time.'' The fact of 
the matter is we move a lot of money around in the Department. 
It is also extraordinary disruptive for our men and women who 
serve, because we literally take money out of their accounts 
and various accounts to pay for ongoing operations, things that 
we need to fund.
    We also have commitments. So for example, the vehicles I 
talked about. When we buy those vehicles, I mean that is a 
large cash flow and our manufacturers buy materials and goods 
to go into a long production chain. Now if we only fund them 
incrementally, they can only buy very small lots, no one ever 
ramps up production, so frankly, we can't make our production 
rates. So we do need funding, reliable, predictable funding 
over a period of time so we can make commitments for everything 
that we buy, for everything that we spend in both support of 
our normal operations and of course for our war operations.
    So when the funding is late, we then have to reallocate 
funds for some period of time, which is very disruptive. And if 
they come incrementally then we cannot make the kind of 
commitments we need to make on a long term basis. So it is 
costly, but it is also that we can't do the mission of the 
Department of Defense. So first you can't do the mission, and 
secondly it is costly, and third it is very disruptive for our 
men and women in uniform.
    Mr. Ryan. What program--if this stalemates through 
September, your fiscal year 2008 supplemental, what programming 
authority do you have and how long can you play that game until 
you literally run out of funds?
    Mr. England. So, Tina, can you talk----
    Ms. Jonas. Yes. Mr. Ryan, we have approximately, I believe 
it is about $3 billion roughly, $3 billion in reprogramming 
authority, but as the Deputy said, that tends to hurt our other 
programs. I mean for example one important program to readiness 
are the depot maintenance accounts. And so we tend to take 
money from areas like that. Last year we had to borrow some 
money, I believe, from the accounts which pay our troops. So it 
does tend to get difficult. It certainly provides an element of 
uncertainty that is not helpful as we try to move forward.
    Mr. England. Also----
    Mr. Ryan. Go ahead.
    Mr. England. Mr. Ryan, if I can comment. I believe the 
reprogramming authority level is set by the Congress, is that 
not right?
    Mr. Ryan. Right.
    Ms. Jonas. That is right, sir.
    Mr. Ryan. Yeah.
    Mr. England. So typically we ask for say $5 billion in 
reprogramming or $8 billion so that we have some flexibility, 
but normally that is limited, because obviously the Congress 
has line item authority and they tend to want to limit that, 
and that is understood. But a higher reprogramming, obviously, 
eases things for us, but it does not solve the problem and we 
still have the same fundamental problem, but to the extent we 
can have a higher reprogramming authority that would also be 
helpful.
    Mr. Ryan. Your fiscal year 2008 supp request is $141 and 
your reprogramming authority is three right now----
    Ms. Jonas. I believe it is about three.
    Mr. Ryan [continuing]. As it stands? Okay. Let me ask you 
one question on the MRAP. How many MRAP vehicles are in 
production now?
    Mr. England. I believe we have on order over 3,000 vehicles 
actually definitize orders. We have we will have a total, I 
believe, of over 6,000 as we definitize current contracts. So I 
believe right now we will have as we definitize contracts, 
6,400 vehicles.
    Mr. Ryan. That is the $4.4 billion that has already been 
obligated?
    Mr. England. That is the $4.4 plus the $1.2 of 
reprogramming dollars that was just reprogrammed by the 
Congress through the last couple weeks ago.
    So that is the $5.6 and that is for those vehicles, but 
what we did, Mr. Ryan, because we wanted the vehicles as 
quickly and as many as we could and as quickly as we could, so 
we increased the production ramp to the maximum production 
ramp. We deferred a number of the support dollars and the 
spares and all that to maintain the vehicles so we moved that 
into the fiscal year 2008. So that will be part of the $5.3 
billion that we will come back to the Congress in fiscal year 
2008 and that will buy us another tranche of vehicles plus the 
year's worth actual two years, I think, of support cost and 
spares and all those things we have to buy to support the 
vehicles.
    Mr. Ryan. How many are deployed in the field? Any?
    Mr. England. Yes. We have--I will have to get you a 
specific number. Do you know, John?
    General Sattler. I do not have that number, Mr. Secretary.
    Mr. England. Okay.
    Mr. Ryan. The reason I ask the question is----
    Mr. England. But hundreds.
    Mr. Ryan [continuing]. I mean the enemy has the EFPs which 
are so much more deadly IEDs. The question I want to get to is, 
have the MRAPs proven to be more effective, measurably and 
demonstrably more effective in protecting our soldiers against 
EFP IEDs than their predecessor Humvees, Unarmored Humvees?
    Mr. England. Mr. Ryan, if you don't mind, I don't want to 
get into classified because I don't want to pass information on 
to our advisories. So I would rather defer that. I will tell 
you that the MRAP is designed for a very specific kind of under 
body----
    Mr. Ryan. I understand.
    Mr. England [continuing]. Type of attack. And beyond that, 
I would like to go to a classified discussion with you or any 
members who may be interested.
    Mr. Ryan. I would like to follow up with you on that.
    Mr. England. I would be happy to do so. I will make an 
appointment, sir.
    Mr. Ryan. One final. The DOD approps bill as I mentioned is 
on the floor right now. I think it is $3.4 billion under the 
Administration's request. Have you analyzed this bill? It seems 
like a pretty, other than the $3.4 under the 302B it seems like 
a pretty vanilla straight forward approps bill. Have you put a 
SAP out on this bill in favor or against it?
    Mr. England. I do not believe we have, but I believe the 
real difference is about $1.7 billion, Tina, because of 
accounting type differences?
    Ms. Jonas. This Committee would appreciate, there is a 
disagreement at this moment----
    Mr. Ryan. Yeah. OMB CBO differences?
    Ms. Jonas. Yes.
    Mr. Ryan. Yeah.
    Ms. Jonas. There are. And so we are trying to assess what 
the exact reduction to our budget would be.
    Mr. Ryan. No SAP has been released?
    Ms. Jonas. To my knowledge, it has not yet been. But I 
would say that one area, and we are very appreciative to the 
support of the Congress. One area that we are a bit concerned 
about in this bill is the reductions to our operations and 
maintenance accounts in the order of $6 billion, and of course 
that does impact our readiness.
    Mr. Ryan. Thank you, Chairman.
    Chairman Spratt. Mr. Edwards.
    Mr. Edwards. Secretary England, Secretary Jonas, John 
Sattler, thank you all for you distinguished service to our 
country.
    Secretary England, you commented, I believe in your opening 
remarks that based on your trip to Iraq and Afghanistan 
recently, you saw ``significant progress in Iraq and 
Afghanistan.'' I hope you are right, I fear you are wrong. And 
I would like I want to give you time to perhaps explain what 
you meant by ``significant progress in Iraq and Afghanistan.''
    And I have great respect for you because I have known you 
for 20 years, but my concern about the word we have been 
getting out of this Administration for the last five years has 
been each year has been significant progress being made, but 
the facts on the ground don't seem to bear that out.
    For example, in terms of significant progress in today's 
Washington Post, Mr. Chairman I would like to read into the 
record. A consortium of humanitarian groups led by a British 
group concluded that 28 percent of children are malnourished in 
Iraq compared to 19 percent before the 2003 invasion. That 
nearly a third of the population needs emergency aid. Ninety-
two percent of Iraqi children have learning problems, mostly 
due to the climate of fear. Fifteen percent or four million 
Iraqis regularly cannot buy enough food. Seventy percent are 
without adequate water supplies compared with half of the 
population prior to 2003. More than two million Iraqis, mostly 
women and children, have been displaced inside Iraq, another 
two million have left the country and about 40 percent of 
Iraq's professional class has left since 2003. That would be 
devastating had that occurred in the United States population.
    I guess in addition to that I would say that, you know, 
after five years training Iraqi army is incapable of defending 
its nation and providing security for its families; virtually 
no political reconciliation. The majority of the parliament 
said they would like to see U.S. troops leave Iraq.
    I guess my question would be in order to make significant 
military progress in Iraq, don't we in this kind of insurgents, 
don't we have to win the hearts and minds of the Iraqi people 
and the typical family there? And is there significant progress 
from their perspective, how their daily life is ongoing?
    The Washington Post article would suggest otherwise. 
Perhaps your comments were more narrowly focused on certain 
military aspects. And let me stop at that point to allow you in 
fairness and out of my great respect for you personally to 
further explain what you meant by their significant progress in 
Iraq and Afghanistan.
    Mr. England. So Mr. Edwards, first of all, I was in 
downtown Baghdad. Yes, had SAPI plates and a helmet because you 
know you are in downtown Baghdad, but I was also in downtown 
Baghdad with people walking the streets and going into stores. 
And the shopping centers are being expanded, so the outdoor 
shopping centers. They are protected because, obviously, one 
person with a vehicle borne IED can cause great havoc so just 
like any other place in the world one person can do great havoc 
so there are protectors so that people can't bring vehicles 
into those areas anymore.
    Markets are expanding, people are shopping and lives are 
starting to return to normal in those areas where our troops, 
along with the Iraqis. By the way, I was in one of the security 
stations with Iraqi police and with the Iraqi military and they 
are there with our men and women on the front, and in fact 
leading in many of those areas.
    I was also out in Al Ambar Province. Al Ambar Province is 
as big as the State of North Carolina. The day before I was 
there, there were four incidents in the entire Al Ambar 
Province. Business is coming to life. And by the way, the 
Sheiks and people are coming back into the area. There is 
another interesting report in the paper today about how, you 
know, that area is now starting to expand to other areas in 
Iraq. So I think as you look at the country and you look at 
different sectors of the country, large sectors of the country 
are returning to normal because people are now wanting to live 
normal lives.
    Jobs are very important. I had mentioned the jobs. I mean 
this is counter insurgency type operation so you did need to 
win the hearts and minds, but this is about jobs and we are 
working that part of it program also. Like I think what is very 
important is to factually look at the progress being made every 
day. I mean I know people like to go back to the past and quote 
all the facts, but I my view is you have to deal with the facts 
on the ground today and what will continue to evolve as the 
surge progresses.
    So when you talk to the commanders and the people there, I 
think they feel like great progress is being made. My view was 
compared to prior trips it was great progress and also by the 
way again I point to the O'Hanan article yesterday, another 
view. I think there is more and more people now starting to 
make a more detailed assessment and the trend line in my 
judgement is now positive. Doesn't mean there aren't problems. 
It is still a war, but progress in a war.
    Mr. Edwards. Thank you.
    Chairman Spratt. Mr. Lungren.
    Mr. England. Thank you.
    Chairman Spratt. You are first according to my list. Mr. 
Tiberi. Mr. Tiberi.
    Mr. Tiberi. Thank you, Mr. Chairman. I thank you for having 
this hearing today. I have some questions, but I want to first 
start off with a statement that Ms. Jonas made at the end of 
Mr. Ryan's testimony regarding funding and how it impacts 
operations and--the operations and maintenance account and how 
that would impact readiness. Can you further comment on that?
    Ms. Jonas. Actually, I might also ask General Sattler to 
talk about the impacts to the force. But one of the areas that 
we have ran into issues last year was making sure that our 
depot maintenance capability was there. And we do put those 
funds in the operations accounts. And we want to make sure that 
our depos are operating capacity to repair equipment and so 
that became a difficulty last year.
    Mr. England. But also Mr. Tiberi, I mean the current bill I 
understand that is to being marked up now, appropriations bill 
is short six and a half billion dollars I believe in O and M, 
is that right, Tina?
    Ms. Jonas. It is five point seven billion.
    Mr. England. Okay. Five point seven billion. So, obviously, 
that is five point seven billion. Now that is not the war 
budget, that is our base operating support budget. So O and M 
is just that, it is all of our operation and maintenance for 
the ongoing activities of the Department of Defense. And so 
that is a problem, I mean, if we are down almost six billion 
dollars, we will have to deal with that some way. But that it 
is a lot of money for our basic force that we use to literally 
steam our ships and maintain our equipment and you know all the 
things are in that account. So six billion dollars, obviously, 
is a very large deficit for us. Now the bill is not complete, 
but I think that was part of the discussion earlier about the 
``six billion dollars.''
    And, General, do you have a word or so?
    General Sattler. I would just pile on that, obviously the 
depo is as the gear comes back from inside theater or the stuff 
that is cycled back and replaced that it needs to go through 
the depos to be upgraded and maintained to be put back into the 
forces, the active, the guard, and the reserve that are back 
here that are training and preparing to do other missions or to 
go back to Iraq or Afghanistan, sir.
    Mr. Tiberi. Thank you. Mr. England, you mentioned earlier 
that the article was in the paper yesterday in the New York 
Times. Within that article it talks about the observation of 
local leaders working with our marines and army units in 
establishing and providing basic services of electricity, fuel, 
clean water, and sanitation to the people and being done pretty 
well.
    Initially that was being done mostly with U.S. dollars, I 
believe. Can you comment on that and how that is working today? 
The reconstruction dollars.
    Mr. England. As I recall, and perhaps somebody here can 
correct me. As I recall the Iraqis are now spending more than 
we are in terms of those activities. So we are spending, I 
believe, about five and a half billion dollars and they are 
spending about seven and a half billion dollars in terms of 
their own infrastructure.
    [The information follows:]

    The information for the record correct data is: For 2007, Iraq has 
a capital budget for reconstruction of about $10.1 billion; while U.S. 
appropriated funds in 2007 amount to about $3.6 billion for 
reconstruction activities. This does not include the U.S. funds 
appropriated for Iraq security forces.

    Mr. Tiberi. How does that relate to what is happening in--
--
    Mr. England. Pardon me. Is that right? Do I have that 
right?
    Ms. Jonas. I believe that is right, sir. I think it is----
    Mr. England. Okay.
    Ms. Jonas [continuing]. About seven point three.
    Mr. England. Okay. But it is pretty close. I mean they are 
now spending more than we are. So, yes, the answer is they are 
now spending more for their infrastructure.
    Mr. Tiberi. How about in Afghanistan? What is the break 
down?
    Mr. England. I don't have that, sir.
    Mr. Tiberi. Is that something you can get to me?
    Mr. England. Yes, sir.
    Mr. Tiberi. Or to the Committee?
    Mr. England. Yes, sir.
    Mr. Tiberi. What the U.S. spends, percentage of dollars on 
reconstruction versus everyone else.
    Mr. England. And specifically compared to the Iraqi--I mean 
compared to the Afghan government, that ratio?
    Mr. Tiberi. And everybody else.
    Mr. England. Okay.
    [The information follows:]

    As of May 2007, the U.S. pledges for this fiscal year were about 
$10.1 billion of a total $12.1 billion pledged by 29 countries and 
organizations (chart submitted), that has been reported.
    Presently, Afghanistan relies on international assistance for its 
reconstruction costs.

 
------------------------------------------------------------------------
                 Donor                   $M Pledges--FY 1386 (2007-2008)
------------------------------------------------------------------------
ADB...................................                           $205.00
Australia.............................                             18.00
Belgium...............................                              9.88
Canada................................                            127.91
Denmark...............................                             29.00
EC....................................                            195.00
ECHO..................................                             12.00
Finland...............................                             12.00
Germany...............................                            131.00
Greece................................                              2.00
India.................................                             50.00
Iran..................................                             50.00
Islamic Dev Bank......................                             30.00
Japan.................................                            150.00
Korea (Rep of)........................                              7.00
Luxembourg............................                              2.44
Netherlands...........................                             40.00
New Zealand...........................                              4.00
Norway................................                             73.00
Pakistan..............................                             40.00
Saudi Arabia..........................                             51.00
Spain.................................                             36.33
Sweden................................                             40.00
Switzerland...........................                             18.00
Turkey................................                             18.00
UK....................................                            300.90
UN Agencies...........................                             26.55
USA...................................                         10,117.00
WB....................................                            265.00
------------------------------------------------------------------------
      Total...........................                         12,061.01
------------------------------------------------------------------------

    Mr. Tiberi. With respect to Afghanistan and with respect to Iraq, 
is there anybody else spending money on reconstruction other than the 
U.S. and the Iraqis? Any other nations?
    Mr. England. I can't answer the question. I will have to get back 
with you, Congressman.
    [The information follows:]

    Iraq has benefited from international donations beyond those 
provided by the United States Government. The Special Inspector General 
has identified about $18.2 billion in international reconstruction 
donations.
    The United States Government contributions to Afghanistan are among 
forty-three donors (countries and other organizations) identified as 
supporting Afghanistan reconstruction since 2002.

    Mr. Tiberi. You can give me both the Iraq number and the 
Afghan number in terms of what we spend versus what their 
governments are spending as well as what other nations may be 
spending.
    Mr. England. We will get back with you on that. And I if I 
could go back to the----
    Mr. Tiberi. Yes.
    Mr. England [continuing]. First discussion because I think 
again you will hear some of this from Stu Bowen later. It is 
important, obviously, to have a secure environment for economic 
development. I mean my view of this is security is one side of 
the coin, economic development is the other side of the coin 
and they go hand in hand. You have to have security for 
economic development and you have to economic development for 
security. So we have been providing this security envelope to 
get economic development.
    Now, until you have security that is a mixed measure of the 
economic development, but as time goes on and again what you 
see in Al Ambar specifically as you get a more secure 
environment you see more economic development and then you will 
see the people taking more responsibility for their own 
infrastructure that they rely on.
    So I mean these go together and I think you have to look at 
them that way.
    Chairman Spratt. Mr. Allen of Maine.
    Mr. Allen. Thank you, Mr. Chairman and thank you all for 
being here. Secretary England, welcome back. I think I will 
start with you.
    The first question I have, the Special Inspector General 
for Iraq last year in July issued a report. And in that report 
``lessons learned, lessons in contracting and procurement,'' he 
had this to say on the use of sole source or no-bid contracts. 
``Generally avoid using sole source and limited competition 
contracting actions. These exceptional contracting actions 
should be used as necessary but the emphasis must always be on 
full transparency in contracting and procurement. While use of 
sole source and limited competition contracting in Iraq should 
have virtually ceased after hostilities ended.'' And I think 
they mean we got to Baghdad. ``And previously sole source 
limited competition contracts should have been promptly 
rebid.''
    Is what is the policy today of the Department of Defense in 
terms of sole source contracts in Iraq? Have you gotten away 
from that practice or are you still doing it?
    Mr. England. Well most of those contracts, I don't believe 
are with the Department of Defense. Most I believe are with 
State and I guess Stu Bowen can help me with that. Most of the 
reconstruction are not actually DOD contracts.
    I can tell you this, though, for DOD and the Special IG is 
absolutely right, but it applies everywhere. That is whenever 
we can we have competitive sourcing rather than sole source. I 
mean sole source is by exception to our policy. So we do have 
our contracting obligation is to have a competitive 
environment.
    Now that said, many times we have a competitive 
environment, people are in place or manufacturing and there is 
a follow on and so you don't have another competition for a 
follow on contract. I mean, you know, in the extreme case once 
you let--once you have a competition, you let the competition 
or an F-35 Fighter follow on orders we don't compete, 
obviously, so that looks like sole source.
    Mr. Allen. But in Iraq, when Iraq began you were doing you 
were relying heavily on Halliburton and Bechtel and others. I 
mean those were sole source contracts, right? No bid contracts?
    Mr. England. I actually I don't--I just can't really 
comment, Mr. Allen----
    Mr. Allen. Okay.
    Mr. England [continuing]. As authoritatively on that.
    Mr. Allen. Let me do something else. Let me turn to another 
slightly different topic. I understand there is no one federal 
agency that has a sole mission to audit, investigate, or 
oversee DOD appropriated funds for troops support services 
under LCAP, the logistics civil augmentation program. I gather 
that is the Halliburton KBR contract.
    And there are--I understand there are many agencies who 
share the mission, including the Defense Contract Audit Agency, 
the Defense Contract Management Agency, the Army Audit Agency, 
and the DOD Inspector General. It has been proposed that the 
Special Inspector General for Iraq be given expanded authority 
to also investigate DOD logistics contracts in Iraq.
    Do you agree with that proposal that Mr. Bowen should have 
expanded area to oversee these contracts?
    Mr. England. I guess I am not--look, we already have 
extensive oversight. Like you said, you mentioned four 
agencies, so I mean the DCA in itself did 35,000 reviews last 
year, so there is extensive reviews by all these agencies. All 
of them have their piece that they look at with their expert 
looking at it. So having another group look at these at this 
area, I don't know would be helpful or not.
    On the other hand it gives another set of eyes on the 
ground. And I think Stu Bowen and his people have done a good 
job, but we do have extensive reviews and oversight and 
analysis of all of those, Mr. Allen.
    Mr. Allen. I understand. One more question. One of the 
recommendations that Mr. Bowen made last year was, ``To 
designate a single unified contracting entity to coordinate all 
contracting in theater.'' Does that solve the problem? Would 
you agree with that recommendation?
    Mr. England. Again, Mr. Allen, I don't--I am not sure I 
agree or I mean somebody will have to be closer to the 
specifics. Here is an--here is sort of the problem I have with 
all of this. Centralizing a vast organization is not always the 
best solution, I have found, my own experiences. 
Extraordinarily large organizations, large expenditures, you 
actually want to decentralize so that you can get, you know, 
views of different discrete parts of this, because this is not 
a homogeneous operation. These are vastly different in terms of 
contracts, kinds of contracts, jobs being accomplished.
    So to look at this as one homogeneous contract, I mean my 
view is that is not always the best the most effective and the 
most efficient. So I would tend to say as a general, you are 
better decentralizing than you are having one organization 
trying to do this broad scope of activity.
    Mr. Allen. Do you think the oversight of the Halliburton 
contract has been effective and efficient?
    Mr. England. I don't know, Mr. Allen. I just can't comment. 
I haven't been involved and I just don't know.
    Mr. Allen. Thank you.
    Chairman Spratt. Mr. Lungren.
    Mr. Lungren. Thank you. Thank you very much, Mr. Chairman. 
Mr. Secretary, again, thank you for being here as was stated 
before. I think it is your third appearance before us and we 
appreciate your testimony.
    Earlier in response to a couple of questions with respect 
to contracts not being performed and so forth. You indicated 
some concern and said that if they are not performed if they 
come up again that goes against them. I just want to make sure 
that that is not all your saying. That if there are instances 
of fraud and abuse you would expect those to be prosecuted and 
fully support that, correct?
    Mr. England. Yes. But as I said in my opening statement 
there has been a number of those cases, unfortunately there are 
people who break the law----
    Mr. Lungren. Right.
    Mr. England [continuing]. And then those people get 
punished. And, yes, there has been convictions and convictions 
based on various groups that were mentioned by Mr. Allen. They 
all have been working. There has been convictions, there is 
others underway. Fortunately, that is a very small percent. I--
well under one percent----
    Mr. Lungren. I agree with that.
    Mr. England [continuing]. Of both people and dollars.
    Mr. Lungren. But we have a very small number of members of 
Congress who have been found to be guilty of crimes and yet 
when somebody like Duke Cunningham does it, in my judgement, he 
is taking money that ought to go to diverting it in a certain 
way, that basically diminishes the protection of our men and 
women in uniform. And I look at I it----
    Mr. England. Absolutely.
    Mr. Lungren [continuing]. And I look at it the same way 
with anybody who is under a contract for reconstruction or 
anything else, they ought to be--they ought to get the full 
weight of the law. And I just wanted to make sure that you 
fully supportive of that.
    Mr. England. We violently agree, Mr. Lungren.
    Mr. Lungren. Very good. I appreciate that. General, you 
talked equipment coming back and so forth. One of the 
complaints I have received from national guard back in 
California is that when they go to the theater of combat they 
leave their equipment there and they are behind, they are in a 
hole right now with respect to equipment to allow them to 
maintain their capability either to respond to incidences at 
home in their normal course of activity if we had a natural 
disaster or for particularized training to allow them to be in 
good shape when they show up in a theater of conflict.
    What do you say about that? What concerns do you have about 
that? And what are we doing to address that?
    Mr. England. Okay. I will let you. Go, no go ahead, 
General, and then I will comment.
    General Sattler. Sir, I obviously the same we have the same 
challenges in the active force and in the reserve as well as 
the guard. And when we went forward and we left our sensitive 
equipment there to efficiently rotate forces in, they fell in 
on equipment that was left in a theater. And forces that went 
back home had training sets back at their home base.
    Now that is a lot easier when you have large units, some 
marine units or army units active, where a unit comes in, 
leaves it gear behind, falls in on a gear of a unit coming 
home. In the case of the guard because they come from a 
geographic location if they leave their gear behind and another 
guard unit comes in, then we have a mismatch when the unit 
comes home.
    So I understand the challenge and the problem. We have been 
working it as we procure additional equipment and we send 
equipment back to through the depots that Secretary Jonas 
talked about, when that is reworked it is sent out to where it 
is needed not necessarily to where it came back from.
    Mr. Lungren. Okay. My concern is that national guard units 
having a capability to respond to natural disasters or other 
kinds--we have had examples of civil unrest in this country. We 
have had them in my State and the national guard is called out. 
I would hope that we would not have a situation where because 
we are doing what we need to do and I support what we are doing 
in Iraq and Afghanistan. I am a very strong supporter of that, 
but I don't want to see us with our units at home incapability 
of doing the other part of their job, which is just as 
important as what is happening in Iraq and Afghanistan to 
respond to either domestic civil unrest or which we have on a 
regular basis, natural disasters.
    And I am concerned about that.
    Mr. England. If I can address it, because we have this 
discussion with General Blum who is head of the National Guard 
Bureau. There are at agreements between all the States in terms 
of national guard so that they actually, you know, share 
equipment when they need to.
    The last time I sat down with General Blum, specifically, 
and there was a White House review, for example, for the 
hurricane season. If you look at all the equipment that is 
available, I mean there is more than adequate equipment 
available within each region of the country to deal with 
natural disasters. I mean we still have vast quantities of 
equipment mainly what we have left in theaters is unique combat 
equipment and not equipment that you would use for natural 
disasters in the United States.
    That said, we are also refurbishing and we have put, I 
believe, $30 billion in the budget, Tina?
    Ms. Jonas. That is right.
    Mr. England. For national guard type equipment to, you 
know, reset and reconstitute the national guard. So that is an 
area focus, but in the meantime I can assure you that the 
nation is well being well served by the national guard. And my 
judgement is between the guards, particularly in regions, well 
prepared to do what is necessary in terms of natural disasters.
    Mr. Lungren. If I just might be indulged a second. I 
appreciate that and I hope you are and I hope that we can 
continue to look at that. And we have reference to the 
hurricane season, that is sort of a cyclical thing. We have 
something in California called earth quakes which are non- 
cyclical and I am not sure you can plan in the same way for 
them. Thank you very much.
    Chairman Spratt. Mr. Doggett.
    Mr. Doggett. Thank you and thank you for your testimony. My 
understanding of what you have said is that we have pending 
here in Congress to fund the war in Iraq and in Afghanistan 
$145 billion request. And you can't tell us today precisely 
what the appropriate level should be, but you know it is more 
than $145 billion?
    Mr. England. We took last January we projected, because 
request of the Congress.
    Mr. Doggett. Of course.
    Mr. England. And right to----
    Mr. Doggett. And you now realize that you need over five 
billion dollars more for the mine resistant equipment. That 
would be on top of the $145 billion?
    Mr. England. That is correct.
    Mr. Doggett. And you will need the money for the surge 
which was not budgeted past the end of this fiscal year. So it 
wouldn't certainly wouldn't be unreasonable as we do our 
planning to estimate that we are up approaching $170 billion 
when you include that, $165, something in that range?
    Mr. England. I don't know if that is the number, sir. But 
you are right, there is the surge past October 1. There is also 
the MRAP vehicles. And I believe the appropriators have 
actually moved some other money into GWOT that was in the base 
bill, so that will be accounted for. So----
    Mr. Doggett. And you wouldn't be surprised to have some 
other adjustments as well as you see the experience and the 
reports in September?
    Mr. England. That is correct.
    Mr. Doggett. Now it is my understanding that while it 
certainly does require additional work in the accounting 
department that if that money is not--well, first of all I 
guess, that money will not be requested probably until the end 
of the fiscal year, the precise amount? Certainly not until 
after the September 15 report?
    Mr. England. I believe the $5.3 will be requested before 
that because we have that, we understand precisely what that is 
so since we know the number. Where we do not yet know what the 
cost will be, we will defer that as long as we can but 
hopefully still be able to, you know, have that responded to by 
the Congress by October the 1.
    Mr. Doggett. All right. So you would hope by October 1, you 
would have this estimate to us of what the cost for those wars 
would be in the next fiscal year?
    Mr. England. That is correct.
    Mr. Doggett. And you have capability if we can't act, of 
course, until you submit the request, but if the action is not 
immediate you have capability to continue the war surely into 
at least the beginning of next calendar year, don't you?
    Mr. England. We have, and I guess I will have to have my 
Comptroller here talk about what expenditures, you know, what 
has been expended or will be by that time. So certainly all, 
for example, the personnel dollars are paid by that point. I 
mean that will be expended. So various categories will be 
expended.
    Tina, can you elaborate, please?
    Ms. Jonas. Sir, it depends on, obviously, where we are on 
October 1. If the Congress has acted, obviously, we will be in 
good shape----
    Mr. Doggett. If we have approved the bill that is up this 
week.
    Ms. Jonas. That is right. And then we would have to just 
adjust either the supplemental----
    Mr. Doggett. You would make adjustments and carry it into 
next year----
    Ms. Jonas. That is right, sir.
    Mr. Doggett [continuing]. Without the supplemental, right?
    Ms. Jonas. That is right.
    Mr. Doggett. Okay.
    Ms. Jonas. The additional we were just talking about.
    Mr. Doggett. And we you testified when you were before the 
Committee before, Ms. Jonas, that the burn-rate in Iraq had 
gotten up approaching $10 billion. If the request for next year 
is in the $165, $168--70 billion dollar range, then the burn-
rate in Iraq has really risen to approaching $12 billion a 
month, isn't it?
    Ms. Jonas. That would be about right. And----
    Mr. Doggett. Okay. And as far as the long term cost in the 
chart that the Chairman mentioned earlier, General Petraeus 
told Fox News back in June that this not a challenge that can 
be resolved in a year or even two years. That the typical 
insurgency takes nine to ten years. Ambassador Crocker said in 
July that we are just getting into the first reel of five reels 
in Iraq, contrary to what many people say. If you assume, if 
you take not just any assumption, but General Petraeus' 
assumption of a nine to ten year commitment then the projection 
that we have of a trillion dollar war here is certainly not 
unreasonable, is it?
    Mr. England. Again, Congressman, it depends on what the 
assumption is in terms of a level----
    Mr. Doggett. Right.
    Mr. England [continuing]. Of that effort.
    Mr. Doggett. Of course.
    Mr. England. And I don't know what the level of that effort 
would be. So whatever that assumption is, the dollars will 
follow the assumption. In this case the assumption is 75,000 
troops, but I don't know if that is valid or not. It certainly 
an assumption.
    Mr. Doggett. The last time I asked you questions on March 
the 6, you told me that there was no effort underway at the 
Pentagon to plan for any cost of withdraw or draw-down.
    Last week, as you know, Secretary Gates in a letter to 
Senator Clinton said that it was not only appropriate but 
essential to have such a plan. When did things change on that 
issue at the Pentagon? Between March 6 in your testimony and 
his letter of July 25.
    Mr. England. I think the--I think what the Secretary was 
saying at that time is there are various questions that you 
would ask regarding the war going forward. And so he has framed 
some of those questions, but what we will do, frankly, is we 
will cost whatever the President's decision is come September. 
I mean that will be the baseline as we go forward, Congressman. 
So whatever that decision by the President is, that will be the 
basis of our funding going forward.
    Mr. Doggett. One last question. There has been comment with 
regard to the sources of foreign fighters and suicide bombers 
in Iraq, that a majority of the suicide bombers and the largest 
percentage of the foreign fighters in Iraq are Saudi nationals. 
Is that accurate?
    General Sattler. Well there certainly are some Saudi 
nationals that fit into the foreign fighter, the suicide bomber 
both vest and vehicle borne, Congressman. But I would rather 
take that for the record rather than--because there are a 
couple countries that dominate the foreign fighter network. So 
I would like to take that for the record so I don't put out 
erroneous information, sir.
    Mr. Doggett. You want to submit something as a follow up, 
is that what you are saying?
    General Sattler. Yes, sir. I mean I will--I am sorry.
    Mr. Doggett. The Saudi's are certainly--Saudi nationals are 
certainly one of the dominant countries in providing foreign 
nationals who are suicide fighters and others that are out 
killing Americans, right?
    General Sattler. A number of the foreign fighters do in 
fact originate from Saudi Arabia, yes, sir.
    [The information follows:]

    [DELETED]

    Mr. Doggett. If you can respond in writing, promptly to the 
Committee to verify the press accounts that a majority of the 
foreign fighters in Iraq are Saudi nationals, a majority--
suicide bombers, excuse me, are Saudi nationals and that about 
40 percent of all foreign fighters coming into Iraq are Saudi 
nationals.
    Thank you very much. Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. Appreciate that. 
Thanks for being here. Those of us who support what we are 
doing still need to know how much it costs. I mean it is, you 
know, it is good practice to don't, you know, start a building 
a home until you know what it costs. And so questions that we 
have relative to the costs, I hope we are not necessarily 
interpreted as being negative to what we are trying to do, but 
we need to know what it is that we are trying to accomplish.
    Last week in the Armed Services Committee we passed out on 
a almost party line basis H.R. 3159 which is which would codify 
DODs intent and all of our intent to create dwell time for our 
men and women in service who have gone into harms way, they 
come home, we want them here for an extended period of time to 
recoup and get ready to do something again on behalf of our 
country.
    But at the hearing, nobody on staff had a clue what that 
cost would be. And you could approach the analysis one of two 
ways. One, either increase the in-strength of the force, which 
I think is the right answer. Or you can dramatically draw-down 
the people who are in harms way, ignoring of course the 
situation on the ground, the circumstances in the fight to 
accomplish what we are going to require DOD to do. Like an 
unfunded mandate if this thing actually became law.
    Have you at this stage and it may be way too early, Ms. 
Jonas or Secretary, have you all looked at how you would comply 
with that 3159 requirement? In other words, how many more 
troops would you need and what would that be cost be on a every 
year basis if we are able to increase the in-strength of our, 
particularly the marine corp and the army to accomplish a goal 
that all of us what to have accomplished.
    Mr. England. So Mr. Conaway, we do have a policy and we are 
growing both the marine corp and the army consistent with that 
policy in terms of increase in the dwell time. While that is a 
policy, I would also say, I think the Department and the nation 
needs to do what needs to be done in time of war, because there 
is an uncertainty in the nation, so I mean I hope this is not 
some law about dwell time.
    I mean, obviously, the men and women who serve want to 
serve at the time of greatest threat to America. So while that 
is a policy and it is a policy that we, frankly, promulgate 
ourselves, right? We came out with the policy for both the 
guard and the reserve and the active force and we are growing 
the force to be able to sustain what we believe is the right 
size force in the field on a long term basis with the 
appropriate dwell times.
    Nonetheless, I mean I would pretty violently say you don't 
want to put that in law, because you do have to have 
flexibility both within the DOD and with the force to respond 
to whatever happens in America. I mean, you know, at the right 
time you and I will both be serving if we need to, obviously.
    So while that is a policy and we are gearing up for that, 
there is a cost, obviously, associated with it that is part of 
growing the force. I mean we are growing the army and the 
marine corp to be able to meet that long term commitment.
    Mr. Conaway. Well, I guess, if you would get some folks to 
just take a look at that policy that came out of Committee, 
which focused on Iraq and dwell times and other--so it may be 
more of a political statement that it is a true effort to 
protect our troops and to make sure that we have got the right 
level of forces in place. I hope it is the latter not the 
former, but nevertheless it may just be political.
    Could you look at that and give us some sort of an estimate 
of saying, ``All right. We are going to keep the fight going 
the way we are. In order to maintain or accomplish the dwell 
time goals and policies that you have got in place, how many 
more people would we need?''
    In other words, one of the things that Petraeus told us 
when he was here in May is that no one liked the extension of 
15 months, additional three months to--but they all understood 
why it had to happen and the professionalism they are going to 
get it done. But to accomplish that goal, I think, we need to 
know what that cost is as a part of it.
    Mr. England. Mr. Conaway, when the Secretary came out with 
that policy, along with that policy we actually put forth also 
the growth of the military consistent with the policy.
    Mr. Conaway. Right. So you are saying you have got that 
answer somewhere and you will get it back to us?
    Mr. England. Yeah. I mean my view is today when we project 
our long term needs for the nation in terms of how many troops 
deployed for what reasons in different parts of the world. When 
you look at that commitment, growing the force allows us to 
meet that commitment and the dwell time policies articulated by 
the Secretary of Defense.
    So I believe we know today what that mix of growth, dwell 
times, and cost is.
    Mr. Conaway. Okay. Understand, Mr. Secretary, that we are 
those statements are being made after a number of years of 
civilian leadership at the Pentagon saying, ``We don't need any 
more forces.'' And so I want to make sure that all of those, 
you know, statements are made and I know you made in good 
faith, but I just want to make sure those of us on the other 
side look at four or five years of saying, ``No, we don't need 
any more people,'' we want to make sure that if you need more 
people to accomplish that, then let us know.
    Mr. England. And that cost for the growth is in the budget.
    Mr. Conaway. Right. Right.
    Mr. England. So and it is in the out year budget. So the 
growth and some of it was in 2007. So the cost of both the army 
and the marine corp to the new authorized level is in the base 
budget Department of Defense across the----
    Mr. Conaway. We just want to make sure that new authorized 
in-strength is the right number. And if it needs to be bigger 
we need to know that going in. Thank you, Mr. Chairman. I yield 
back.
    Chairman Spratt. Mr. McGovern.
    Mr. McGovern. I thank you and thank you Mr. Secretary for 
being here. You have stated that future cost of the war in Iraq 
will be situation dependent. And I think everybody agrees with 
that. And I want to get back to something that Mr. Doggett 
raised. If the situation were the redeployment of all U.S. 
troops and contractors not needed for the protection of the 
U.S. Embassy our diplomatic personnel and for limited 
operations targeting foreign jihadists, I mean is it--I mean 
you must have cost estimates for the redeployment, you know, of 
all other U.S. troops from Iraq over a period of time. Do you 
have cost estimates for the redeployment over six months or 
nine months or 12 months? Is that something that----
    Mr. England. No, sir, I don't.
    Mr. McGovern. Well, you know, what is a little bit 
disturbing is the fact that Congress, the House of 
Representatives have on record as voting for a time line. The 
Senate, if they ever get allowed to vote, would probably the 
majority would probably vote for the same thing.
    I guess what I would like to ask, and I am not sure the 
proper way to request this, is that if you could give this 
Committee the estimates of the cost of the redeployment of U.S. 
forces over a period of six, nine, and 12 months. Is that 
something that you could provide the Committee?
    Mr. England. I would say, Mr. McGovern, you can only 
provide it if you understand all the guidelines that go into 
that. So there is a whole lot of considerations in terms of 
equipment. I mean so you could construct such a scenario.
    Mr. McGovern. I think that would be helpful to us given the 
fact that a majority of the House of Representatives is on 
record asking for a time line. And I am not sure what the 
situation is going to be in September, but it is conceivable 
that a majority in this House will vote again for a time line. 
And it is conceivable that the United States Senate will. And 
that, you know, a bill will be moved to President.
    And I guess I would like to, you know, ask the Chairman or 
whatever the proper way to do this is, is if you could provide 
this Committee within the next 30 days so when we come back in 
September that we have some basic outlines of what in fact, you 
know, the cost of redeployment would be. I mean Senators Warner 
and Lugar, also two republicans have set out a set of 
guidelines that cost--that call for a date certain.
    But I think it is important for us to know what we are 
talking about in terms of cost. Just as you, you know, kind of 
guestimate what in fact it might be to stay for a month or two 
months or three months or four months or a year. I think we 
would like to know what it would cost actually, you know, to 
bring our troops home with a caveat that obviously we would 
want to protect our the people at our Embassy and have a force 
there to respond to al-Qaida or any other threats.
    And so if we could make that formal request here, and if 
you could get us something in the next 30 days that would be 
very much appreciated.
    Mr. England. So, Mr. McGovern, so let me just say, I do 
understand the request. And so I understand your request and 
I--and so I accept the request.
    [The information follows:]

    I provided the response to this Insert for the record directly to 
Representative McGovern's office, dated September 5, 2007.

    Mr. McGovern. All right. Thank you. One other issue here, 
and that is you know according to the October 2006 report of 
the Special Inspector General for Iraq reconstruction, only 
about 10,000 of the 370,000 smaller arms delivered through U.S. 
assistance had their serial numbers recorded. And I think there 
is slide on the bottom on the bottom of page five that deals 
with this.
    Some of these arms and equipment have been discovered in 
the possession of sectarian militias, others have turned up on 
the black market. There have also been several recent articles 
as well as testimony before Congress that raise concerns about 
the reliability and loyalty of Iraq security forces. One 
article in the New York Times described how uniformed security 
forces equipped with U.S. arms have even attacked and ambushed 
U.S. military forces.
    Now I read that U.S. military commanders are now pushing 
the strategy to create local militia groups to provide security 
who might or might not be hired at a later point by the Iraqi 
government. And these forces would be paid with, ``U.S. 
emergency funds, reward payments, and other monies,'' according 
to a July 28 Washington Post article.
    I guess my question is what emergency or other funds are 
being used to pay for these forces? Is this coming out of the 
Commanders Emergency Response Program monies?
    General Sattler. The movement that they are talking about, 
sir, is mainly out in Al Ambar Province where the Sheiks----
    Mr. McGovern. Right.
    General Sattler [continuing]. Have come forward and due to 
the brutality and intimidation of the al-Qaida they have 
basically worn our their welcome. So that the Sheiks have come 
forward, partnered with the commanders on the ground to go 
ahead and build local--to go ahead and take local security 
forces or under the tribal command and partner with. I am not I 
cannot--I do not know for a fact where the funds whether it is 
CERP funds or what type funds are being used initially to go 
ahead and pay those forces, but----
    [The information follows:]

    [DELETED]

    Mr. McGovern. If you could provide us that information as 
well, because CERP funds as I--is supposed to respond to 
``urgent humanitarian reconstruction needs.'' And I am I guess 
there is some concern about having those funds be, you know, 
directed to supporting militias.
    And just this is the final thing, is how can we be assured 
that the funds, equipment, and arms that we are providing the 
Iraqi military police and security forces are not being used 
against U.S. troops in the field or in sectarian attacks 
against various Iraqi groups and communities as, you know, we 
have seen a number of reports that have appeared in the press 
about that. And I guess, you know, how do we ensure that, that 
is not the case in the future?
    General Sattler. Well, obviously, the commanders on the 
ground do the best they can do go ahead and vet those who would 
come forward to part of these security elements just like we do 
when we recruit them to send them to formal military training 
or to police academy, sir. So and they are in the process now 
of they are taking the fingerprints and they are putting them 
in that system so that we have a record of those individuals 
who step forward to become part of these security forces.
    Mr. McGovern. But clearly there is--there seems to be a 
problem when we have Iraqi--U.S. trained Iraqi security forces 
in some cases attacking U.S. military and in some cases, in 
many cases, attacking Iraqi civilians.
    So, obviously, something is not working the way we want it 
to. And I guess, and I know I am running out of time, but maybe 
you could provide us some sort of a statement as to, in fact, 
what is going on to try to deal with this situation more 
effectively.
    Mr. England. Mr. McGovern, we will try to actually 
categorize this in terms of scope and size. Obviously, Iraq, I 
mean there is a lot of security forces, a lot of capability. 
And so I don't know if this is just aberrant small group or how 
big this problem is. So we will try to characterize for you and 
also answer your questions.
    Mr. McGovern. Appreciate it. Thank you very much.
    Chairman Spratt. We have three votes coming up; a 15- 
minute vote followed by two 5-minute votes. I will ride the 
clock down to about three minutes, have 13 minutes left for the 
vote. We will go to Mr. Diaz-Balart and then we will come back 
to Mr. Scott and we will do the best we can. But Mr. Secretary 
England has to leave by 12 o'clock so there is no way we can 
make it back to see him. I am sorry for the members who will 
miss it.
    For those who did not get to ask questions, we will put you 
in the front of the line for the next panel.
    Mr. England. Is there a next time, Mr. Chairman?
    [Laughter.]
    Chairman Spratt. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Mr. Chairman. Gentleman, there 
is let me ask, is there any doubt that al-Qaida now is in Iraq? 
Or we are fighting al-Qaida in Iraq?
    Mr. England. There is no question there is al-Qaida in 
Iraq.
    Mr. Diaz-Balart. And again there is no question?
    Mr. England. There is no question. We know al-Qaida is in 
Iraq. I mean al-Qaida is firmly implanted in Iraq.
    Mr. Diaz-Balart. And--because I keep hearing and reading 
about the civil war, but the so called civil war, but if al-
Qaida is in Iraq, again I am not the smartest guy in the world, 
so I am going to have to ask you again. We are sure that al-
Qaida is in Iraq. We are fighting al-Qaida in Iraq and we are 
now--and the Iraqis are also now helping us fight al-Qaida in 
Iraq?
    Mr. England. They certainly are, at least in a lot of those 
provinces and a lot of those areas. And, General, I will let 
you speak, you are closer to military. But I mean every time 
just the last time I was there I mean that was that was the 
discussion about al-Qaida elements and everything you read, I 
mean every report, every Intel report, newspapers, everything 
is al-Qaida in Iraq.
    Mr. Diaz-Balart. This would be the same al-Qaida that when 
there was a vacuum in Afghanistan attack the United States. My 
question is then, if we don't fight al-Qaida there, is there 
any indication that they will just put down their arms and 
become farmers?
    Mr. England. I thought the last commander in Iraq said it 
well, and that is, if we withdraw from Iraq they will follow us 
back to the United States.
    I mean look this is the fundamental question facing 
America. And that fundamental question is, how do you better 
protect and defend America? There are those of us who believe 
you want to be on the offense and you don't want them to be on 
the offense. You always want al-Qaida on the defense. And, 
frankly, so far it seems to work for America. We have avoided 
an attack.
    I think a large part of that is we have managed to keep al-
Qaida on the defensive while we have been on the offense. I 
frankly believe it is not possible to protect and defend 
America inside America. I mean you do have to be on the offense 
otherwise we can obviously suffer our own chaos in this 
country.
    Mr. Diaz-Balart. Mr. Secretary, and if we were prematurely 
leave Iraq, in your opinion or is there any indication that al-
Qaida would not, for example, then move to Afghanistan and try 
to fight the coalition forces there? Or would Afghanistan be 
perfectly safe regardless of us leaving al-Qaida alone in Iraq?
    Mr. England. I think the whole concern in the Middle East 
and of course the Secretary is in the Middle East this week 
with the--with Ambassador Rice to discuss the broad issues in 
Middle East, because our presence in the Middle East is 
obviously very important for stability and security there and 
that of course that translates to lots of other places in the 
world including the United States of America.
    Mr. Scott. Thank you. Mr. Secretary, it is good to see you 
today and just to follow up, the just question you got, has our 
presence in Iraq increased or decreased the presence of al-
Qaida in Iraq?
    Mr. England. In judgement, al-Qaida is al-Qaida. I mean 
they have a world wide ambition.
    Mr. Scott. Has our presence--has our presence in Iraq 
increased or decreased the al-Qaida's presence in Iraq? You 
said al-Qaida is in Iraq.
    Mr. England. Yes.
    Mr. Scott. Has our presence in Iraq increased or decreased 
al-Qaida's presence in Iraq?
    Mr. England. I hope we have drawn more al-Qaida in Iraq so 
frankly we can fight them and dispose of them.
    Mr. Scott. The more al-Qaida in Iraq after we got there?
    Mr. England. I don't know. My comment was I hope, sir, that 
more of them are there rather than here so we can fight them.
    Mr. Scott. We were told by the CIA that Iraq posed no 
terrorist threat to the United States and was not expected to 
pose a terrorist threat unless we attack them.
    Mr. England. Pardon me? Repeat your statement.
    Mr. Scott. The CIA wrote a letter to the Senate 
Intelligence Committee indicating that in their opinion, it is 
in the Congressional Record, that Iraq posed no terrorist 
threat in their opinion to the United States before we 
attacked. And that an attack would increase the terrorist 
threat.
    Let me ask you another question. You are familiar with the 
articles written over the weekend from the Washington Post and 
New York Times talking about wastes in the contracts. The 
headlines----
    Mr. England. I mean I have seen various articles.
    Mr. Scott. Okay. Could you provide us for the record your 
response to those articles?
    Mr. England. Response to the articles?
    Mr. Scott. Right.
    Mr. England. I normally don't respond to articles in the 
Washington Post, but I mean I don't know what you mean.
    Mr. Scott. Are the articles true?
    Mr. England. We will provide you if you would like the 
actions taken, you know, to prevent waste, fraud and abuse and 
to convict people who do, you know, who break the law in that 
arena.
    So I have commented in that regard that we do have lots of 
processes in place and we will be happy to provide that to you. 
And also the record of people that have been convicted to date 
uncovered by our processes that we utilize every day.
    Mr. Scott. Okay. Are you satisfied with the budget for 
mental health services for our troops and veterans?
    Mr. England. There was an addition of $900 million which 
has being used now for both mental health and for TBI. And 
there is a group under way under the Chairmanship of myself and 
Gordon Mansfield who is the Deputy of Veterans' Affairs. So 
there is a group looking at this and we will be making 
recommendations in this area before the end of the year.
    Mr. Scott. Thank you. In response to the question from the 
Ranking Member, you didn't answer because of security concerns 
about the vehicles and whether or not they are have certain 
capabilities. Has Congress provided enough funding to make sure 
that these vehicles are in fact the state of the art? There are 
a lot of published reports that suggest that if we had had 
better equipment early on that some of the troops might not 
have died.
    Have we--has Congress provided enough money to get the 
state of the art vehicles?
    Mr. England. I would say that Congress has been very 
responsive to our request, Mr. Scott. And again more broadly I 
would rather talk to you off line in terms of what those 
capabilities are. But I can say this: the Congress has been 
very responsive to our request for special vehicles for our 
troops in Iraq and Afghanistan.
    Mr. Scott. Okay. And I guess finally I wanted to question 
on the surge. We are seeing charts that plot out what it would 
cost if the surge last 24 months, or if lasts four months. What 
was the estimate when we started the surge of how long the 
surge would last?
    Mr. England. Again, we cost it. I am not sure we knew how 
long it would last, but we cost it until the end of this fiscal 
year. So at the beginning of the surge we costed the surge 
until the end of this fiscal year. And I don't recall there was 
a discussion of how long it would last. I just know there was a 
discussion of how much we would fund.
    Mr. Scott. Is it unrealistic to think that we could in the 
foreseeable future, that is within ten years, get under 75,000 
troops?
    Mr. England. Mr. Scott, again I don't know. It depends on 
what everybody's assumptions are. So if that is again, I think 
we need to wait until, you know, an assessment is made in terms 
of going forward in Iraq.
    Mr. Scott. If we surge as far as 24--keep the surge numbers 
the deployment numbers up to where they are for 24 months, 
Senator Webb has a bill to limit the troop deployment to a 
reasonable length and frequency. What would a 24 month surge do 
in terms of troop deployment to an individual troop in terms of 
length of deployment and frequency of deployment?
    Mr. England. General, do you know?
    [The information follows:]

    The Secretary of Defense's current policy is that active Army 
forces will deploy according to a 15:12 deployment-to-dwell ratio. That 
is, active Army forces will deploy to USCENTCOM for no longer than 15 
months and will spend no less than 12 months at home before deploying 
again. As such, our current deployment and rotational plans for active 
Army forces deployed to USCENTCOM are at or below a 1:1 deployment-to-
dwell ratio. If the current USCENTCOM surge was to last for a total of 
24 months, and assuming there are no other changes in global 
requirements, the deployment-to-dwell ratio for forces deployed to 
USCENTCOM will continue to decrease. Our forces will deploy for longer 
and/or deploy more frequently (thereby reducing dwell). It is difficult 
to provide the exact ratios without an in-depth study of different 
options to satisfy a particular scenario. As always, the intent would 
be to balance readiness and the increased stress on the force, to 
ensure our forces always remain ready and capable of fighting, and 
winning our Nation's wars.

    General Sattler. Sir, we will have to take that also to 
question and respond to you. To take a look at what continuing 
surge for 24 months would mean as far as dwell time, deployed 
time for the forces. We will have to take that on, sir.
    Mr. England. Yes, we will. We will respond to the record, 
sir.
    Chairman Spratt. We will have to call that a morning. Thank 
you very much for your forthright testimony. We appreciate you 
coming here once again and your cooperation with us.
    The questions for the record that were asked. To Mr. 
Etheridge, you had one question you want to ask?
    Mr. Etheridge. Just permission, Mr. Chairman.
    Chairman Spratt. Go ahead. One more.
    Mr. Etheridge. For those of us who didn't get to ask 
question to send written request to the Secretary for him to 
respond?
    Mr. England. Absolutely. Yes, sir. If you will send them, 
we will try to promptly respond.
    Mr. Etheridge. Thank you, Mr. Chairman.
    Chairman Spratt. Thank you very much. And we very much 
appreciate it. And to our second panel, we have got one vote 
followed by two votes and we will be back as quickly as we 
possibly can. We very much appreciate you forbearance.
    Mr. England. Mr. Chairman, thank you very much.
    Chairman Spratt. The Committee stands in recess until 
pending the three votes that are now occurring on the House 
floor.
    [Recess.]
    Chairman Spratt. We come now to our second panel which 
consists of Dr. Robert Sunshine, who is the Assistant Director 
for Budget and Analysis at CBO; Stuart Bowen who is the Special 
Inspector General and Senior Transition Advisor, State 
Department; the Honorable Joseph Saloom who is the Ambassador 
of the United States and also his is the Senior Transition 
Advisor, U.S. Department of State. Of course Stuart Bowen is 
the IG at the Pentagon or State? Which? Both? Okay. And the 
Honorable John A. Gastright, Jr., who is the Deputy Assistant 
Secretary for South and Central Asian Affairs in the Department 
of State.
    Please bear with me with this cold. Yesterday I couldn't 
hear. Today I can't talk. I am--we are delighted to have all of 
you and we look forward to your testimony. And as with all 
witnesses we will make yours part of the record, your 
testimony, your written testimony so that you can summarize it 
as you see fit.
    And we will start with Dr. Sunshine.

 STATEMENTS OF ROBERT SUNSHINE, ASSISTANT DIRECTOR FOR BUDGET 
   ANALYSIS, CONGRESSIONAL BUDGET OFFICE; STUART BOWEN, JR., 
  SPECIAL INSPECTOR FOR IRAQ RECONSTRUCTION; HONORABLE JOSEPH 
 SALOOM, AMBASSADOR OF THE UNITED STATES AND SENIOR TRANSITION 
ADVISOR, U.S. DEPARTMENT OF STATE; HONORABLE JOHN A. GASTRIGHT, 
  JR., DEPUTY ASSISTANT SECRETARY FOR SOUTH AND CENTRAL ASIA 
               AFFAIRS, U.S. DEPARTMENT OF STATE

                  STATEMENT OF ROBERT SUNSHINE

    Mr. Sunshine. Thank you, Mr. Chairman. Mr. Chairman and 
Congressman Ryan, I appreciate the opportunity to appear before 
you today to discuss the cost of the U.S. operations in Iraq 
and Afghanistan and the war on terrorism. My testimony will 
address three questions. First, how mush is the U.S. spending 
on these operations and activities
    Mr. Ryan. Can you pull the mic closer?
    Mr. Sunshine. It is on? Yeah. Okay. First, how much is the 
U.S. spending on these operations and activities related to 
them. Second, what might be the cost of the recent increase in 
the number of troops deployed to the Iraq theater. And third, 
looking out over the next ten years, what might be the 
budgetary impact of U.S. operations in the war on terrorism 
under several different assumptions.
    First, the big picture. CBO estimates that since September 
2001 the Congress has appropriated $602 billion for military 
operations and other activities related to the war on 
terrorism. In addition, we estimate that the Department of 
Veterans' Affairs has spent another two billion for war- 
related care and benefits, bringing total funding to date to 
about $604 billion. That figure differs only slightly from a 
CRS figure of $610 billion. There are a number of judgements 
that both agencies have to make in doing this calculation and 
we differ only a little in how we make those judgements.
    Specific appropriations which average $93 billion a year 
from 2003 to 2005 have now risen to $120 billion in 2006 and 
$170 billion in 2007. Most of the appropriations about $563 
billion have been allocated for military operations and other 
defense related activities including funding for Afghan and 
Iraqi security forces. The Defense Department's 2007 
appropriation for these purposes, $165 billion accounts for 
more than a quarter of its budget for the year. The Department 
has reported obligations for fiscal year 2007 that average 
almost $11 billion a month for expenses related to its 
operations in Iraq and Afghanistan and for other activities 
related to the war on terrorism.
    Most of that sum, more than $9 billion a month is related 
to operations in Iraq. We estimate that in fiscal year 2007 the 
U.S. will spend about $120 billion for its operations in Iraq 
and elsewhere in the war on terrorism. These figures include 
cost for the State Department and intelligence agencies. That 
means that we are now spending on these activities more than 
ten percent of all the government's annually appropriated 
funds.
    As for the recent increase in force levels, last year the 
Defense Department announced plans to deploy 15 army brigades 
and marine regiments in the Iraq theater. Comparing current 
force levels to what we thought we would have anticipated under 
those plans, CBO estimates that an additional 30 to 40,000 
personnel from the four military services have been deployed on 
the ground in the Iraq theater. If that increase is sustained 
for four months, we estimate that added costs will come to 
about ten billion dollars. If it remains in place for a year, 
those additional costs will reach $22 billion.
    Looking farther out, CBO has projected costs through 2017 
for all activities associated with operations in Iraq, 
Afghanistan, and the war on terrorism on the basis of two long 
term scenarios requested by the Chairman.
    One assumes that the number of deployed troops declines to 
30,000 by 2010 and remains at that level for several years. 
That scenario produces out year costs of about $30 billion a 
year. The other assumes a higher long term commitment of 75,000 
troops. That scenario results in out year costs of around $65 
billion to $70 billion a year. Those costs are shown in tables 
five, six, and seven in my prepared statement
    Because detailed operational statistics are not available, 
and because the nature of wartime operations is difficult to 
predict in any event, these estimates are rough approximations 
based on current funding and force levels. Costs in the next 
few years would be higher, how much higher would depend on the 
duration of the recent increase in force levels and the 
rapidity with which troops are withdrawn. Under the scenarios 
we assessed funding required for fiscal year 2008 might be in 
the range of $140 billion to $170 billion dollars. For 2009 the 
range is much bigger, from about $90 billion to $170 billion.
    Than concludes my statement, Mr. Chairman. And I would be 
happy to answer any questions.
    [The prepared statement of Robert Sunshine follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Spratt. Thank you very much, Mr. Sunshine. Now 
Ambassador Bowen.

                  STATEMENT OF STUART W. BOWEN

    Mr. Bowen. Thank you, Chairman Spratt, Ranking Member Ryan, 
members of the Committee on the Budget. Thank you for inviting 
me today to address you. Well I am very appreciative of that 
and because I had the opportunity always to work closely with 
Ambassadors in Iraq so. Thank you.
    That is right. I report to Secretary Rice and Secretary 
Gates.
    Chairman Spratt. Thank you very much and you may proceed 
with your statement.
    Mr. Bowen. Thank you very much. Thank you for asking me to 
address the Committee on the cost of military operations and 
reconstruction in Iraq and Afghanistan. The Office of the 
Special Inspector General for Iraq Reconstruction was created 
in January of 2004 initially as the coalition provisional 
authority Inspector General. In October of that year the 
Congress created SIGIR. We have oversight now of about $32 
billion in reconstruction funds. Thirty-two of the 44 that have 
been appropriated to date by Congress.
    Yesterday we released our 14 quarterly report and this 
report contains detailed reviews of eight new audits, five new 
on the ground inspections, updates on our many investigations 
and a sector by sector review of how taxpayer money has been 
allocated and spent for Iraq reconstruction to the four major 
funds that Congress created. I leave this week for my 17 trip 
to Iraq to oversee the continuing work of the 30 auditors, 
inspectors, and investigators that are carrying our mission 
today in Baghdad.
    The title of this hearing asks what the cost of Iraq 
reconstruction have been. SIGIRs newest quarterly report helps 
answer that question. The United States Congress has 
appropriated approximately $44 and a half billion for the 
relief and reconstruction of Iraq, including around $21 billion 
through the Iraq Relief and Reconstruction Fund; $14 billion 
through Iraq Security Forces Fund; $3.1 billion through the 
Economic Support Fund; and two and a half billion through the 
Commanders Emergency Response Program. About 90 percent of the 
IRRF is spent. Sixty-one percent of the ISSF is spent and half 
of the CERP and the ESF that has been appropriated to date has 
been spent.
    My office has oversight of about 70 percent of these funds. 
Our audits and inspections and investigations have numerous 
incidences of waste and some egregious examples of fraud as 
evidenced just last week three new arrests were made in a case 
that SIGIR is a joint task force participant on. And we 
continue to move forward on 57 fraud cases. But waste is really 
the challenging issue in Iraq reconstruction. It is no surprise 
that our audits have uncovered incidences of waste, that is my 
job.
    Part of our mission is to root out waste and abuse and we 
do that through real time auditing. And what that means is 
working with management to inform them about what we find in 
the course of our audits so that the corrections are made along 
the way. And Ambassador Saloom worked extraordinarily well with 
my office in the year that he was director of the Iraq 
Reconstruction Management Office in responding and making 
meaningful, positive changes in the mission. And so I commend 
him to the Committee for his excellent coordination on this 
effort.
    The task order 130 audit that we just released, Ambassador 
Saloom worked closely with us on and it looked at how KBR 
supported the mission through food, fuel and shelter. And along 
the way a number of significant deficiencies were found, almost 
all of them were fixed before the audit was released three 
weeks ago.
    Along with our real time auditing, we are also engaged in 
an ambitious focused forensic audit endeavor and that is 
looking at the largest contracts for Iraq reconstruction 
pursuant to the Congress' mandate to SIGIR and the Iraq 
Reconstruction Accountability Act of 2006 to carry out forensic 
auditing. The first one is our in this quarterly report. It is 
of Bechtel and it has some interesting and revealing statistics 
about how that contract was carried out. We are also next up 
dealing with Parson's, Blackwater, KBR are all underway and 
announced.
    Asset transfer another important audit this quarter 
highlights the fact that the asset transfer process that had 
been worked out with the Iraqi government has been off the 
rails for about a year and other means have had to be used to 
transfer projects such as local transfer or unilateral 
transfer. That raises grave questions about the sustainability 
of what the U.S. has constructed in Iraq.
    The Provincial Reconstruction Team Program audit in this 
quarterly is a piece of good news. Real progress has been made 
since our report of last October on security, resources, and 
staffing front. And the 15 new PRTs are being staffed and a 
number of the embedded PRTs are operational and we will have a 
report out in September on the ethicacy of that endeavor.
    As I said, sustainment, that is ensuring that what the 
United States has provided Iraq continues to be operated and 
maintained is a continuing issue for our office and we carry 
out inspections looking at projects that have been handed over 
to the Iraqis at least a year and in this latest report the Al 
Doura power generation plant, the most important power plant 
for Baghdad is not working as revealed by our visit in June. 
Indeed it hasn't worked for most of this year. Ninety million 
dollars invested to get two units going, only one was ever 
started and that was in April of 2004. It was turned over the 
Iraqis and they it burned out the unit. And the Corps of 
Engineers has taken it over and we will have both restarted 
next week. In fact, one just started up the last couple of days 
and about 30 megs are flowing into the city. When both are up 
it will add seven and a half percent to the grid in power 
generated.
    You also asked for improvements that SIGIR has helped 
effect in the course of our oversight, and much has been done 
as I pointed out by in the responsiveness of management to help 
apply many of our findings. For example, the definitization 
problem that we uncovered over a year ago and that is getting 
control over cost and cost plus contracts and it was virtually 
ignored. It had been virtually ignored. As a result of the 
audit the control over cost within those contract is beginning 
to be managed better. Certainly better than before.
    Two years ago during my trip to--one of my trips to 
Baghdad, I discovered the award fee process for cost plus 
contracts of, you know, a very significant financial issue 
because there is a guarantee three percent plus of another 
possibility of 12 percent in each of these cost plus contracts. 
There were no criteria for those award fees. And as soon as we 
kicked off our audit, criteria were developed, files were 
developed, and that process was finally managed appropriately 
saving millions in taxpayer dollars.
    Our audits of the construction--reconstruction database 
prompted coordination and develop of a meaningful database that 
kept track of reconstruction projects. Something that wasn't 
the case when our audit began. And our three lessons learned 
reports to date have effectuated real change. One on human 
capital management promoted the civilian reserve corp concept 
which is taking hold and I think an important structural reform 
necessary to for future contingency operations.
    The contracting lessons learned report has produced some 
pending legislation from Senator Collins called the 
Accountability in Government Contracting, that is going to 
address this cost plus contract problem that we have 
continually focused on. And our most recent lessons learned 
report on program and project management emphasis the need for 
real reform of post conflict contingency relief and 
reconstruction operations. That is structural reform that I 
believe the Congress should provide for the agencies.
    Our investigations continue. We coordinate well on a number 
of task forces with other IG's and the FBI. And I have six 
investigators on the ground today and 14 working here in D.C. 
and I expect in the course of the year we are going to make 
some real progress and have some more news to report to you in 
due course.
    So with that I appreciate your time and look forward to 
answering your questions.
    [The prepared statement of Stuart W. Bowen follows:]

 Prepared Statement of Stuart W. Bowen, Jr., Special Inspector General 
                        for Iraq Reconstruction

    Chairman Spratt, Ranking Member Ryan, and members of the Committee 
on the Budget, thank you for inviting me to appear before you today to 
address ``The Costs of Military Operations and Reconstruction in Iraq 
and Afghanistan.''
    The Office of the Special Inspector General for Iraq Reconstruction 
was created in January 2004, and is responsible for conducting the 
independent and objective oversight of more than $31.8 billion in funds 
appropriated under the Iraq Relief and Reconstruction Fund and certain 
other appropriations.
    Yesterday we released our 14th Quarterly Report to the Congress. 
This Report contains detailed reviews of SIGIR's eight new audits, five 
new on-the-ground inspections, updates on SIGIR's investigative work 
(which includes two recent sentencings and three recent arrests for 
fraud), and a sector by sector recounting of how taxpayer money has 
been allocated and spent for Iraq's reconstruction through four major 
funds created by the Congress.
    Over the past three years, SIGIR has produced 94 audits, nearly 100 
on-the-ground inspections, opened over 300 investigations, released 3 
``lessons learned'' reports, and obtained savings, recoveries and 
restitution orders from audits and investigations amounting to over $70 
million. I am proud of the achievements of SIGIR's auditors, 
inspectors, and investigators: 30 of them are working today in Iraq to 
carry out the oversight mission assigned by the Congress. I must note 
that their work has become more challenging over the past three months 
as attacks upon the Green Zone have markedly increased. Later this 
week, I will leave on my 17th trip to Iraq to support my team's efforts 
in Baghdad and across Iraq.
    The title of this hearing asks what the costs of Iraq's 
reconstruction have been. That is a question that can be answered on 
several levels. SIGIR's newest quarterly report helps provide those 
answers on a financial level.
    The United States Congress has appropriated approximately $44.5 
billion for the relief and reconstruction of Iraq. That includes: 
around $21 billion appropriated in 2003 to the Iraq Relief and 
Reconstruction Fund (IIRF); around $14 billion appropriated to the Iraq 
Security Forces Fund (ISSF) since mid-2005; $3.1 billion appropriated 
to the Economic Support Fund (ESF) since early 2006; $2.5 billion 
appropriated to the Commander's Emergency Response Program (CERP) over 
the past three years; and approximately $4 billion appropriated to 26 
smaller accounts. Approximately 90 percent of the IRRF is spent, around 
61 percent of the ISSF is spent, and around half of CERP and half of 
ESF appropriated to date has been spent. SIGIR has oversight of around 
70 percent of these appropriations.
    Pledges of international support amount to approximately $18 
billion in loans, grants and debt reductions, but, to date, just under 
$4 billion of this amount has been used in Iraq. Our new quarterly 
report also notes that around $36 billion in Iraqi funds have been used 
for relief and reconstruction purposes since 2003. In total, almost 
$100 billion has been allocated for Iraq's recovery from varying 
sources.
    SIGIR's audits and inspections have uncovered numerous instances of 
waste and inefficiency in the program; but we also have inspected many 
projects that have met contract expectations.
    The reasons for the shortfalls we have found vary greatly. This 
quarter's reporting uncovered problems in sustainment at the Al Doura 
power plant south of Baghdad. The benefit of the $90 million dollar 
investment in this project, which is so critical to providing power to 
Baghdad, has not been realized because of weak operations and 
maintenance practices by the Iraqis after the project was turned over 
in April 2006. Specifically, only one of the Al Doura units was brought 
on line, and it failed in late 2006 because of deleterious operational 
practices. The US Army Corps of Engineers is now repairing both units 
and expects to have them back on-line in August. Once up and fully 
running, Al Doura will provide 320 megawatts to the electric grid, 
adding 7.5 % to the current generated nationwide output and increasing 
greatly the hours of power available per day to Baghdad.
    As happened at Al Doura, waste can occur because of poor operations 
and maintenance, whether in planning or execution. Waste also can occur 
due to weak oversight (see SIGIR's audit of the Primary Health Clinics 
program) or poor quality control (see SIGIR's inspection of the Baghdad 
Police College) or both (see this quarter's audit of KBR's support to 
the Embassy). ``Waste'' can also arise due to delays created by 
security problems. In any event, waste increases the cost of investment 
to help rebuild Iraq.
    Part of SIGIR's mission is to root out waste, and we have 
accomplished that in a number of instances through our ``real time'' 
auditing approach. Real time auditing means keeping management informed 
during audits so that changes can be made to correct accountability and 
control weaknesses before the audit is released. The Task Order 130 
audit this quarter is a perfect example of how this approach is 
applied. SIGIR auditors found a number of problems in KBR's management 
of the provision of food, fuel, and shelter to the Embassy in the Green 
Zone. As the problems, were uncovered, management and KBR corrected 
them such that, by the time the audit was published on June 22, almost 
of the problems were remediated.
    SIGIR's real time auditing is complemented by larger-scale contract 
audits that look to answer the question ``where did the money go and 
what did we get for it.'' SIGIR will accomplish this mission by 
carrying out a series of focused financial audits of the largest 
contracts in Iraq reconstruction This audit program will meet the 
forensic audit requirement of the Iraq Accountability Act of 2006.
                        focused forensic audits
    SIGIR completed this quarter the first in its planned series of 
focused financial reviews of large contractors funded by the Iraq 
Relief and Reconstruction Fund (IRRF). SIGIR reviewed the spending of 
Bechtel National Inc. under its Phase II IRRF contract. Bechtel was the 
largest IRRF contractor.
    The audit, which reviewed Bechtel's work under a $1.33 billion 
contract with USAID, is emblematic of the challenges faced in Iraq 
reconstruction. Bechtel succeeded in meeting original contract scope 
requirements in about half of the contract's 24 task orders.
    Among the findings, SIGIR found:
     The shortage of government contracting staff resulted in a 
lax oversight in the validation of performance.
     Approximately half of the job orders did not meet their 
original stated objectives.
    SIGIR's audit illustrated both the successes of some task order 
projects and how some projects were descoped, cancelled, ran over their 
budgets, or were severely delayed. Among the items of concern uncovered 
by the audit was a government decision to pay Bechtel invoices within 
10 days of receipt, with just two staff members assigned to the review 
process.
                             asset transfer
    SIGIR has closely followed the asset transfer process in Iraq--that 
is, how U.S. agencies are turning over completed projects to Iraqi 
officials, both at the national and on the local levels. SIGIR has 
conducted four audits on various aspects of this important process.
    This latest audit discovered that the Government of Iraq (GOI) has 
not formally accepted a single project since July 2006. Local Iraqi 
officials are accepting projects, but the national government has not. 
Completed projects that are not transferred also represent potential 
ongoing sustainment expenses for the U.S.
    Typically, asset transfer between nations is managed under 
bilateral agreements. Thus, SIGIR recommended that the U.S. Ambassador 
to Iraq provide senior-level support to finalize a bilateral agreement 
between the United States and Iraq on asset transfer to the GOI. SIGIR 
believes that asset transfer to the GOI is best accomplished through a 
single U.S. government process, rather than by each implementing agency 
independently negotiating its own agreement.
                    provincial reconstruction teams
    The United States is placing additional emphasis on the use of 
Provincial Reconstruction Teams (PRTs), which are civil-military teams 
designed to build capacity in local governance across Iraq through 
direct assistance to and training of provincial government personnel. 
As of June 2007, the United States has provided $1.934 billion to 
support the Iraq PRT Program, and DoD has requested $937 million in 
additional funding for FY 2008.
    This quarter, SIGIR issued the second of three audits on the PRTs, 
which showed that the PRT program has made great strides overcoming 
problems with civil-military integration, operational support issues, 
and resource and staffing shortfalls. However, SIGIR continues to 
recommend that planners further define the objectives and develop a 
monitoring system to measure the performance of the PRT program, 
including clearly defined objectives and performance measures and 
milestones.
                              sustainment
    For over 18 months, SIGIR has been raising concerns about the 
process for sustaining U.S.-funded infrastructure and systems after 
they have been turned over to the GOI. Last year, SIGIR instituted a 
regime of inspections to review sustainment of projects already turned 
over to Iraq. In the last two Quarterly Reports, SIGIR observed only 
limited progress in this regard. The Al Doura report issued this 
quarter was the most serious sustainment shortfall uncovered to date.
    SIGIR's assessments this quarter suggest that some improvement has 
been made, but we note that efforts need to be more effective:
     In 3 of the 4 sustainment assessments SIGIR inspectors 
made this quarter, sustainment problems were identified, posing threats 
to the condition and durability of the facilities, and the health and 
safety of those who worked and lived in the facilities.
     In one other sustainment review, SIGIR found that 
sustainment was being properly addressed and the project should 
continue to remain functional.
    A larger challenge to sustainment practices is likely to occur when 
the bulk of U.S.-funded projects are transferred to the GOI. The 
program and fiscal planning required by the GOI to successfully meet 
this sustainment challenge reminds us of the importance of a well-
defined asset transfer process.
                              improvements
    The Committee has asked about improvements that agencies are making 
with respect to their Iraq reconstruction practices. Of note, agency 
management has been receptive to virtually all of SIGIR's 
recommendations, whether from our audits and inspections or our lessons 
learned reports. My co-panelist today, Ambassador Joe Saloom, was very 
responsive to SIGIR's recommendations during his recently completed 
year in Iraq as the Director of the Iraq Reconstruction Management 
Office.
    Much has been done, for example, to repair the contract 
``definitization'' process, through which cost-plus contract task 
orders are defined into a more fixed price state. SIGIR audited this 
definitiatzation requirement in 2006 and found that it was not being 
applied. The agencies agreed with our concerns and our recommendation; 
thus, corrective measures have improved definitization practices in 
Iraq.
    Two years ago, I learned, during one of my trips to Baghdad, that 
the award fee process for cost plus contracts was not being properly 
managed. I immediately ordered an audit of the process, and SIGIR's 
auditors found no adequate criteria in place for the award of very 
large award fees. The managing agency quickly reformed the process so 
that only performance exceeding expectations is rewarded. This was a 
good example of SIGIR's real time auditing.
    SIGIR's multiple audits of the reconstruction database management 
systems eventually prompted the creation of a single project database, 
based on SIGIR's recommendations. Our lessons learned report on 
contracting recommends that this improvement be made part of the 
permanent planning structure.
    SIGIR's lessons learned reports have effected a number of 
improvements. The contracting report helped evolve salutary change 
within the Joint Contracting Command/Iraq-Afghanistan. Senator Collins 
(R-ME) has introduced the ``Accountability in Government Contracting 
Act,'' which would implement needed reform into the area of cost-plus 
contracting practices consistent with recommendations in the 
contracting lessons learned report. SIGIR's contracting report also 
prompted OMB's Office of Federal Procurement to adopt SIGIR's 
contingency contracting recommendations in its recently published 
contracting guidance.
    Personnel practices in Iraq also changed after SIGIR's lessons 
learned report on human capital management. Changes included improved 
management of tour lengths and personnel transition. The need for 
developing a ``civilian reserve corps'' recommended in that report is 
receiving support in the agencies and from the Congress. Finally, 
SIGIR's most recent lessons learned report on program and project 
management contained what I believe is SIGIR's most important 
recommendation: Congress should reform post-conflict contingency relief 
and reconstruction planning and structure.
                             investigations
    SIGIR aggressively pursues all credible allegations it receives of 
criminal misconduct on the part of government officials or contractors, 
and we work with other investigative agencies and with career 
prosecutors at the Justice Department to develop and prosecute our 
cases. SIGIR's investigative work has resulted in 13 arrests, 5 
convictions, 5 imprisonments, and the recovery or restitution of over 
$15 million. In the past ten days, SIGIR participated in arrests in a 
significant new bribery case, which arose form the work of one of the 
joint task forces of which SIGIR is a part.
    Corruption within the Iraqi government is a serious problem that we 
refer to it as ``the second insurgency.'' SIGIR's review of 
anticorruption support to Iraq found areas still in need of 
improvement. A recent reorganization of United States efforts followed 
SIGIR's recommendations and will help make progress in this important 
area.
                             sigir planning
    During the next reporting quarters, SIGIR will, among many other 
things, continue its focused financial reviews of large contractors, 
report on the results of the Provincial Reconstruction Team Program, 
assess and inspect Commanders' Emergency Response Program projects, and 
open up audits on large Iraq Security Force Fund contracts. In 
addition, we will continue to work aggressively on our many 
investigations of alleged criminality in the reconstruction program. In 
pursuing each of these missions, SIGIR continues to rely on and 
appreciate the support we receive from the Congress and the Departments 
of State and Defense.
    Mr. Chairman, members of the Committee, thank you for your time and 
attention to these important matters, and I look forward to answering 
your questions.

    Chairman Spratt. Ambassador Saloom.

                   STATEMENT OF JOSEPH SALOOM

    Mr. Saloom. Thank you very much, Mr. Chairman. It is a 
pleasure for me to testify before you, Congressman Ryan, and 
other members of the Committee, ladies and gentleman.
    I just got back--I got back from Iraq about two and a half 
months ago where I spent a year as head of the Iraq 
Reconstruction Management Office. So this is a topic that is 
near and dear to me. Okay.
    So this is a topic of course that is very near and dear to 
me. I did have the chance to discuss this with Congressman Ryan 
when he was in Baghdad and actually we had quite a large number 
of Congressional visitors that we had the chance to discuss 
this program with.
    Mr. Chairman, your letter inviting me here noted the 
Committee's interest in past and projected costs of 
reconstruction and what the departments were doing to identify 
and curb wasteful spending.
    The answer to your first question is that our emphasis has 
moved for building things to building the capacity of the 
Iraqis to channel their own considerable resources to meeting 
the needs of the Iraqi people. If there was one theme that I 
had in my year there that was in every talk it was we are 
building capacity, not things.
    Our efforts with the ministries in Baghdad are complemented 
by giving the provincial reconstruction teams that Mr. Bowen 
mentioned both the mission and the tools to spur the Iraqis at 
the provincial level and at the local level to use their 
resources to make visible improvements in the daily lives of 
Iraqis. What you are, I think, most interested in the budget 
impact of all of this change is that our requests for fiscal 
years 2006, 2007, and 2008 are each in order of magnitude 
smaller than the IRRF, the original IRRF 2003, 2004 IRRF funds 
which were $20.9 billion. So the numbers were $1.7 billion for 
2006; $2.2 billion in 2007 and our request for 2008 is $1.4 
billion.
    I am especially delighted to see Special Inspector General 
for Iraq Stuart Bowen on this panel. I would simply echo what 
he mentioned--our record of working with SIGIR is 
overwhelmingly one of acceptance and implementation of the 
SIGIR recommendations to improve the management of resources 
that are entrusted to us by you, by Congress.
    The most pressing fiscal challenge preventing Iraq from 
being self reliant in economic affairs is the failure of the 
Iraqis to execute their capital budget. They do very well at 
spending current doing current expenditures, wages, pensions 
that sort of thing. But it's mobilizing funds for projects that 
are particularly difficult. The bright side of this is that 
Iraqis have of all political persuasions from all regions of 
the country and at all levels recognize this problem and are 
moving to address it.
    While our focus is on the way forward, we are also 
determined to manage effectively the remaining funds for Iraq 
reconstruction. As I mentioned, we received $20.9 billion in 
IRRF I and II. We have obligated 98 percent of IRRF II and as 
of July 17 we have disbursed 86 percent. The 90 percent number 
Stuart used was probably IRRF I and II together.
    We expect to complete most ongoing IRRF II projects during 
the course of 2007. But we know that not every project has 
progressed as we would have wished. Some projects have 
deservedly attracted attention, including from Congress and 
from SIGIR. In such cases we have taken action to get them 
moving in the right direction and have moved to put in place 
management oversight structures to help ensure that similar 
problems do not reoccur.
    We have learned lessons from our experience that have 
reshaped the program to more effectively meet its intended 
goals. In the early stages IRRF managers relied heavily on cost 
plus design build contracts with large U.S. and international 
firms. Experience has taught us as the situation evolved that 
it is often much more economical to move to firm fix priced 
contracts with other Iraqi companies or companies from the 
region and we have moved to do that.
    To conclude, Iraq has a significant capital budget that it 
must mobilize to spend on needed facilities. We have designed 
our assistance to foster that mobilization but not to 
substitute for it.
    Thank you very much. I look forward to your questions and 
to your ideas.
    [The prepared statement of Joseph Saloom follows:]

  Prepared Statement of Hon. Joseph Saloom, Ambassador of the United 
     States and Senior Transition Advisor, U.S. Department of State

    Mr. Chairman, Mr. Ryan, members of the Committee, ladies and 
gentlemen: It is a pleasure for me to appear before you today to 
discuss reconstruction in Iraq. I returned two and a half months ago 
from a year as Director of the Iraq Reconstruction Management Office 
where I worked on these issues on a daily basis and had the chance to 
brief some of you on these issues during your trips to Baghdad.
    The Chairman's letter inviting me noted the Committee's interest in 
past and projected costs of reconstruction and what Departments were 
doing to identify and curb wasteful spending. The answer to the first 
question is that our emphasis has moved from building things to 
building the capacity of the Iraqi government to channel its 
considerable resources to meet the urgent needs of the Iraqi people in 
a transparent and accountable manner. We expect the Iraqis, not the 
U.S. taxpayer to pay for fixing the Iraqi economy, building on generous 
U.S. reconstruction assistance which we provided during the 
reconstruction phase of our assistance program to Iraq under the IRRF. 
As this phase winds down, we are focusing on building Iraqi capacity 
though the investment of a much smaller amount of U.S. funds to help 
Iraqi authorities to mobilize and channel their own resources to meet 
the needs of the Iraqi people.
    The budget impact of this shift in focus is that our requests for 
FYs 2006, 2007 and 2008 each are an order of magnitude smaller than the 
IRRF funding. The Congress made available $1.7 billion in FY 2006, $2.2 
billion in FY 2007 and our request for FY 2008 is $1.4 billion.
    On the question of wasteful spending, I am delighted to see Special 
Inspector General Stuart Bowen on this panel. The Department of State 
works closely with SIGIR and is constantly exploring ways to improve 
monitoring of projects to minimize waste. The record of our working 
with SIGIR is overwhelmingly one of acceptance and implementation of 
SIGIR recommendations to improve management of the resources entrusted 
to us by Congress.
                             changing focus
    As part of the President's New Way Forward announced in January, 
the focus of our assistance effort in Iraq is changing. As Iraqis 
increasingly take the lead we have shifted our focus from large 
infrastructure projects to capacity development and technical 
assistance programs that will increase the ability of the Iraqis to 
better plan and execute their capital budget, increase production of 
essential services in vital areas such as electricity and water, and 
improve governance at the national and provincial levels.
    To meet these objectives, we continue to boost our capacity 
building effort with the central government in Baghdad and are 
extending and expanding our reach beyond the Green Zone to help local 
communities and leaders transition to self-sufficiency. At the center 
of this latter effort is the expansion of the Provincial Reconstruction 
Teams (PRTs).
                             curbing waste
    One of the issues I had to grapple with in deciding whether or not 
to take on the challenge of the IRMO position were the questions that 
have been raised regarding allegations of waste and abuse of Iraq 
Relief and Reconstruction Fund (IRRF) monies appropriated by Congress. 
Secretary Rice has emphasized in testimony her complete commitment to 
transparency and accountability. She meets regularly with the Special 
Inspector General for Iraq Reconstruction (SIGIR) Stuart Bowen. The 
State Department and our implementing agency partners also work closely 
with SIGIR to support the latter's program review of our assistance. I 
met frequently with Mr. Bowen during his trips to Baghdad. When he 
found deficiencies, my goal was to have his reports read ``SIGIR found 
this problem and it either has been or is in the process of being 
fixed.''
                      civil military common effort
    The President has reinforced our own troop levels in the Baghdad 
area and in Anbar Province. Also, these troops are doing things 
differently. The mission of this enhanced force is to augment the 
efforts of Iraqi troops and commanders to lead in the clearing and 
security of neighborhoods, protect the local population, provide 
essential services, and create conditions necessary to spur political 
reconciliation and economic development. The State Department is 
contributing robustly to this effort by expanding our presence--
including by embedding our staff with military units--and closely 
coordinating with our military counterparts in and outside of Baghdad, 
as well as with the Iraqi government. Congress has provided additional 
budgetary resources for assistance programs designed to capitalize on 
security improvements by creating jobs and promoting economic 
revitalization. There must be the fullest possible civilian-military 
unity of effort if we are to be successful. In this vein I would like 
to underscore that hardly a day went by during my time in Baghdad when 
I did not hear or use the expression ``One Team, One Mission'' to 
describe the partnership between military and civilian elements. This 
ethos is also strong between Divisions and Brigade Combat Teams on the 
military side and the PRTs. I visited all ten of the PRTs that existed 
throughout Iraq at the time that I was there and found remarkable 
civil/military unity of purpose and team spirit. The fact that DOD has 
requested additional PRTs is the best indicator of the value our 
military colleagues place in this partnership.
    To further reinforce this civil/military effort, we are deploying 
greater resources alongside our military in Baghdad, Anbar Province and 
North Babil. The centerpiece of this effort is the expansion of our 
Provincial Reconstruction Teams. We have doubled the number of PRTs 
from 10 to 20 and are adding anther four in the coming months. We are 
adding more than 300 new personnel to the existing personnel already on 
the ground. The first phase of PRT expansion is complete, as the ten 
new interagency PRT core teams (40 personnel in total) arrived in Iraq 
in March. The new PRTs--six in Baghdad, three in Anbar and one in north 
Babil--are embedded in Brigade Combat Teams engaged in security 
operations. To demonstrate our unity of effort, on February 22 the 
State Department and the Defense Department signed a Memorandum of 
Agreement to codify this joint civilian-military effort.
    The State Department has assigned ten senior-level Team Leaders for 
these new PRTs. Each Team Leader is joined by a senior USAID 
development advisor, as well as a civil affairs officer and bilingual, 
bicultural advisor from the Department of Defense, to form core teams. 
These core teams completed the first specialized interagency PRT 
training course at the Foreign Service Institute, designed to prepare 
them for their new mission. PRT leaders worked jointly with Brigade 
Commanders to develop plans for the ``build'' phase of clear, secure, 
and build.
    PRTs target both civilian and military resources, including foreign 
assistance and the Commanders' Emergency Response Program, against a 
common strategic plan to sustain stability, promote economic growth, 
advance our counter-insurgency efforts and foster Iraqi self-
sufficiency where we have made security gains. In the next phases of 
our PRT expansion, we will augment the ten new PRTs and our existing 
PRTs with specialized technical personnel and add four more PRTs. Based 
upon ground-up evaluations, we are recruiting (among others) city 
planners, rule of law experts, and agribusiness development experts to 
meet provincial and local needs.
    PRTs use targeted assistance designed to develop provincial 
capacity to govern in an effective and sustainable way. PRTs will 
continue to play a leading role in coordinating U.S. programs funded by 
the Congress, including Iraqi Provincial Reconstruction Development 
Councils (PRDC) and USAID`s local governance, community stabilization, 
and community action programs.
                             iraqi efforts
    Iraqis understand that they are in the lead and the Iraqi 
government is dedicated to doing its part to invest in its own economic 
development. The Government of Iraq is committed to spending $10 
billion for capital projects. At a conference co-hosted by U.N. 
Secretary General Ban Ki-Moon, on May 3, Iraq committed to implement 
the comprehensive economic reform programs laid out in the 
International Compact with Iraq. On July 20 at the U.N. in New York, 
Iraq reported that it is making tangible progress toward meeting more 
than two-thirds of its International Compact goals and benchmarks.
    The most pressing fiscal challenge preventing Iraq from being self-
reliant in economic affairs is the failure of Iraqis to execute their 
capital budget. The Government of Iraq has available financial 
resources from oil revenues. They do not, however, uniformly have the 
capacity to execute this funding--especially when money must move 
rapidly, as is the case with post-military-action stabilization in 
Baghdad and Anbar Province. Iraq must develop the means to put its 
money to use, both for short-term ``build'' efforts and longer-term 
capital investment.
    The Iraqis have responded by designating budget execution as a high 
priority in 2007, and, to this end, the GOI has formed a budget 
execution taskforce led by Deputy Prime Minister Barham Salih, Finance 
Minister Bayan Jabr and Planning Minister Ali Baban. In coordination 
first with Ambassador Carney and now with Ambassador Ries, the joint 
taskforce held a conference for spending ministries and provinces to 
introduce new budget regulations and to dispel concerns about 
corruption allegations that stymied Iraqi spending in 2006. The Iraqi 
Ministry of Finance also has released 25 percent of the 2007 capital 
budget to ministries and16 percent to provinces and created incentives 
for ministries to execute their capital budgets or risk losing the 
funds. Ministries have committed nearly 25 percent of their funds to 
contracts, and provinces have committed 42 percent. Several ministries 
have demonstrated sufficient progress in allocating and spending their 
2007 budget that the Ministry of Finance has released the second 
tranche of their budget funds, including the Ministries of 
Municipalities, Public Works and Electricity.
    The PRTs are working closely with their provincial governments both 
to boost the capacity of provincial and local officials to execute 
their budgets but also to enhance communication and cooperation between 
provincial and central government entities. One of the most successful 
initiatives between the PRTs in the northern part of the country and 
Multinational Division North is a program that brings delegations of 
provincial officials to Baghdad to meet regularly with key central 
government officials whose cooperation is needed to move projects 
forward. Deputy Prime Minister Barham Salih plays a pivotal role in 
arranging the appropriate appointments for these provincial officials 
and this combined effort has removed many of the roadblocks to 
provincial spending. We remain cautiously optimistic that their resolve 
combined with our support will result in better budget execution in 
2007.
 supporting physical infrastructure and democracy with the iraq relief 
                     and reconstruction fund (irrf)
    While our focus is on the way forward, we are also determined to 
manage effectively the remaining funds for Iraq reconstruction. In 
Fiscal years 2003-4, we received $20.9 billion in the Iraq Relief and 
Reconstruction Fund (IRRF). This funding was intended to kick start the 
Iraqi economy and focused primarily on helping to re-establish the 
Iraqi security forces and police; restore essential services like 
water, electricity and oil; and improve health and education. Despite 
challenges, including insurgent attacks, IRRF projects have made 
significant improvements in Iraq. We have added capacity to provide 
clean water for up to 5.9 million Iraqis and capacity to provide 
sewerage for 5.2 million; added or rehabilitated more than 2,500 MW of 
generating capacity and helped to keep an additional 2,200 MW operating 
through preventive maintenance; and helped Iraq maintain oil production 
at relatively steady levels despite deteriorating security conditions. 
Democracy programs also helped Iraq hold three elections and provided 
advisers to support the drafting of the constitution.
    IRRF was never designed to completely rebuild Iraq's degraded 
infrastructure. The 2003 UN/World Bank estimate of medium term 
reconstruction needs amounted to $56 billion based on certain 
assumptions about the security situation: an estimate today would 
certainly be higher.
    We have obligated 98 percent of IRRF II, and, as of July 17, have 
disbursed 86%. The remaining 2% of IRRF funds ``expired'' on October 1, 
2006 and will be used to cover technical adjustments to existing 
obligations as required under law. We expect to complete most ongoing 
IRRF II projects during the course of 2007.
    But we know that not every project has progressed as we would have 
wished. Some projects have deservedly attracted attention, including 
from the Congress and from SIGIR, with whom we work very closely. In 
such cases, we have taken action to get them moving back in the right 
direction and have moved to put in place management oversight 
structures to help ensure that similar problems do not reoccur.
    I want to emphasize the State Department's strong commitment to 
oversight of the funds Congress has appropriated to us for our efforts 
in Iraq. We have supported 14 audits by the Government Accountability 
Office, more than 80 audits and reports issued by the SIGIR as well as 
audits done by the Inspectors General of the various implementing 
agencies. We will continue to work closely with SIGIR, GAO, and the 
Inspectors General to maintain the highest standards of oversight and 
accountability for all of our operations in Iraq.
    There are numerous studies and reports on the evolution of the IRRF 
program, the various times that it was adjusted and refocused, and why 
certain approaches worked better than others. We have learned lessons 
from our experience and have reshaped the program to more effectively 
meet its intended goals. In early stages, IRRF managers relied heavily 
on ``cost plus design build'' contracts with large U.S. and 
international firms. The idea was that this was the only way to attract 
bidders capable of mobilizing quickly in the uncertain atmosphere of 
the early days of Operation Iraqi Freedom. Experience has taught us as 
the situation evolved that it was often more economical to move to firm 
fixed price contracts with Iraqi and regional firms for many projects, 
especially those that do not require specialized technical expertise.
                economic support funds: fy 2006 and 2007
    While IRRF was designed to start recovery of Iraq's severely 
degraded infrastructure, the focus of subsequent assistance efforts 
moved progressively away from construction of facilities and more to 
building capable and transparent Iraqi government structures at the 
central and provincial levels. Main spending categories for FY 2006 and 
FY 2007 were funds for use by the PRTs and USAID Local Governance 
Project (LGP) to train local and provincial leaders to take on the 
responsibility of governing in a decentralized system rather than 
taking orders from a central authority in Baghdad. In addition, 
Congress provided significant funds for the Community Stabilization 
Program (CSP) and the Community Action Program (CAP). The PRDC funds 
provided the new democratically elected provincial authorities with 
their first funds to program and allocate, teaching them how to use 
open and transparent procedures and to balance the needs of competing 
constituent interests. These PRDC, LGP, CSP funds all provide funds for 
near-term, high impact improvements in the lives of citizens after 
security operations created conditions for such projects to succeed.
    Other major spending categories included operations and maintenance 
for U.S.-built projects, capacity building at plant level for 
operations and maintenance as well as longer term public administration 
training, democracy promotion, and support for rule of law, civil 
society, rural development and economic reform activities.
    The common theme is that we are spending our money to help the 
Iraqis develop the capability to govern themselves in an efficient, 
transparent and democratic manner, and that we are not rebuilding major 
facilities for Iraq. The programs that actually involve construction 
are small, short term, high impact projects that are designed either as 
a capacity building tool for provincial governments or as civilian 
support to ongoing security operations by demonstrating that 
cooperating in combating insurgents and militias can bring a better 
life to citizens.
                            looking forward
    Iraq has a significant capital budget that it must mobilize to 
spend on needed facilities. We have designed our assistance to foster 
that mobilization, not to substitute for it.
                            lessons learned
    Mr. Chairman, your letter noted the Committee's interest in what 
the departments are doing to identify and reduce wasteful spending. 
Beyond my testimony above, I would like to pass on some personal views 
of ``lessons learned'' for the future post-conflict operations based on 
my on my time working on reconstruction throughout Iraq for the past 
year. Some of you, including Ranking Member Ryan, have heard some of 
this before from me in Baghdad. Not surprisingly, many of these are 
similar to some of Special Inspector Bowen's recommendations in his 
``lessons learned'' series.
    I would like to stress the importance of ``listening to the 
client'' in order to have projects meet the priorities of the intended 
recipients: the key to local buy-in and local ``ownership'' of 
projects. This can be done relatively quickly for a small, high impact 
project but takes more time and consultation with a broader range of 
stakeholders for larger infrastructure projects. Special Inspector 
Bowen has noted the difficulties in the Asset Recognition and Transfer 
process. There are hosts of complicating factors involved with this 
process, including frequent changes in Ministers, but fundamentally, 
this process would have been easier if, from the start, the Iraqis had 
had a greater sense that these were projects that they had selected to 
meet their most important needs.
    Use the local firms and workers as much as you can. This builds the 
local business community, the domestic economy and local employment and 
is likely to provide best value for money to the taxpayer. It forges a 
spirit of partnership with the local community. This requires a rapid 
survey of the capability of local firms because there will always be 
specialized requirements for which the local skill base is inadequate. 
I concur with Special Inspector Bowen's suggestion to pre-compete and 
pre-qualify the specialized contractors that you will need for things 
local firms cannot do so that we can move quickly on items beyond the 
capacity of local firms.
    Much like in medicine, there is a ``golden hour'' in post-conflict 
reconstruction, when small, high impact projects can demonstrate in the 
early stages of an operation our good intentions and show rapid 
benefits to the population of cooperation with us. Authority and 
funding to furnish a small generator to power local essential service 
providers or other similar items should be part of the toolkit that we 
should be able to deploy quickly in such situations. Every military 
commander that I worked with in Iraq stressed the importance of having 
a civilian capacity to do this as a complement and enhancement to CERP. 
Preplanned rapid procurement, contracting and grant-making mechanisms 
are especially important.
    Special Inspector Bowen and I have often discussed the importance 
of quality assurance and my people in Baghdad were sick of me using the 
cliche that ``you don't get what you expect, you get what you 
inspect.'' My chief of operations in IRMO, MG Steve Abt, visited 
projects at every opportunity and earned a Silver Star for taking fire 
so often when he was out looking at ongoing reconstruction efforts. I 
and my other IRMO colleagues also spent significant time in the ``Red 
Zone'' monitoring project progress as did colleagues at the Gulf 
Regional Division of the Corps of Engineers. Special Inspector Bowen 
and his people added to this effort by having ``eyes on'' projects. 
This monitoring and oversight will always be more complicated and 
costly if the environment is non-permissive and we need to recognize 
and plan for security issues as a cost of doing business and as a 
constraint on optimal monitoring.
    In post-conflict operations, there will always be complementary 
programs done by different agencies under different authorities and 
drawing on different sources of funds but there needs to be a 
preplanned mechanism to deconflict and coordinate efforts and share 
best practices from the unit level to the national level. This 
mechanism needs to be something that civilians and military have 
trained together to implement as part of civil/military contingency 
post-conflict exercises. There are useful lessons to be learned from 
the experience of IRMO, CETI, and the PRTs as we design the way 
forward.
    It is also a cliche that no battle plan survives the first contact 
with the enemy but I believe that if we do the things above, more of 
the plan will survive.
    Thank you very much. I look forward to your questions and ideas.

    Chairman Spratt. Thank you, Ambassador. And now my 
constituent and as fellow South Carolinian, Secretary John 
Gastright.

              STATEMENT OF JOHN A. GASTRIGHT, JR.

    Mr. Gastright. Thank you, Mr. Chairman. It is a pleasure to 
be here today before yourself and Mr. Ryan and other members 
Committee.
    Afghanistan obviously remains at the forefront of efforts 
to combat global terrorism. And I am pleased to say that we are 
winning, but this effort in Afghanistan is going to require 
many years of intense U.S. engagement and it is going to 
require continued support from the United States Congress.
    I have this story I tell, I say in 1979 Afghanistan was one 
of the poorest countries in the world and then they went 
through 25 years of invasions and civil war. So they went 
backwards. We have a term that we use, in fact for this 
hearing, reconstruction. And that term doesn't accurately apply 
to the case of Afghanistan.
    In Afghanistan we are starting from scratch. We are 
starting at less than zero. And so our approach these years has 
been focused on constructing a state. We started by building 
the institutions of that state. We started with a constitution. 
We worked on developing the Office of the Presidency, the 
Parliament. We started working on building an Afghan national 
army. They have never had an Afghan national army before. They 
defeated the soviets with the Mujadhideen and they had run the 
British our hundreds of years earlier with the same process. 
They have never had a national institution like that. We are 
working on building the Afghan police as well.
    And we started moving on building the economic 
infrastructure on which you can build a sustainable economy. An 
economy that needs to provide economic opportunity for over 20 
million Afghans over 60 percent of those under the age of 25.
    And finally, today we are thinking forward about what we 
are going to do and it is about building capacity of that 
government to reach out and provide the services required to 
govern the Afghan people. At not only the government level at 
the central level, but at the sub-national level. And so far to 
date through fiscal year 2007 that has cost the American people 
about $22.7 billion.
    It is going to require us to stay the course for many 
years, because we are talking about building the Afghan state 
so that it can never again be a haven for international 
terrorism. Again, I believe we are on the right track. 
Afghanistan is making great progress and I look forward to 
answering your questions. Thank you, sir.
    [The prepared statement of John A. Gastright, Jr., 
follows:]

  Prepared Statement of Hon. John A. Gastright, Jr., Deputy Assistant 
Secretary of State for South and Central Asian Affairs, U.S. Department 
                                of State

                              introduction
    Mr. Chairman, Members of the Committee, almost six years after 
September 11, 2001, Afghanistan remains at the forefront of efforts to 
combat global terrorism. Make no mistake: we are winning, but this 
effort is going to require many years of intense U.S. engagement. And 
with the continued strong support of the United States Congress our 
strategic goal of a democratic Afghanistan that is never again a haven 
for international terrorism will be achieved.
    The integrated strategy we are pursuing melds together security, 
governance, and reconstruction. Each line of effort reinforces the 
other. The focus of our security efforts is training the Afghan 
military and police forces and we are making real progress. To 
complement these efforts, we are strengthening Afghan national 
institutions and improving Afghan governance throughout the country. We 
continue to make excellent progress on road construction, which 
improves Afghan economic viability, and also intend to extend the 
availability of electricity. We are re-building the rural 
infrastructure, enabling agricultural production to take place in vast 
areas of the country until recently out of bounds because of lack of 
irrigation or the presence of land mines.
    Since 2001, with this Committee's support, the United States has 
invested more than $22.7 billion into rebuilding Afghanistan, and we 
have made great progress on many fronts. The Congress has appropriated 
$10.1 billion for assistance in Fiscal Year 2007 alone, which includes 
over $2 billion of foreign operations assistance for reconstruction. 
Economic growth remains high, and major reconstruction milestones in 
health, education, and infrastructure development have been reached.
    Despite these successes, renewed attacks, particularly in the 
south, by the Taliban and other groups opposed to the legitimate 
Government of Afghanistan, as well as the continued menace of narcotics 
production remind us that our efforts are far from complete and that 
our commitment needs to be strong and steady.
                             reconstruction
    Our military efforts are helping to create a secure environment, 
while our reconstruction activities are laying the foundation for a 
functioning Afghan economy by constructing roads, building power 
generation capacity, expanding rural development opportunities, and 
working with the Afghan Government to extend good governance to the 
Afghan people.
    In 2001, after the fall of the Taliban, there were only 50 
kilometers of paved roads in the entire country. Construction is 
complete on over 5,825 kilometers of highways and provincial roads. The 
Ring Road is fully subscribed; routes to neighboring countries are 
under construction; and provincial and district roads are knitting 
together the country, particularly in the south. Not only are these 
roads transforming the rural landscape of Afghanistan and providing the 
foundation for a sustainable economy, they are also providing 
construction jobs and help to extend the writ of the central 
government. The Pyanj River Bridge, constructed by the U.S. Army Corps 
of Engineers, will link Afghanistan and Tajikistan. Once it is 
dedicated in August, it will draw Central and South Asia closer 
together by permitting the flow of goods and travelers that will help 
to re-establish Afghanistan as the transportation focal point for the 
region. We have also recently completed crossing facilities on the 
Turkmen border at Imamnazar. Allied to such physical infrastructure 
upgrades, the United States supports mentoring of customs and border 
police units in order to improve Afghanistan's ability to sustain 
itself.
    Access to reliable, affordable power is also critical to the 
stabilization and development of Afghanistan. Today, roughly ten 
percent of Afghans have access to electricity. We are working with the 
Afghan Government and other donors to build a power generation network 
that can serve as an engine of development. The goal of the Afghan 
government is to provide power to 40 percent of its population by 2011. 
In recent months, success in security operations in the Sangin District 
of Helmand Province has permitted the resumption of construction on the 
Kajaki Dam project, which will provide electricity for Helmand and 
Kandahar Provinces to close to two million Afghans. In the north, with 
our international partners, we are assisting Afghanistan in its efforts 
to secure power purchase agreements with neighboring countries and to 
build transmission lines to Kabul.
    In addition, we are working to harness the power of markets. To 
ensure that people have opportunities for employment and a chance to 
develop sustained alternative livelihoods, President Bush announced his 
support for the establishment of Reconstruction Opportunity Zones 
(ROZs) in Afghanistan and the border regions of Pakistan. By allowing 
certain goods manufactured in ROZs to enter the United States duty free 
as part of a comprehensive strategy of support for the Afghan private 
sector, this initiative can serve as a catalyst for increased trade and 
economic stability. The Administration is working with Congress, 
American industry, and the Afghan government to implement this 
initiative and to give these people, who need jobs and hope for the 
future, an opportunity to join the world economy and build sustainable 
livelihoods.
                               governance
    Improved governance is essential to laying the foundations of a 
stable society. Widespread incapacity and corruption together with 
traditional patronage networks impede efforts to deliver government 
services. Afghans deplore the continued presence of corrupt officials 
at all levels. Regrettably, the central government has been slow to 
remove even those involved in some of the most egregious cases. 
However, the attorney general has launched efforts to hold corrupt 
officials accountable, and we are beginning to see progress on this 
front. Good governance is key to maintaining and reinforcing long-term 
stability, preventing the return of the Taliban and winning in 
Afghanistan.
    At the July 2007 Rome Conference on Rule of Law in Afghanistan, the 
international community pledged approximately $98 million in new 
contributions to support justice sector reform efforts in Afghanistan, 
and they developed a plan to coordinate justice assistance programs in 
the provinces.
    Where governmental authority is weak and provincial governors 
uncommitted, poppy cultivation has grown. Farmers must have alternative 
livelihoods; security forces (army and police) must enforce the law; 
and government officials need to provide the necessary leadership. 
Preliminary poppy cultivation figures this year show a distinct north-
south split. In the North, where our five-pillar strategy (alternative 
development, eradication, interdiction, judicial reform, and public 
information) is working in synergy, poppy cultivation is down. In the 
South where our five pillars have a more difficult environment, poppy 
cultivation will likely be up significantly.
    Mr. Chairman, we have made much progress in Afghanistan, yet the 
international community must persist in supporting the Afghan people 
until they are able to stand on their own two feet. We must ensure that 
Afghanistan never again becomes a safe-haven for those who wish us harm
    Thank you Mr. Chairman, I look forward to responding to your 
questions.

    Chairman Spratt. Thank you very much indeed. Mr. Ryan I 
will turn first to you.
    Mr. Ryan. Dr. Sunshine, what was the--I think you had this 
in your testimony, but what is the total money that has been 
spent on reconstruction in Iraq to date? Is that the $44 
billion figure I heard? What is that number?
    Mr. Sunshine. Yes. I think that is- let me check that for 
you. Well we have diplomatic operations and foreign aid we have 
about $39 billion. There is another five billion that was 
originally appropriated to the State Department that was for 
indigenous security forces. We put that in a separate pot so we 
are using $39 billion for diplomatic operations and foreign 
aid.
    Now that is just not--that is not just reconstruction.
    Mr. Ryan. Yeah. So----
    Mr. Sunshine. That is the operation of the Embassy and all 
the other things that are going on.
    Mr. Ryan. And the SIGIR has the number as well. Is that the 
44? I think you used the $44 billion number, Stuart.
    Mr. Bowen. That is right. That is not the amount spent, 
that is the amount appropriated.
    Mr. Ryan. To date?
    Mr. Bowen. Yes. To date, yeah. And it is combining the 
amount from the Iraq Relief Reconstruction Fund, the Iraq 
Security Forces Fund, the Commanders Emergency Response 
Program, and the Economic Support Fund as well as 26 sub- 
accounts.
    Mr. Ryan. Let me ask both Joe and Stuart if I could, when a 
lot of the criticisms that we have seen on these trips to Iraq 
are on the Iraqi side of the budget. And the Iraqis' ability 
to, number one, execute their own budget, I can't recall the 
number but it was billions last year they literally couldn't 
execute. And then on the revenue side, the oil. And I can't 
recall the name of the refinery, General Odierno walked us 
through you know the ``black market'' problem with the 
refinery. The sabotage problem. I think he detached a unit from 
82 airborne to protect it.
    Can you give us a sense on where we are now with respect to 
helping the Iraqis execute their own budget and with the extent 
of the Iraqis protecting their own revenue base and preventing 
sabotage and the black market from eroding their own revenue 
base.
    Who ever feels, you know, so motivated to answer.
    Mr. Saloom. Actually I have been working on this for much 
of the past year. Indeed, the capital budget this year is $10 
billion. Execution last year was in the low 20 percent range. 
It is an absolutely pivotal thing but the Iraqis themselves 
recognize this problem and it is actually one thing on which 
all Iraqis agree. I mean all regions of the country, all 
political parties, all levels of government.
    The Deputy Prime Minister, Dr. Barham Salih, has put 
together a task force to work on budget execution. They had a 
conference in March that explained to the new budget expedited 
procedures. We are working with them, Major General Darryl 
Scott who is head of the Joint Contracting Command for Iraq and 
Afghanistan, has been instrumental in helping set up 
procurement assistance centers in conjunction with the Ministry 
of Planning where one of the big problems has been ministries 
would get money, but they couldn't actually contract it out. 
Okay? They just didn't have the expertise or the experience. 
And this group is set up so that if a ministry or a province 
has a problem.
    Now the first one of these is actually up and running, but 
they plan on having these in every province. In addition, we 
have set up in Deputy Prime Minister Barham Salih's office a 
budget execution monitoring office. Well we have helped them to 
set it up.
    Mr. Ryan. It is a total cash economy, correct?
    Mr. Saloom. Cash.
    Mr. Ryan. So all cash?
    Mr. Saloom. Cash.
    Mr. Ryan. Everything cash. Every project that is let, cash?
    Mr. Saloom. Cash.
    Mr. Ryan. And 20 percent of the ten billion capital budget 
last year----
    Mr. Saloom. No. Twenty percent of last year's budget was 
spent. Last year's budget was capital budget was so much 
smaller.
    Mr. Ryan. Okay. So this year it is ten billion?
    Mr. Saloom. This year is ten billion. But also USAID is 
working with six of the key ministries to put in project 
management units. So we are--we have made budget execution 
helping them on budget execution absolutely job one.
    When the Iraqis themselves had their budget management 
conference in March we had a conference for all of our PRT 
leaders the following week and gave them binders this thick, 
sort of saying, here is how you help your provincial government 
to actually spend its money. And in addition there has been 
great cooperation with multi-national division north where they 
are bringing members of the local governments, they have got 
five or six governments in MND North.
    They will bring the governors down to Baghdad and Dr. 
Barham Salih and his office will help coordinate meetings with 
all of the ministers for them so that they can advance projects 
that have to be approved at central level with the ministries 
that the governors can sit with the ministers and advance those 
projects.
    So it is----
    Mr. Ryan. Well I got to think it is----
    Mr. Saloom [continuing]. That is considerable effort.
    Mr. Ryan. I got to think it is pretty tough for them to 
establish an audit trail on these cash transactions. Has the 
SIGIR looked at this on behalf of----
    Mr. Bowen. We have.
    Mr. Ryan [continuing]. Of and----
    Mr. Bowen. We have. We have good reporting on and our 
latest quarterly about eight to ten billion was left unspent in 
the Treasury last year that should of been spent on capital 
projects, most notably administrative oil, $3.5 billion they 
spent $90 million. Less than two percent.
    This year already, according to the Iraqis' own reporting, 
we know how reliable it is, $538 million has been spent or 23 
percent of the ministry of oils budget. This is the result of a 
coordinated effort between the Embassy and the Iraqis. The 
Embassy has coordinator for economic transition who now has 
complete authority over economic issues with respect to Iraq, 
including the budget execution initiative.
    The Iraqis have also created a budget execution monitoring 
unit. And so those are important steps which is why the bench 
mark on this three weeks ago was rated conditional 
satisfactory. The actual explanation under the bench mark show 
that the Iraqis have a appropriated money for budget execution. 
The data on actual execution is still a question mark, but it 
points out that if they continue on current levels they might 
reach about 50 percent. It is not a linear process. But if they 
reach 50 percent that is significantly better than last year.
    Mr. Ryan. In the revenue base, the black market on the oil 
coming out of the refineraries which is protects their own 
revenue. What progress has been established on that?
    Mr. Bowen. That is a huge issue. Ninety-four percent of the 
budget is derived from the sale of oil and gas reserve. 
Seventy-four percent of the GDP and Bhagee is the power plant 
you were talking about. And I think one of the best things that 
General Petraeus did when he came in was send a battalion up 
surround it and stop the black marketing that is going on, but 
it still an issue and that is why frankly the turkey pipeline 
gets taken out a lot. It is down almost all the time and 
because when that pipeline is down it means oil has to be 
exported by truck, which means it is susceptible to smuggling 
and indeed there is a significant black market for refined 
fuels, a lot, most of it coming out of Bhagee in Iraq.
    And for and this is the core of the corruption problem.
    Mr. Ryan. But no more smuggling out of the refinery itself?
    Mr. Bowen. Well I am going back to Iraq to find out what 
the current status is. I mean whether that battalion is still 
up there and what the issues are, because the Commissioner on 
Public Integrity reports to us it continues to be a problem.
    Mr. Ryan. Joe, you spent a year doing reconstruction. What 
kind of projects are the way to go in the future versus what we 
did in the past? It seems like we had a lot of white elephant 
projects that really didn't advance the cause. And you 
mentioned, I think in your testimony, expanding the Iraqis' 
capacity. What lessons have we learned now after a few years of 
IRRF on what not to do and what to do? And I think anybody else 
who cares to comment on that, I would appreciate your answer on 
that.
    Mr. Saloom. I put some of those in my written testimony. I 
would say first and foremost is ask the client. I realize that 
in 2003 when we went in there wasn't an Iraqi government with 
which to coordinate these things. But looking forward in other 
places and under other circumstances, getting the taking the 
time to know what all of the stakeholders want, what as this 
goes to the issue that Stuart and I talk about all the time 
with sustainability. If there is buy-in at the beginning, the 
chances of you getting sustainability are going to be 
significantly higher.
    So the first thing is consult with those people who will be 
affected by the project as the very first important step. 
Another one I mentioned briefly and it is a lesson learned that 
we actually have applied in Iraq is going to from fixed price 
contracts with local contractors. I asked GRD for the Gulf 
Regional Division of Corps of Engineers for some data on this 
and they sent me something back that from 2005 to 2007 the 
percentage of contracts going to Iraqis went from the low 40s 
to the 70s in terms of percent.
    Mr. Ryan. When you switched to fixed price contracts?
    Mr. Saloom. And the switch to fixed price contract went 
from virtually 100 percent cost plus in 2003 to 95 percent 
from--this is GRD only.
    Mr. Ryan. Yeah.
    Mr. Saloom. There are other contracting mechanisms and it 
is construction only. But virtually a complete turn around from 
of the GRD construction contracts from cost plus to firm fixed 
price.
    So it is a lesson learned that we have both we have learned 
and applied.
    Mr. Ryan. One last question. I think this is probably for 
the SIGIR. The cost plus contracts, this is a concern. Could 
you give us more of your take on how money has been wasted in 
these cost plus contracts and how a real audit trail hadn't 
been established until you started looking into this.
    Mr. Bowen. The Bechtel audit is a good example. Bechtel had 
166 subcontractors, 60 percent of those usually subs to those 
subs many of them were Iraqi subcontractors. So in the 
evolution that Joe was talking about was simply removing the 
design build component out of the picture which also removed 
the dilution of the taxpayer's investment in Iraq. That is an 
expensive couple of steps down when you finally get health care 
facility or a refurbished power plant at the end, which done by 
regional or Iraqi firm. The lesson learned is exactly the one 
Joe pointed to and JCCI, the Joint Contract Command Iraq, moved 
agility there when we started to raise the issue and that is 
contract directly with fixed prices then you know what you are 
paying and you know what you are going to get and you have some 
accountability.
    The cost plus system depends upon a definitization. As I 
said during my statement, it was observed in the breach in the 
course of the Iraq reconstruction system. Senator Collin's bill 
I also mentioned addresses the cost plus contracting matter and 
I think it provides reform that is very necessary.
    This $18.4 billion in IRRF II was contracted out, the 
construction part, through 12 $500 million cost plus contracts. 
In other words, totally dependent, $6 billion dependent upon 
definitization that didn't happen overseen by six other 
contractors. So the oversight was outsourced as well. That is 
spelled out in our contracting lessons learned and our program 
management lessons learned report.
    And I think the recommendations from both help provide some 
guidance for reform.
    Chairman Spratt. Mr. Allen.
    Mr. Allen. Thank you, Mr. Chairman. And thank you all for 
being here. I think I would like to stay on this topic for a 
moment.
    Mr. Bowen when Secretary England was here, I sort of read 
this part of your July report. And I am going to read it again 
just to get bring us back there. The recommendation you had 
was, ``Generally avoid using sole source and limited 
competition contracting actions. These exceptional contracting 
actions should be used as necessary, but the emphasis must 
always be in full transparency in contracting and procurement. 
The use of sole source and limited competition contracting in 
Iraq should have virtually ceased after hostilities ended.'' 
You mean 2003?
    Mr. Bowen. Well I understand your point. Yeah.
    Mr. Allen. Yeah. And previously sole source limited 
competition contracts should of been promptly rebid. You know 
this is in--this is a lessons learned that you wrote----
    Mr. Bowen. Yes.
    Mr. Allen [continuing]. In July of 2006.
    Mr Bowen. That is right.
    Mr. Allen. My question is, didn't you personally come to 
this conclusion much earlier than that in 2004 and 2005? You 
didn't really need a study to come to this conclusion did you?
    Mr. Bowen. Well it was--well you are right. When we started 
doing our audits of contracting and among our first set of 
audits we looked at the CPA contracting process and found many 
weaknesses. For instance, unlocatable contracts, no system, no 
portable database. Another recommendation is develop a 
contracting method that is used in theater. We found five 
different methods that were being used and that led simply to 
inconsistent audit trails that we have talked about today.
    There was no way to find out how many contracts had been 
let because there was no single system developed. There were 
some missing contracts that we asked for and they said well 
they were on a thumb drive and someone had left the country.
    Mr. Allen. If I can just interrupt you.
    Mr. Bowen. Yes.
    Mr. Allen. You start--you took this position in January of 
2004.
    Mr. Bowen. That is right.
    Mr. Allen. So you are talking now about 2004 or?
    Mr. Bowen. 2004 and 2005.
    Mr. Allen. 2004 and 2005.
    Mr. Bowen. It took a while to get the organization stood up 
and get auditors deployed to Iraq. So our first this first 
contracting audit began in April of 2004 and was published in 
July of 2004.
    Mr. Allen. And how many different reports have you made 
since you personally became the inspector general for----
    Mr. Bowen. Ninety-four audits and 96 inspections.
    Mr. Allen. Okay. And quarterly reports?
    Mr. Bowen. Fourteen.
    Mr. Allen. Fourteen.
    Mr. Bowen. Three lessons learned reports.
    Mr. Allen. And in the last three years, how many times have 
you testified before a House or a Senate Committee?
    Mr. Bowen. This is my twenty-first time.
    Mr. Allen. But, let me break up, 2004, 2005, 2006, how many 
during that period?
    Mr. Bowen. I think none in 2004. And so all 11 this year, 
and ten last year. Or 12 this year and nine last year.
    Mr. Allen. Okay. And none in 2005?
    Mr. Bowen. I don't know. I would have to go back and look. 
I think a couple, yeah.
    Mr. Allen. Order of magnitude. Let me come back to another 
question here. The in the lessons learned that I referred to 
earlier, July 2006, you advocated for establishing a single set 
of simple contracting regulations and procedures that provide 
uniform direction to all contracting personnel in contingency 
environments. And I gather that is because so many agencies 
oversee, among other things, so many agencies oversee LCAP 
the----
    Mr. Bowen. Yes.
    Mr. Allen [continuing]. The Halliburton KBR contract.
    Mr. Bowen. The----
    Mr. Allen. Can you expand on that?
    Mr. Bowen. Yes. And interestingly, those recommendations 
about contingency contracting were adopted a week before last 
by the Office of Federal Procurement Policy as contingency 
guidelines. So it is an example, I think where SIGIR lessons 
learned have helped promote reform and helped develop a better 
approach to contracting.
    Mr. Allen. Yeah. I don't question that, I just wish some of 
this had happened earlier.
    We have spent, I am told, about $19 billion on training and 
arming Iraqi security forces. Is that about right as far as you 
know?
    Mr. Bowen. Eighteen billion. That is right.
    Mr. Allen. Okay. And the your report says that actual 
present for duty--the actual present for duty number of Iraqi 
army personnel continues to be lower than reported. DOD states 
that only 65 percent of authorized personnel are active on duty 
in fielded units at any time.
    Mr. Bowen. That is right.
    Mr. Allen. And that police trained by soldiers receive less 
emphasis on rule of law, human rights, and treatment of 
suspects and prisoners and policing in a democracy. Is that 
right?
    Mr. Bowen. That is right.
    Mr. Allen. And that----
    Mr. Bowen. And it is changing though as the rule of law 
initiative develops.
    Mr. Allen. Okay. Okay. What if anything--I am concerned 
that we are training Iraqi personnel who may well wind up using 
their training and using the arms that are provided to them 
either to kill each other or to attack U.S. military personnel. 
Have you looked at that issue and what have you found so far?
    Mr. Bowen. We do not look at that issue. We are--some 
reporting on that, that we get from DOD and there are concerns 
about the national police and if it's facility protection 
service. Those both have needed and have received reform 
because of sectarian issues that you elude to.
    Mr. Allen. Okay. And I guess the last question I would have 
is that it has been suggested that you should have expanded 
authority to investigate DOD logistics contracts in Iraq, and I 
am thinking the Halliburton contract, which I understand is 
about half of what we have spent in terms of reconstruction. Is 
that number right?
    Mr. Bowen. On the DOD side I don't know what the logistic 
spending number is.
    Mr. Allen. Well there is----
    Mr. Bowen. But LCAP if you are talking about LCAP it is $16 
billion contract in Iraq.
    Mr. Allen. Right. Okay. So that is--and Halliburton 
overall, KBR I should say----
    Mr. Bowen. That is right.
    Mr. Allen [continuing]. Has received, I understand, about 
$20 billion, which is about half of the $44 you----
    Mr. Bowen. Well, again, we are mixing numbers here. That is 
all military DOD money that is not within our jurisdiction and 
that is why the proposal, I think you are referring to in 
Senator Webb's bill is to provide us jurisdiction to look at 
that money.
    Mr. Allen. What is your position on that proposal?
    Mr. Bowen. We will respond if assigned the task.
    Mr. Allen. What is the--well the last thing I will say, 
what do you think is the extent, given current law of your 
responsibility if any, for overseeing Halliburton and KBR's 
contracts?
    Mr. Bowen. Well the Task Order 130 audit is a KBR audit. 
And it looked at real shortfalls on the part of KBR in managing 
fuel supply to the mission and providing food and managing the 
building program. But we only look at it to the extent that it 
involves Iraq relief and reconstruction fund money, which is a 
tiny fraction of the overall investment.
    Mr. Allen. Okay. Well, thank you very much.
    Mr. Bowen. Thank you.
    Chairman Spratt. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. The quarterly report 
you talk about convictions and results of some of the audits in 
the legal system. Can you did these convictions result in jail 
time?
    Mr. Bowen. They did.
    Mr. Conaway. Can you give us a little how that----
    Mr. Bowen. Sure. We have a chart in Section one of this 
report, the first time we have included a detailed chart that 
lays out who the wrongdoer was, what where they were from, what 
their crime was, and all five of the----
    Mr. Conaway. Okay.
    Mr. Bowen [continuing]. Persons from SIGIR are in prison 
now as a result of our investigation.
    Mr. Conaway. Can you help me understand, those five 
convictions and the 13 arrests, eight pending trials.
    Mr. Bowen. Right.
    Mr. Conaway. What is the scope of the overall transactions 
that you glean that from so is there any way extrapolate that 
to the broader issue?
    Mr. Bowen. Yes. The biggest crime that we uncovered was a 
result of an audit down in Hilla of a series of contracts. 
Really the CPA's management of $120 million. We found through 
that audit that $90 million had poor back-up paperwork. Then we 
drilled down further and we found $8 million was just missing. 
So I sent my investigators down there to look at it and they 
indeed found a number of significant problems. We began a year 
long investigation in this and have caught about eight people 
in this net and four of these five are from that scheme and 
they have gone to prison. It involved about $10 million in kick 
backs and bribes.
    Mr. Conaway. Okay. Did we recover any of that money?
    Mr. Bowen. We have. We have recovered or have gotten 
restitution orders to date of $16 million total from our 
investigations.
    Mr. Conaway. And then the 57 ongoing investigations, those 
are criminal----
    Mr. Bowen. Yes, they are.
    Mr. Conaway. Could result in criminal as well?
    Mr. Bowen. There is some civil in there and but 90 percent 
are criminal.
    Mr. Conaway. Criminal. Okay. You are talking and all I have 
got is this, right?
    Mr. Bowen. Yes.
    Mr. Conaway. At this moment? The sustainment reviews?
    Mr. Bowen. Yes.
    Mr. Conaway. And you also talk about of the four transfers 
only you are saying three of the four transfers cannot be 
sustained?
    Mr. Bowen. We are talking about our sustainment inspections 
and it was a regime we started last quarter to look at projects 
that had been handed over for over a year. Al Doura is the 
biggest one.
    Mr. Conaway. Okay. Of the--give me a sense of what the 
scope of a project is. Is this is a tiny little $10 million 
deal or a billion dollars?
    Mr. Bowen. No. But we look at it across the board, but----
    Mr. Conaway. Of the four that you have got.
    Mr. Bowen. Of the four. And the Al Doura one was--yeah. Al 
Doura was $90 million. That was one that fell short. It is a 
$90 million--$93 million rehabilitation of the most important 
electric plant providing power Baghdad.
    Mr. Conaway. Right.
    Mr. Bowen. And so we went down there in June to see what 
the status was and that is as I mentioned in my testimony the 
it was not operating, neither unit. It could provide 320 
megawatts to the grid, which would be seven and a 2half percent 
of the total power right now generated. And it would provide 
Baghdad with much more than the eight hours it is currently 
receiving.
    Mr. Conaway. Okay. And the other two projects?
    Mr. Bowen. The there was----
    Mr. Conaway. That is 90----
    Mr. Bowen. Yeah.
    Mr. Conaway [continuing]. You said $90 million or $90 
billion?
    Mr. Bowen. Ninety million.
    Mr. Conaway. Million. Okay.
    Mr. Bowen. Ninety million. The there was the Al Rashid 
refurbishment which was a several million dollar project. It 
was a base in the Baghdad vicinity and the C-130 based also a 
refurbishment of barracks and providing generators.
    Mr. Conaway. And----
    Mr. Bowen. Several million dollars much smaller than Al 
Doura.
    Mr. Conaway. All right. And of those three, you talk about 
the are not being sustained properly?
    Mr. Bowen. Yes. There were problems with sustainment and--
--
    Mr. Conaway. Was that ongoing?
    Mr. Bowen. Well the--we raised the problems and the 
expectation is that the Iraqis will address and repair the are 
the concerns we have. The generators are broken at the were 
broken at the Al Rashid base.
    Mr. Conaway. Okay. And on the power plants you are--you 
said it is going to be online in August of 2007? Is that----
    Mr. Bowen. That is right. In that case the Corps of 
Engineers took over and one is started up a couple days ago. 
One of the units has started and it is producing 30 megawatts 
right now.
    Mr. Conaway. When did the Corps take over?
    Mr. Bowen. They have--earlier this year. The beginning of 
this year.
    Mr. Conaway. Okay. And you think they will have everything 
up, the other one going in August?
    Mr. Bowen. Yes. I met with the Commander of the Corps 
yesterday and he told me they will be up in August.
    Mr. Conaway. Okay. On the asset transfers, on the first 
place, you are talking about asset transfers that the central 
government has not accepted any of those transfers. What does 
that mean to us?
    Mr. Bowen. That is right. This is our fourth audit on this 
issue. Very important. Tied to the sustainment issue, because 
it is about whether there is a plan for our projects to go 
within the jurisdiction--to be transferred within the 
jurisdiction of the Iraqis and then manage and operate and 
maintain properly.
    A good process which worked out as the audit points out. 
And it from April to June of last year hundreds and hundreds of 
projects transferred with tens of millions of dollars. Then in 
July the ministry of finance abandoned the program. And there 
was no coordinated transfer program thereafter to replace it. 
And as a result local transfer had to occur and then eventually 
the Corps just developed a unilateral transfer process, 
certainly not what anybody wants with respect to these 
projects.
    There is a pending remedy. A new bilateral agreement to re-
energize, re-institute the transfer program that fell off the 
tracks a year ago.
    Mr. Conaway. Okay. And you will review that for us next 
quarter or I mean that will be----
    Mr. Bowen. Yes, sir.
    Mr. Conaway [continuing]. A subject you are continuing----
    Mr. Bowen. Yes.
    Mr. Conaway [continuing]. Oversight?
    Mr. Bowen. Our recommendation to the Ambassador was to is 
to ensure that he and his counterpart execute that and they 
have accepted the recommendation.
    Mr. Conaway. Okay. Good. Thank you, Mr. Chairman. I yield 
back. Thank you for your--and I apologize for interrupting you 
but we only get five minutes.
    Mr. Bowen. Sure. I understand.
    Mr. Conaway. Unless I keep asking one last question.
    Mr. Bowen. Sorry for going on so long.
    Mr. Conaway. Yeah. No, no, no. So, pardon my abruptness 
with you. I was trying to get some answers. Thank you, sir. I 
yield back.
    Mr. Bowen. Thank you. Thanks.
    Chairman Spratt. The number we have is $44.5 billion 
appropriated thus far for reconstruction work. We also are 
informed that Iraq has amassed about $37 billion for the same 
purpose. And that firms other assistance has been pledged, but 
yet to be delivered of about four billion out of an amount of 
$18 billion pledged, much of which I think was in loans as 
opposed to grants.
    Mr. Bowen. That is right.
    Chairman Spratt. Those numbers are roughly correct?
    Mr. Bowen. The Iraqi money is the amount that has already 
been spent. It is not it doesn't address the amount of money 
that they currently are putting forward. That is the 
development fund for Iraq money, the development fund sub-
accounts and the amount that was transferred to the Iraqis 
during the CPA and thereafter for their national budgets. That 
is where that number is derived from.
    Chairman Spratt. Well I take it that you included capital 
budgeting as one of the bench marks?
    Mr. Bowen. Yes. That is exactly right.
    Chairman Spratt. Because you--do you believe that is a sign 
of a functional government?
    Mr. Bowen. Exactly. And we have a separate section just 
addressing that issue. Yes, sir.
    Chairman Spratt. Sorry, I didn't understand you.
    Mr. Bowen. Yes. The capital--moving forward the expending 
the capital budget is essential to recovery of the economy.
    Chairman Spratt. Is the--here the numbers we were talking 
about 44.5, 36.9, and 18.2 of which four billion is in 
disbursed----
    Mr. Bowen. Yes. That is right.
    Chairman Spratt [continuing]. $14 billion remains in 
pledge. What is the hold up? Is it due partly to the fact that 
the technocrats who ran the government, the Baathists, are no 
longer in power and those who are in power don't have that 
confidence or capability?
    Mr. Bowen. I think that is part of it. The fact is that 
over the last four years, four governments have ruled Iraq. The 
CPA, ambassador--excuse me--Prime Minister Alawhi, Prime 
Minister Jaffri, and now Prime Minister Maliki's government.
    And with each one of those turn overs there was frequently 
turn over among the ministry heads which led to turn over 
within the ministries themselves. Continuity of management in 
most ministries is relatively weak and I think so capacity is 
the issue you are pointing to is continuing to be a problem. 
And it is a place where economic support funds are being spent.
    Chairman Spratt. One of the reasons we are pursuing this is 
we had Mr. Wolfowitz here in March of 2003, March the 27th. And 
we asked him about reconstruction, normalization, putting Iraq 
back together again. And he said, ``We are dealing with a 
country that can really finance its own reconstruction and 
relatively soon.'' Why did we make that assumption and why did 
it not work out?
    Mr. Bowen. The assumption was based on the fact that Iraq 
has the third largest oil and gas reserves in the world and an 
enormous potential for economic benefits to the citizens of 
Iraq. Only nine percent of the Iraq relief and reconstruction 
fund, however, was spent on the oil and gas sector. It was 
behind security, of course, behind electricity, behind water, 
behind economic development. The assumption was that it would 
begin to regenerate on its own. That assumption has proved 
false.
    Chairman Spratt. The goal set early after the war for 
reconstruction was, I believe, around two point five to three 
million barrels per day. Preferably the upper end of that.
    Mr. Bowen. The three. Yes.
    Chairman Spratt. The two point----
    Mr. Bowen. Yes, sir.
    Chairman Spratt [continuing]. Eight to three million is 
compared to about two and a half million barrels a day before 
the war.
    Mr. Bowen. That is right.
    Chairman Spratt. What happened? Is this due to sabotage, 
pilferage, corruption, over estimation, lack of competence, all 
of the above?
    Mr. Bowen. All of the above plus a debilitating 
infrastructure. The primary problems have been security. As I 
mentioned earlier that the pipelines get hit regularly. Then 
corruption right behind it as I mentioned the smuggling issue 
deprives the Iraqis of the benefits of a significant portion of 
their economy, because it is off budget. It doesn't benefit the 
country. And third, that there is a refinery system is 
debilitated, is deteriorated and needs capital investment now. 
As a result of that debilitated system, Iraqis import refined 
fuels. They cannot refine enough for their own needs.
    And finally, related to the reconstruction enterprise, a 
number of the electrical generators that we have installed are 
running on the wrong fuel because the system is so inadequate 
that the natural gas necessary to run those generators is not 
laid and provided for the power plants.
    Chairman Spratt. In March the head of the Army Corps of 
Engineers of the Gulf Regional Division estimated that $100 
billion more would be needed for reconstruction. This is in 
addition to the $100 billion provided to date from the U.S., 
Iraq and other sources. Do you know the derivation of that 
number and if so where is this $100 billion to be obtained?
    Mr. Bowen. I don't know the derivation, but I have heard 
numbers like that from World Bank or IMF estimates. As we have 
said in our last two quarterly reports and repeat again in this 
one, the burden of financing the recovery of Iraq is a burden 
squarely on the shoulders of the government of Iraq. And they 
have tremendous resources that are untapped in the oil and gas 
reserves. And if that sector can be brought online and 
operating optimally then there is a great potential for 
progress.
    Chairman Spratt. Let us just take the $10 billion that was 
earmarked, designated for as one of the bench marks for 
distribution to get the economy going again, tend to some 
essentially capital needs. The ten billion dollars subject to 
the bench mark apparently there is a memo, some sort of MOU for 
the allocation of this, but the allocation has never occurred. 
What is the problem?
    Mr. Bowen. Well, I think that the allocations have 
occurred, the execution is the open question. The bench mark 
report that came out three weeks ago gave the conditional 
satisfactory to the progress on the budget execution 
initiative. The coordinator for economic transition and the 
budget execution monitoring unit on the Iraqi side have pushed 
out funds to the provinces, $5.8 billion in capital funds, and 
the oil sector, the public works, ministry of education for 
example are spending their capital budgets. But getting good 
data from the ministry of finance about that execution is 
continues to be a challenge and is the mission of the 
coordinator for economic transition. So I can't give you a 
sense of whether it really is satisfactory at this point. There 
is a conditional satisfactory based on allocations to date.
    Chairman Spratt. There is a story in the New York Times 
this past weekend and I put this question to all of you. It 
said that even as we complete these projects the Iraqis are 
reluctant to take responsibility for them. Only one in seven 
apparently which has completed is actually been taken over. One 
out of every seven projects out of a couple thousand projects?
    Mr. Bowen. Right. That is from our asset transfer audit.
    Chairman Spratt. Yeah. Is that an accurate account?
    Mr. Bowen. Yes, sir. The asset transfer process needs to be 
reformed and re-energized with the new agreement.
    Chairman Spratt. One would think that they would want to 
get their hands on the equipment then, you know, exercise some 
dominion and control and----
    Mr. Bowen. Yes, sir.
    Chairman Spratt [continuing]. Be in charge. But apparently 
not. Is their a lack of get up and go? A lack of 
entrepreneurial spirit? Fear that they will fail and suffer the 
consequences?
    Mr. Bowen. I think a lot of the problem may be centered 
upon the current minister of finance as pointed out in our 
audit.
    Chairman Spratt. There obviously has been a lot of poor 
contracting work. Granted a lot of the contractors didn't 
estimate the security situation adequately and probably didn't 
appreciate the conditions. One thing for clarification I would 
like to have straightened out. You say cost plus and cost plus 
by itself is illegal, but there is cost plus fixed fee and cost 
plus incentive fee. Were most of these contracts fixed fee 
contracts?
    Mr. Bowen. They were a mixture of cost plus fixed and 
incentive. There was a three percent fixed fee and then the 
opportunity to earn 12 percent in incentive award fee. So a 
total amount of 15 percent award fee on the design build 
contracts, which is why I was so concerned when I found out 
there were no criteria for the management of the award fee 
process.
    Chairman Spratt. If you take all of these capital amounts 
that have been provided, the $44 billion or $37 billion and the 
$4 billion out of the 18 provided by other sources adds up to 
$80 odd billion dollars. What would you estimate is the value 
of the assets that corresponds with these investments today?
    Mr. Bowen. On the ground in Iraq?
    Chairman Spratt. Yeah.
    Mr. Bowen. I will--that is a tough question that we don't 
have enough data to answer yet. That is what I am trying to 
accomplish through these focused financial reviews is find out 
where the money went and what we got for it. And the Bechtel 
audit is the beginning of that. It lays out in that contract, 
you know for example, you know the Basrah Children's Hospital, 
the original budget was $37 million the final budget was $26 
million but there were--had been other cost related to the 
delays. What the value of what ultimately is completed is 
something we are going to have to address over the course of 
these many focused financial reviews that SIGIR is now carrying 
out.
    Chairman Spratt. One final question then I will turn it 
over to Mr. Scott. With respect to those contracts that weren't 
completed where the contractors had substantial overruns and 
didn't stay to complete the job. Did you allow them or did the 
government allow them, did we allow them some exoneration, some 
release from the contract so that they could walk away from the 
job without consequences or----
    Mr. Bowen. Yes. The fact is, is that the only way to 
recover for a poor performance under a cost plus fixed award 
fee contract is terminating for default. In most cases, 
however, in Iraq terminations have been for convenience.
    Chairman Spratt. Of the government.
    Mr. Bowen. And when there is termination for convenience 
there is no then cause of action that the government retains 
for going against the contractor for poor performance.
    Chairman Spratt. But down the road there are no penalties, 
no----
    Mr. Bowen. Well we are pursuing----
    Chairman Spratt [continuing]. Damages, debarment, anything 
like that?
    Mr. Bowen. We actually are pushing hard on the debarment 
suspension front in my office. And we are working with the 
Department of Army and we have made some progress there and we 
will continue to push it because that is an important mechanism 
too for accountability.
    We also are going to do an audit of the terminations issue 
you just raised, because I have been looking at this as well 
for a while and we want to know what contracts were terminated, 
why they were terminated, and what the issues were connected to 
them.
    So we will have a report by the end of the year to you on 
that.
    Chairman Spratt. Thank you very much. Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. I wanted to follow that 
up. In what you will have at the end of the year, will that 
give us an idea of what these services should reasonably have 
cost?
    Mr. Bowen. Those were our focused financial reviews and 
with that and the Bechtel is the first. Parson's is next. We 
are doing Black Water and Floor and Research Triangle 
Institute. The big contracts in Iraq and out of that the 
purpose is to say what was contracted for, what was actually 
achieved, what was it originally suppose to cost, and what did 
it cost. And then explain the delta.
    Mr. Scott. Well and what should it have reasonably cost, 
because there are a handful some of these are sole source and 
just because you contracted for it doesn't mean that is a 
reasonable cost. Can you get a kind of idea of what it should 
of cost?
    Mr. Bowen. That is beyond our capacity. What we can do is 
look at the contracts and find out. But let me just make a 
point on sole source. Sole source and limited competition, 
which was more common, occurred primarily in 2003. Since then 
it has been a very infrequent mechanism.
    Mr. Scott. Well there--I would image that there are limited 
number of firms actually bidding so the real--you don't have 
this kind of competition you would have on a domestic contract. 
Is that right?
    Mr. Bowen. That is a fair point. Yes, sir.
    Mr. Scott. And so if they I know in Virginia they would we 
had a when I was in the State House we had a scandal because 
people would have kind of cooperative bids.
    Mr. Bowen. Uh huh.
    Mr. Scott. You bid high on this one so that my high bid 
will actually----
    Mr. Bowen. Bid rigging that is called.
    Mr. Scott. Well courtesy bidding.
    [Laughter.]
    Mr. Scott. Without if everybody is just kind of bidding 
high generally, not rigging, just an understanding you can if 
everybody is bidding high then everybody is going to get a nice 
price. Now are you looking at what these value of the contract 
should be?
    Mr. Bowen. That is a job for the Defense Contract Audit 
Agency. Their mission is exactly that. They serve the 
contracting officers in reviewing bids and assessing whether 
they are financially appropriate.
    Mr. Scott. Okay. Now when I was in the National Guard when 
you talked about privatizing you what we kind of thought of was 
privatizing KP. Everything else you would expect military 
personnel to actually do. Now we are using a lot of contractors 
to do what are essentially military functions.
    Mr. Bowen. That is right.
    Mr. Scott. Is that an efficient way of getting things done?
    Mr. Bowen. That is a broad policy question. The LCAP----
    Mr. Scott. But part of it is the numbers we see later on 
show that about 70,000 troops are going to cost--75,000 troops 
will cost $70 billion. That is about a million dollars a troop 
in round numbers. I imagine that part of that is because for 
every troop you got you got a bunch of contractors around. So 
it is not a really apples to apples comparison.
    Does the use of contractors is that financially appropriate 
and does it affect your ability to get the job done when you 
are dealing with contractors that you can't--that aren't as 
responsive necessarily as the person in the chain of command.
    Mr. Bowen. Well this is an issue that is outside the 
jurisdiction of my office. It is within the jurisdiction of the 
Department of Defense IG because it has to do with DOD funding. 
I focus on reconstruction funding which is inner agency 
appropriations. We do look at a small portion of KBR's spending 
as it affects the reconstruction program. We will be auditing 
their oil contract. We had an audit out this quarter on their 
LCAP task order that supported the embassy and found a number 
of concerns there that were fixed.
    Mr. Scott. Does your office have anything to do with mental 
health funding?
    Mr. Bowen. No, we don't.
    Mr. Scott. Replacement of vehicles?
    Mr. Bowen. No, sir.
    Mr. Scott. And things like that?
    Mr. Bowen. It is all Department of Defense.
    Mr. Scott. Have you read the articles that were written 
over the weekend talking about things that have been wasted? 
New York Times and Washington Post?
    Mr. Bowen. Can you refer to me specifically which ones?
    Mr. Scott. The headlines or report says, ``Iraq Lags in 
Rebuilding.'' ``U.S. Rebuilds Iraq Won't Act on Finished 
Work.'' ``Bechtel's Projects Lacking in Iraq.''
    Mr. Bowen. Yes. Those are articles reporting on our audits.
    Mr. Scott. Okay. Are these reasonably accurate to the best 
of your knowledge?
    Mr. Bowen. Yes, they are.
    Mr. Scott. Okay. Thank you, Mr. Chairman.
    Chairman Spratt. Thank you, Mr. Scott. To our panel, I 
would like to thank you very much for your excellent 
presentation, for your forthright responses. We really do 
appreciate you coming in, not least for your forbearance in 
waiting while we had to finish our votes on the floor. Thank 
you very much, indeed.
    Mr. Bowen. Thank you, Mr. Chairman.
    Chairman Spratt. A couple of housekeeping details before we 
finally recess. I would like to ask unanimous consent that my 
opening statement be made part of the record. In addition, Mr. 
McGovern has a study done by the Progressive Caucus which he 
would like to have inserted in the record as well, if there is 
no objection.
    Mr. Scott. Mr. Chairman----
    Chairman Spratt. Hearing none, so ordered.
    [The information follows:]

                                   THE PROGRESSIVE CAUCUS: COST OF THE IRAQ WAR/OCCUPATION BY CONGRESSIONAL DISTRICT AND WHAT ELSE THAT $ COULD HAVE FINANCED
                                                                                  [ISSUE REPORT #1: JULY, 2007]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                Scholarships
                                      Total $ on  People with   Elementary   Head Start  Children w/   Affordable      New           for      Music & Art     Public     Homes with      Port
             CPC Member                Iraq War   Health Care     School     Places for  Health Care    Housing     Elementary   University     Teachers      Safety     Renewable    Container
                                      (million)                  Teachers     Children                   Units       Schools      Students                   Officers      Energy     Inspectors
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Abercrombie........................      $883.00      296,947       16,965      117,958      297,861        2,764           67       238,917       16,965       21,657    1,470,114       12,786
Baldwin............................    $1,125.70      674,804       19,998      168,136      805,479        9,391          134       179,244       19,123        26416    1,372,905       17,896
Becerra............................      $687.10      282,193       10,366       81,542      256,291        2,057           52       105,515       10,246       12,783    1,224,272        9,184
Bordallo...........................    Not found
                                          in NPP
                                        Database
Robert Brady.......................      $736.40      171,120       12,179      104,456      217,473        7,483           51        63,984       12,574       16,981      885,548       11,322
Corrine Brown......................      $899.90      289,060       16,643      121,839      452,793        6,636          141       290,864       15,559       21,420      632,904       11,100
Capuano............................    $1,170.00      340,649       17,334      139,090      426,199        4,064           88       126,107       20,165       23,553    1,824,237       17,584
Carson.............................      $785.00      244,560       14,134      116,429      390,961        8,219           70       110,370       13,210       20,107      746,058       11,248
Christensen........................    Not found
                                          in NPP
                                        Database
Clarke.............................       $1,281      225,561       14,927      141,094      427,416        7,053           87       204,485       17,339       24,638    2,323,074       18,649
Clay...............................         $844      314,085       18,017      124,087      301,778        8,473          100       121,243       16,735       21,215      736,708       13,432
Cleaver............................      $890.30      331,357        19007      130,911      318,373        8,939          104       127,910       17,655       22,382      777,220       14,170
Cohen..............................      $837.70      138,958       16,578      115,735      232,690        8,711           92       158,343       16,273       23,300      620,197       11,779
Conyers............................      $753.10      258,837       10,504      112,906      514,761        6,071           68        81,747       10,401       16,284    1,058,482       11,394
Cummings...........................      $941.90      171,769       15,232      125,234      337,003        5,052           83       120,440       16,078       20,296      874,483       17,807
Davis (IL.)........................       $1,288      468,502       20,967      188,357      772,918        9,303          152       148,616       22,616       26,014    1,706,375       19,825
DeFauzio...........................      $746.50      160,824       13,064      110,650      223,075        4,621           78       132,985       13,731       15,912      701,662       12,488
DeLauro............................        2,346      804,569       33,822      325,826      934,954       11,334          177       299,122       33,008       47,322    2,922,032       30,178
Ellison............................    $1,402.10      393,858       24,271      198,871      454,051        8,827          164       160,314       22,019       31,812    1,586,596       16,477
Farr...............................    $1,289.40      531,854       19,537      153,684      483,035        3,877           98       198,867       19,311       24,093    2,307,404       17,310
Fattah.............................      $800.90      186,115       13,246      113,610      236,530        8,139           56        69,591       13,676       18,469      963,150       12,314
Filner.............................    $1,033.00      424,237       15,584      122,587      385,297        3,092           78       158,628       15,403       19,218    1,840,519       13,808
Frank..............................       $1,631      460,510       23,433      188,030      576,163        5,494          118       170,480       27,259       31,841    2,466,115       23,772
Grijalva...........................      $696.30      153,305       16,138       89,145      300,591        5,301           53       154,809       15,113       16,515      596,557        8,329
Gutierrez..........................    $1,142.70      417,211       18,671      167,736      688,299        8,284          136       132,346       20,140       23,167    1,519,562       17,655
Hall (N.Y.)........................       $2,342      425,316       28,147      266,045      805,930       13,300          163       385,576       32,694       46,456    4,380,352       35,163
Hare...............................    $1,114.80      407,045       18,216      163,649      671,528        8,083          132       129,121       19,649       22,602    1,482,536       17,224
Hinchey............................       $1,406      255,521       16,910      159,834      484,187        7,990           98       231,646       19,642       27,910    2,631,631       21,125
Hirono.............................      $844.00      283,811       16,215      112,740      284,686        2,642           64       228,349       16,215       20,699    1,405,082       12,221
Honda..............................       $1,989      810,344       29,766      234,156      735,963        5,907          150       302,998       29,422       36,709    3,515,613       26,375
Jackson............................       $1,292      480,158       21,488      193,043      792,149        9,535          156       152,313       23,178       26,662    1,748,831       20,318
Jackson-Lee........................    $1,057.80      230,237       19,996      149,167      433,033       12,611          107       151,718       18,830       25,344      805,546       17,913
Johnson (GA.)......................       $1,294      286,166       23,324      185,962      636,578       11,001          208       287,259       23,283       35,357    1,037,064       19,243
Tubbs-Jones........................      $808.30      270,917       13,734      124,799      459,647       73,649           73       100,004       12,372       19,388      905,181       16,673
Kaptur.............................    $1,017.10      340,935       17,283      157,052      578,440        9,486           91       125,851       15,570       24,399    1,139,122       20,982
Kilapatrick........................      $650.50      223,586        9,074       97,529      444,656        5,244           59        70,614        8,984       14,066      914,328        9,842
Kucinich...........................    $1,057.40      354,443       17,968      163,275      601,359        9,862           95       130,837       16,187       25,365    1,184,255       21,814
Lantos.............................       $1,871      759,591       27,902      219,490      689,869        5,537          141       284,021       27,579       34,410    3,295,420       24,722
Lee................................    $1,167.30      479,385       17,609      138,523      435,383        3,494           89       179,248       17,405       21,717    2,079,774       15,603
Lewis (GA.)........................    $1,071.00      230,534       18,789      149,809      512,824        8,862          168       231,414       18,757       28,484      835,452       15,502
Loebsack...........................      $823.40      259,765       19,032      123,881      369,806       10,245           97       146,720       18,241       20,400      926,476       13,795
Maloney............................       $2,104      378,262       25,032      236,611      716,767       11,829          145       342,918       29,077       41,317    3,895,739       31,273
Markey.............................       $1,644      485,744       24,717      198,334      607,733        5,795          125       179,822       28,752       33,586    2,601,247       25,075
McDermott..........................       $1,295      200,573       23,089      147,862      509,939        7,365          141       237,631       23,160       25,599    1,187,569       18,095
McGovern...........................       $1,518      434,836       22,126      177,547      544,039        5,188          112       160,976       25,740       30,066    2,328,624       22,446
Miller (CA.).......................       $1,403      571,274       20,984      165,074      518,837        4,164          105       213,606       20,742       25,879    2,478,425       18,593
Moore (WISC.)......................      $793.30      475,538       14,093      118,487      567,625        6,618           94       126,315       13,477       18,615      967,493       12,611
Nadler.............................       $1,751      311,600       20,621      194,913      590,450        9,744          119       282,485       23,953       34,036    3,209,185       25,762
Holmes-Norton......................       $2,335      590,376       39,034      311,645      727,150        7,965          204     1,107,837       39,034       39,598    4,057,835       34,465
Olver..............................       $1,285      368,586       18,756      150,497      461,152        4,397           95       136,450       21,818       25,486    1,973,844       19,026
Pastor.............................      $692.20      152,394       16,042       88,615      298,803        5,270           53       153,889       15,023       16,418      593,010        8,280
Payne..............................       $1,286      141,943       18,656      145,369      506,426        5,052           89       137,832       15,788       23,326    1,779,046       17,977
Rangel.............................    $1,017.40      184,936       12,239      115,682      350,434        5,783           70       167,656       14,216       20,200    1,904,660       15,290
Rush...............................       $1,173      432,516       19,356      173,889      713,549        8,589          141       137,201       20,878       24,016    1,575,307       18,302
Linda Sanchez......................       $1,175      490,207       18,007      141,649      445,211        3,572           90       183,295       17,799       22,206    1,818,982      324,606
Sanders............................      $776.60      281,075       13,791       90,102      226,608        5,696           59        72,255       14,395       17,868    1,161,348       12,222
Schakowsky.........................       $1,516      539,788       24,156      217,017      890,523       10,719          176       171,229       26,057       29,973    1,966,013       22,841
Serrano............................      $703.30      127,856        8,461       79,977      242,274        3,999           49       115,909        9,828       13,965    1,316,798       10,571
Slaughter..........................    $1,156.50      210,241       13,913      131,510      398,385        6,574           81       190,596       16,161       22,964    2,165,281       17,382
Solis..............................    $1,088.90      447,203       16,427      129,223      406,155        3,260           82       167,215       16,237       20,258    1,940,157       14,555
Stark..............................       $1,640      674,442       24,774      194,886      612,535        4,916          124       252,182       24,488       30,553    2,926,012       21,951
Thompson (Miss.)...................      $449.30       97,385        9,914       74,279      255,206        6,617           70       104,014        9,430       14,583      332,634        7,309
Tierney............................       $1,752      502,312       25,560      205,098      628,461        5,992          129       185,955       29,734       34,732    2,689,966       25,930
Udall..............................      $554.60      163,424       11,847       79,228      217,054        5,658           68       141,560       11,351       14,726      867,530       26,824
Velzquez...........................    $1,061.60      192,986       12,772      120,717      365,689        6,034           74       174,954       14,835       21,079    1,987,572       15,955
Waters.............................      $846.20      347,548       12,767      100,427      315,647        2,533           64       129,953       12,619       15,744    1,507,809       11,312
Watson.............................      $832.80      342,028       12,563       98,832      310,634        2,493           63       127,889       12,419       15,494    1,483,861       11,132
Watt...............................    $1,002.20      207,021       21,329      135,168      461,002        9,485          110       217,256       19,361       26,365      795,084       14,607
Waxman.............................       $1,634      657,070       24,136      189,866      596,757         4789          122       245,686       23,857       29,766    2,850,643       21,385
Welch..............................      Same as
                                         Sanders
Woolsey............................       $1,528      639,045       23,474      184,658      580,388        4,658          118       238,947       23,203       28,949    2,772,445       20,799
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Chairman Spratt. Mr. Scott?
    Mr. Scott. Ask unanimous consent that Congressional record 
S-10154, October 9, 2002 be entered into the record. It is the 
copy of the letter that the CIA wrote to Senator Graham about 
the presence of al-Qaida and the threat that was present in 
Iraq and the fact that it would be worse if we attacked.
    Chairman Spratt. How about letting us have a copy of that 
then for record.
    Mr. Scott. Thank you.
    [The information follows:]
    [From the Congressional Record, October 9, 2002, page 
S10154:]

                               Central Intelligence Agency,
                                   Washington, DC, October 7, 2002.
Hon. Bob Graham, Chairman,
Select Committee on Intelligence, U.S. Senate, Washington, DC.
    Dear Mr. Chairman: In response to your letter of 4 October 2002, we 
have made unclassified material available to further the Senate's 
forthcoming open debate on a Joint Resolution concerning Iraq.
    As always, our declassification efforts seek a balance between your 
need for unfettered debate and our need to protect sources and methods. 
We have also been mindful of a shared interest in not providing to 
Saddam a blueprint of our intelligence capabilities and shortcoming, or 
with insight into our expectation of how he will and will not act. The 
salience of such concerns is only heightened by the possibility for 
hostilities between the U.S. and Iraq.
    These are some of the reasons why we did not include our classified 
judgments on Saddam's decisionmaking regarding the use of weapons of 
mass destruction (WMD) in our recent unclassified paper on Iraq's 
Weapons of Mass Destruction. Viewing your request with those concerns 
in mind, however, we can declassify the following from the paragraphs 
you requested.
    Baghdad for now appears to be drawing a line short of conducting 
terrorist attacks with conventional or CBW against the United States.
    Should Saddam conclude that a US-led attack could no longer be 
deterred, he probably would become much less constrained in adopting 
terrorist actions. Such terrorism might involve conventional means, as 
with Iraq's unsuccessful attempt at a terrorist offensive in 1991, or 
CBW.
    Saddam might decide that the extreme step of assisting Islamist 
terrorists in conducting a WMD attack against the United States would 
be his last chance to exact vengeance by taking a large number of 
victims with him.
    Regarding the 2 October closed hearing, we can declassify the 
following dialogue. Senator Levin: * * * If (Saddam) didn't feel 
threatened, did not feel threatened, is it likely that he would 
initiate an attack using a weapon of mass destruction?
    Senior Intelligence Witness: * * * My judgment would be that the 
probability of him initiating an attack--let me put a time frame on 
it--in the foreseeable future, given the conditions we understand now, 
the likelihood I think would be low.
    Senator LEVIN: Now if he did initiate an attack you've * * * 
indicated he would probably attempt clandestine attacks against us * * 
* But what about his use of weapons of mass destruction? If we initiate 
an attack and he thought he was in extremis or otherwise, what's the 
likelihood in response to our attack that he would use chemical or 
biological weapons?
    Senior Intelligence Witness: Pretty high, in my view.
    In the above dialogue, the witness's qualifications--``in the 
foreseeable future, given the conditions we understand now''--were 
intended to underscore that the likelihood of Saddam using WMD for 
blackmail, deterrence, or otherwise grows as his arsenal builds. 
Moreover, if Saddam used WMD, it would disprove his repeated denials 
that he has such weapons.
    Regarding Senator Bayh's question of Iraqi links to al-Qa'ida, 
Senators could draw from the following points for unclassified 
discussions: Our understanding of the relationship between Iraq and al-
Qa'ida is evolving and is based on sources of varying reliability. Some 
of the information we have received comes from detainees, including 
some of high rank. We have solid reporting of senior level contacts 
between Iraq and al-Qa'ida going back a decade.
    Credible information indicates that Iraq and al-Qa'ida have 
discussed safe haven and reciprocal non-aggression.
    Since Operation Enduring Freedom, we have solid evidence of the 
presence in Iraq of al-Qa'ida members, including some that have been in 
Baghdad.
    We have credible reporting that al-Qa'ida leaders sought contacts 
in Iraq who could help them acquire WMD capabilities. The reporting 
also stated that Iraq has provided training to al-Qa'ida members in the 
areas of poisons and gases and making conventional bombs.
    Iraq's increasing support to extremist Palestinians, coupled with 
growing indications of a relationship with al-Qa'ida, suggest that 
Baghdad's links to terrorists will increase, even absent US military 
action.
            Sincerely,
                                           John McLaughlin,
                                   (For George J. Tenet, Director).

                             Statement by DCI George Tenet,
                                                   October 8, 2002.
    There is no inconsistency between our view of Saddam's growing 
threat and the view as expressed by the President in his speech. 
Although we think the chances of Saddam initiating a WMD attack at this 
moment are low--in part because it would constitute an admission that 
he possesses WMD--there is no question that the likelihood of Saddam 
using WMD against the United States or our allies in the region for 
blackmail, deterrence, or otherwise grows as his arsenal continues to 
build. His past use of WMD against civilian and military targets shows 
that he produces those weapons to use not just to deter.

    Chairman Spratt. Likewise I ask for unanimous consent that 
members who didn't have an opportunity to ask questions of the 
witnesses be given seven days to submit questions for the 
record. Without objection, so ordered.
    [Questions submitted for the record and the witnesses' 
responses follow:]

Congressman: Congressman Blumenauer
Witness: Mr. Bowen
          question no. 1: water quality and sanitation issues
    Question: Special Inspector General Bowen: SIGIR's audits indicate 
limited progress in nearly every aspect of reconstruction. Please 
inform me as to steps planned to improve water quality and water 
sanitation infrastructure in Iraq. Are these planned actions sufficient 
to restore access to fresh water and functioning water sanitation to 
the Iraqi population?

    Answer: The World Bank estimates that the Iraq water sector needs 
$14.4 billion to rebuild Iraq's public works and water system. 
According to information program managers have submitted to SIGIR, but 
which we have not independently verified, the U.S. has contributed 
approximately $2.38 billion in reconstruction funds to the water 
sector, the preponderance of which came from the Iraq Relief and 
Reconstruction Fund (IRRF). Of the total U.S. allocation for the water, 
$2.2 billion has been obligated and $1.72 billion expended.
    The IRRF was used to fund approximately 1,100 water projects, 
including potable water, sewerage, water conservation, wastewater 
treatment, and pumping stations across Iraq, according to program 
managers; we are told that only about 100 projects remain ongoing. As 
only these few projects remain to be completed, it is unlikely that 
direct U.S. efforts in this sector will result in a significant further 
improvement in access to fresh water and functioning water sanitation 
to the Iraqi population.
    The goal of the U.S. effort is to provide potable water capacity 
for 8.38 million people and sewerage service for 5.2 million people. As 
of July 31, 2007, U.S. projects have provided the capacity to serve 
5.86 million people with potable water and 5.1 million people with 
sewerage service, according to figures provided to SIGIR by the program 
managers. It is important to note that the U.S. is not able to measure 
with accuracy how much water actually reaches Iraqis. The outcome 
metrics recorded by the Iraq Transition Assistance Office track 
``potential'' impacts of U.S reconstruction efforts in the water 
sector.
    Commanders' Emergency Response Program funds are starting to play a 
larger role in the water sector since IRRF funds are mostly expended.
    Iraq's water treatment and sewerage facilities are operating at 
considerably less than normal capacity. The inability of Iraq's water 
ministries to sustain projects continues to limit progress in the 
sector. The security situation is the number one challenge faced by 
ministries today in executing their work. According to an official of 
the Department of State's Near Eastern Affairs Bureau, ``deteriorating 
[security] conditions are increasingly affecting the ability of both 
the Ministry of Water Resources and the Ministry of Municipalities and 
Public Works to operate and has reached a crisis stage.''
    SIGIR noted in its latest quarterly report that ``employees [of the 
water ministries] have vacated Baghdad buildings in dangerous 
locations'' and that Iraqi Ministry of Municipalities and Public Works 
officials said that ``less than half of the remaining staff are showing 
up for work every day.''

                                 ______
                                 
Congressman: Congressman Blumenauer
Witness: Mr. England
          question no. 2: energy efficiency in dod operations
    Question: Deputy Secretary of Defense England: In the 6 years since 
the publication of the Defense Science Board report, please fully 
discuss whether the Department of Defense has implemented any of its 
recommendations.

    Answer: The 2001 Defense Science Board (DSB) recommendations have 
sparked an increased emphasis in DoD's approach to energy and energy 
security. This DoD emphasis is highlighted in my August 9, 2007 
memorandum listing ``energy initiatives'' as a DoD top 25 
transformation priority.
    Core to Departmental efforts is an initiative to accurately value 
the fully burdened cost of fuel (FBCF) and integration of FBCF 
considerations into DoD acquisition processes. Integrating the FBCF, 
which studies have shown to be as high as $42 per gallon, will 
facilitate the use of energy efficient technologies in weapons systems 
development by revealing the true cost of energy across the life cycle 
of a weapons system. Formal process change to introduce FBCF 
considerations into acquisition programs began April 10, 2007 with an 
Under Secretary of Defense, Acquisition, Technology and Logistics (USD 
(AT&L)) memorandum. This memo identified three (3) pilot programs which 
are being used to develop the specific guidance and detailed procedures 
to apply the fully burdened cost fuel to acquisition processes. 
Overarching guidance mandating use of FBCF considerations is currently 
being integrated into DoD Instruction 5000.2, ``Operation of the 
Defense Acquisition System''.
    In addition, last year the Department formed an Energy Security 
Task Force to explore energy efficient technologies applicable to the 
DoD. The Energy Security Task Force has the responsibility for 
technologies relative to DoD platforms, systems and installations and 
looks at both conventional and alternative energy sources and demand-
reduction strategies.
    The Department fully recognizes energy as a dominant factor in the 
21st century battle space. While traditional Departmental approaches to 
energy have focused on supply-side efficiencies, the DSB and other 
studies have emphasized that energy must be addressed in a broader 
context. Accordingly, the Department is moving to incorporate energy 
considerations (cost and technologies) into key corporate processes on 
the demand-side to develop a more mobile and agile force.

                                 ______
                                 
Congressman: Congressman Blumenauer
Witness: Mr. England
          question no. 3: energy efficiency in dod operations
    Question: Deputy Secretary of Defense England: What is the status 
of your efforts to implement the performance parameter noted in ADM 
Giambastiani's 2006 memorandum? Also, is the ``fully burdened cost of 
fuel'' metric identified in Mr. Krieg's 2007 memorandum now being used 
in all acquisition trade studies?

    Answer: Chairman of the Joint Chiefs of Staff (CJCS) incorporated 
the requirement for an energy efficiency key performance parameter 
(KPP) in the recent update to CJCS Instruction 3170.01F and CJCS Manual 
3170.01C. These documents formally lay the foundation for the selective 
application of an energy efficiency KPP to DoD systems and potential 
capabilities. Currently, efforts are under way to develop the detailed 
criteria to determine how and when to apply an energy efficiency KPP to 
a program. The energy efficiency KPP must be measurable and serving to 
reduce both battle space supply-side challenges and life-cycle costs.
    Complementing the energy efficiency KPP initiative, the USD (AT&L) 
April 10, 2007 Fully Burdened Cost of Fuel (FBCF) memo identified three 
(3) pilot programs which are being used to develop the specific 
guidance and detailed procedures to apply the fully burdened cost fuel 
in acquisition processes. The Institute for Defense Analysis is on 
contract to assist in guidance and procedure development. Formal 
program performance based on fully burdened cost of fuel considerations 
should begin late 2008.

                                 ______
                                 
Congressman: Congressman Blumenauer
Witness: Mr. England
          question no. 4: energy efficiency in dod operations
    Question: Deputy Secretary of Defense England: I understand the 
Army has established a Rapid Equipping Force (REF) to respond to urgent 
operational needs in Iraq and Afghanistan. Please describe the status 
of this effort. Has the REF identified any conditions in Iraq 
contributing to the high fuel demand there? If so, what steps is the 
Department of Defense taking to relieve that situation?

    Answer: The REF has been fully operational since October 3, 2005, 
and to date has developed over 257 types of technology and has shipped 
over 59,800 pieces of equipment to theater. The REF ``leans forward'' 
to provide advanced technology to meet operational commanders' 
immediate warfighting needs. The REF's cutting-edge solutions increase 
Soldiers' lethality and enhance their survivability.
    Pursuant to a Joint Urgent Operational Need Statement from 
Commander, NMD-W, the REF chartered a Power Surety Task Force to assess 
energy requirements in support of contingency operations. The primary 
intent was to reduce the number of Soldiers and trucks exposed to enemy 
activity while moving bulk fuel. Surveys, beginning in November 2006, 
in Djibouti, Kuwait, Iraq and Afghanistan determined that the majority 
of fuel for Forward Operating Base (FOB) power generation is consumed 
powering HVAC for temporary work and living spaces (mainly tents). The 
REF quickly developed a technique, called Project Eskimo, which 
insulates temporary structures by applying sprayable foam to the 
exterior surfaces, controlling temperature, cutting dust infiltration, 
and reducing noise transmission. This solution was approved by Army 
Test and Evaluation Command (ATEC) and the Center for Health Promotion 
and Preventive Medicine in January 2007, with first deployment to 
theater in May 2007. To date, the REF has sprayed approximately 120,000 
square feet in Iraq, 56,200 square feet in Djibouti, and 25,700 square 
feet in Kuwait; spraying in Afghanistan is scheduled for September 
2007. Initial reports indicate that Project Eskimo is reducing HVAC 
power use by 45% to 80%.
    The Army submitted a Joint Concept Technology Demonstration to the 
Department of Defense to continue the development of technologies and 
techniques such as Eskimo, which are focused on achieving energy 
independence at our Forward Operating Bases and Installations. The 
strategic importance of energy independence is now supported by the 
tactical relevance of reducing the number of trucks on the road. 
Reducing the burden cost of fuel in dollars is important; reducing the 
burden cost in blood is paramount.

                                 ______
                                 
Congressman: Congressman Blumenauer
Witness: Mr. England
question no. 5: recruiting standards in light of the demands of the war
    Question: Deputy Secretary of Defense England: What are the long-
term costs imposed on the Army as a result of the relaxation of these 
standards? Are there any efforts to quantify the added costs of adding 
recruits who, in previous years, would have been rejected? Are there 
any limitations imposed on Army readiness as a result of these added 
costs?

    Answer: Army recruiting standards are measured by a Soldier's 
mental category (MENTCAT) and whether or not the Soldier accessed with 
some type of waiver (medical, drug, moral, etc.). The Army does track 
loss rates by MENTCAT and by waiver, and the data clearly indicates 
that there is no significant long term cost of accessing Cat IV 
Soldiers or Soldiers who require a waiver.
    All recruits access into the Army through a MOS specific Initial 
Entry Training (IET) pipeline. MENTCATs are an indicator of the 
trainability of the recruit and as such they are used solely to 
determine what MOS the Soldier is qualified for based upon his/her 
degree of technical capacity. There is no additional training for Cat 
IV Soldiers within a given IET pipeline. Therefore, the Army does not 
incur an extra training cost for accessing a Cat IV Soldier, nor does 
it degrade Army readiness. The Army does track loss rates by MENTCAT, 
and the data shows that the loss rate of Cat IV Soldiers is only 
slightly more than that of the average of all Soldiers (and actually 
slightly better then Cat IIIA and IIIB soldiers). Since the Cat IV 
soldiers retain at about the average rate of all Soldiers, the Army 
does not expect a higher loss rate (and thus an increase to the 
accession mission) should the Army decide to access more Cat IV 
Soldiers.
    Waivers are given to Soldiers who the Army otherwise deems fit to 
serve. There is no extra training necessary for Soldiers with a waiver, 
and as a whole, they have a loss rate almost exactly equal to those 
Soldiers without a waiver. Like Cat IV Soldiers, there appears to be no 
long term cost or decrease in readiness due to accessing a Soldier with 
a waiver under current policy.
    Currently, the Army considers all recruits fully capable of serving 
in their designated MOS. If this policy changes in the future, and the 
Army is forced to allow Cat IV soldiers to serve in a MOS above their 
current technical capacity, then there is a foreseeable training cost 
to the Army.

                                 ______
                                 
Congressman: Congressman McGovern
Witness: Mr. Bowen
                             question no. 6
    Question: I asked Deputy Secretary England how we can be sure that 
funds, equipment and arms we are providing to Iraqi military, police 
and security forces are not being used against U.S. troops in the field 
or in sectarian attacks against various Iraqi groups and communities? I 
pose that same question to you, Mr. Bowen: In your investigations, can 
you reassure this Committee that this is not the case?

    Answer: I can give no such assurances, in part because our 
jurisdiction is limited to a small portion of the programs related to 
the issues raised in the question. We did complete a report on weapons 
for Iraq security forces funded by the Iraq Relief and Reconstruction 
Fund (SIGIR 06-003), which disclosed problems with accountability for 
those weapons and which demonstrates that agency management did not use 
procedures intended to prevent those weapons from being misused.

                                 ______
                                 
Congressman: Congressman McGovern
Witness: Mr. Bowen
                             question no. 7
    Question: How well, in your opinion, are we tracking and monitoring 
the Iraqi military and security forces that we train, and the equipment 
and arms we provide them?

    Answer: We have not directly examined the adequacy or effectiveness 
of efforts to track and monitor Iraqi military and security forces we 
have trained or the equipment and arms we have provided to them. SIGIR 
provides, in its Quarterly Report, information derived from a variety 
of sources which may help Members of Congress address this question, 
but we have not assessed the accuracy of that information. We did note, 
in the report cited above (SIGIR-06-003), serious problems with 
tracking arms provided to Iraqi security agencies. We anticipate 
undertaking other work in this area.

    Once again, thank you very much indeed.
    [Whereupon, at 1:30 p.m., the Committee was adjourned.]

                                  
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