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



                         [H.A.S.C. No. 110-91]
 
 ACCOUNTABILITY DURING CONTINGENCY OPERATIONS: PREVENTING AND FIGHTING 
CORRUPTION IN CONTRACTING AND ESTABLISHING AND MAINTAINING APPROPRIATE 
                          CONTROLS ON MATERIEL

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                           SEPTEMBER 20, 2007

                                     
[GRAPHIC] [TIFF OMITTED] 



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                   HOUSE COMMITTEE ON ARMED SERVICES
                       One Hundred Tenth Congress

                         IKE SKELTON, Missouri
JOHN SPRATT, South Carolina          DUNCAN HUNTER, California
SOLOMON P. ORTIZ, Texas              JIM SAXTON, New Jersey
GENE TAYLOR, Mississippi             JOHN M. McHUGH, New York
NEIL ABERCROMBIE, Hawaii             TERRY EVERETT, Alabama
SILVESTRE REYES, Texas               ROSCOE G. BARTLETT, Maryland
VIC SNYDER, Arkansas                 HOWARD P. ``BUCK'' McKEON, 
ADAM SMITH, Washington                   California
LORETTA SANCHEZ, California          MAC THORNBERRY, Texas
MIKE McINTYRE, North Carolina        WALTER B. JONES, North Carolina
ELLEN O. TAUSCHER, California        ROBIN HAYES, North Carolina
ROBERT A. BRADY, Pennsylvania        JO ANN DAVIS, Virginia
ROBERT ANDREWS, New Jersey           W. TODD AKIN, Missouri
SUSAN A. DAVIS, California           J. RANDY FORBES, Virginia
RICK LARSEN, Washington              JEFF MILLER, Florida
JIM COOPER, Tennessee                JOE WILSON, South Carolina
JIM MARSHALL, Georgia                FRANK A. LoBIONDO, New Jersey
MADELEINE Z. BORDALLO, Guam          TOM COLE, Oklahoma
MARK UDALL, Colorado                 ROB BISHOP, Utah
DAN BOREN, Oklahoma                  MICHAEL TURNER, Ohio
BRAD ELLSWORTH, Indiana              JOHN KLINE, Minnesota
NANCY BOYDA, Kansas                  CANDICE S. MILLER, Michigan
PATRICK J. MURPHY, Pennsylvania      PHIL GINGREY, Georgia
HANK JOHNSON, Georgia                MIKE ROGERS, Alabama
CAROL SHEA-PORTER, New Hampshire     TRENT FRANKS, Arizona
JOE COURTNEY, Connecticut            BILL SHUSTER, Pennsylvania
DAVID LOEBSACK, Iowa                 THELMA DRAKE, Virginia
KIRSTEN GILLIBRAND, New York         CATHY McMORRIS RODGERS, Washington
JOE SESTAK, Pennsylvania             K. MICHAEL CONAWAY, Texas
GABRIELLE GIFFORDS, Arizona          GEOFF DAVIS, Kentucky
ELIJAH E. CUMMINGS, Maryland
KENDRICK B. MEEK, Florida
KATHY CASTOR, Florida
                    Erin C. Conaton, Staff Director
                Andrew Hunter, Professional Staff Member
               Jenness Simler, Professional Staff Member
                   Margee Meckstroth, Staff Assistant
                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2007

                                                                   Page

Hearing:

Thursday, September 20, 2007, Accountability During Contingency 
  Operations: Preventing and Fighting Corruption in Contracting 
  and Establishing and Maintaining Appropriate Controls on 
  Materiel.......................................................     1

Appendix:

Thursday, September 20, 2007.....................................    39
                              ----------                              

                      THURSDAY, SEPTEMBER 20, 2007
 ACCOUNTABILITY DURING CONTINGENCY OPERATIONS: PREVENTING AND FIGHTING 
CORRUPTION IN CONTRACTING AND ESTABLISHING AND MAINTAINING APPROPRIATE 
                          CONTROLS ON MATERIEL
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hunter, Hon. Duncan, a Representative from California, Ranking 
  Member, Committee on Armed Services............................     2
Skelton, Hon. Ike, a Representative from Missouri, Chairman, 
  Committee on Armed Services....................................     1

                               WITNESSES

Assad, Shay D., Director, Defense Procurement and Acquisition 
  Policy, Office of the Under Secretary of Defense (Acquisition & 
  Technology), Department of Defense.............................     7
Condon, Kathryn A., Executive Deputy to the Commanding General, 
  U.S. Army Materiel Command.....................................    11
Gimble, Thomas F., Principal Deputy Inspector General, Department 
  of Defense.....................................................     5
Thompson, Lt. Gen. N. Ross, III, Military Deputy to the Assistant 
  Secretary of the Army for Acquisition, Logistics and 
  Technology, U.S. Army..........................................     9
Velz, Peter M., Foreign Affairs Specialist for Iraq, Office of 
  the Deputy Assistant Secretary of Defense for Middle East, 
  Office of the Secretary of Defense.............................    12

                                APPENDIX

Prepared Statements:

    Assad, Shay D................................................    74
    Gimble, Thomas F.............................................    43
    Thompson, Lt. Gen. N. Ross, III, joint with Kathryn A. Condon    83
    Velz, Peter M................................................    93

Documents Submitted for the Record:
    [There were no Documents submitted.]

Questions and Answers Submitted for the Record:
    [There were no Questions submitted.]
 ACCOUNTABILITY DURING CONTINGENCY OPERATIONS: PREVENTING AND FIGHTING 
CORRUPTION IN CONTRACTING AND ESTABLISHING AND MAINTAINING APPROPRIATE 
                          CONTROLS ON MATERIEL

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                      Washington, DC, Thursday, September 20, 2007.
    The committee met, pursuant to call, at 11:38 a.m., in room 
2118, Rayburn House Office Building, Hon. Ike Skelton (chairman 
of the committee) presiding.

 OPENING STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM 
        MISSOURI, CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. Ladies and gentlemen, let me welcome you to 
today's hearing.
    Let me mention to the members and the staff--please remind 
members as they come in that, because of the votes, we will 
have a short grace period on who is here at the time of the 
gavel, but we do want to proceed with this hearing, and I trust 
the staff will tell people that.
    We had a classified briefing a short while ago involving 
this subject matter, and I remind the members that it is 
classified and there is also sensitive material that may not be 
raised correctly in this hearing.
    This morning, the committee received that classified 
briefing, and we will proceed with the open hearing now. There 
are dedicated men and women working for the Department of 
Defense overseas, and we know they face enormous pressures to 
operate in very challenging conditions.
    The majority of them, of course, do ethical and very proper 
work. Taken as a whole, they are absolutely the finest group of 
men and women you will ever see.
    There will be no excuse, however, for those who engage in 
outright fraud or accept bribes large or small in the 
performance of their duties.
    It is also unacceptable for serious losses of 
accountability to occur in the tracking and control of military 
weapons provided to foreign forces, as losses can lead to 
serious embarrassment for our country.
    As has been reported in the press, the Department of 
Defense Inspector General and the Army have uncovered a cluster 
of fraud and corruption problems arising out of a series of 
support contracts, many of which were let from an office in 
Kuwait.
    As of August 28th, the Army reported that it had 76 cases 
of fraud and corruption under investigation, 20 pending 
indictments and had uncovered over $15 million in bribes.
    The people involved range from civilians and enlisted 
military personnel to relatively senior officers. These 
problems were so severe that they represent a culture of 
corruption, at least in one location.
    General Thompson, I hope that you will address that 
concern. I am extremely disappointed to learn that so many 
individuals violated their integrity and undermined the oaths 
that they made.
    Through the course of this hearing, the committee hopes to 
learn what factors may have contributed to an atmosphere in 
which so many problems did occur.
    The Special Inspector General for Iraq Reconstruction and 
General Accountability Office have also reported on serious 
losses of accountability for weapons provided to Iraqi Security 
Forces (ISF).
    These accountability problems concern us both because they 
could undermine our vital efforts to train and to equip the 
Iraqi Security Forces, because they can lead to diversion of 
materiel in ways that threaten our interest, but also because 
the Department of Defense is seeking significantly expanded 
authority to train and equip foreign security.
    We have before us five witnesses, all excellent witnesses: 
Principal Deputy Inspector General of the Department of Defense 
Thomas Gimble.
    Shay Assad, the Director of Defense Procurement Acquisition 
Policy and Strategic Sourcing.
    Lieutenant General Ross Thompson, Military Deputy to the 
Assistant Secretary of the Army for Acquisition, Logistics, and 
Technology.
    And a co-chair in the Army task force investigating these 
problems, Kathryn Condon, Executive Deputy to the Commanding 
General of Army Materiel Command.
    And last, we have Mr. Peter Velz, Foreign Affairs 
Specialist for Iraq, from the Office of Assistant Secretary of 
Defense for the Middle East.
    And before we hear from these witnesses, who I know will 
give us thorough information--and if we venture into a 
classified area, I take it that the witnesses will say 
something to that effect and that the question can be answered 
to that individual or to our committee as a whole on a 
classified basis.
    Duncan Hunter, Ranking Member.

    STATEMENT OF HON. DUNCAN HUNTER, A REPRESENTATIVE FROM 
    CALIFORNIA, RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Hunter. Thank you, Mr. Chairman. And thanks for holding 
this hearing.
    Good morning to our witnesses. Ladies and gentlemen, thank 
you for being with us. And we had a chance to have this 
classified hearing earlier that I think set the stage fairly 
effectively for this hearing.
    And you know, one thing that strikes me is the depth of the 
problem and the involvement of Americans who are bound by a 
sense of duty and honor and integrity, or should be bound by a 
sense of duty and honor and integrity, who apparently have been 
part of this.
    Today we are going to talk about two separate issues, and 
they have been loosely linked by the media in the sense that 
the issues were reported in the same series of articles.
    The first issue is allegations that bribes were paid to 
Army contracting officials in order to get lucrative contracts 
steered toward certain contractors.
    The second issue is the lack of accountability, as reported 
by the Government Accountability Office (GAO), for weapons 
procured by the Department of Defense intended to equip the 
Iraqi Security Forces.
    And while I am clearly concerned about the allegations of 
bribery, and we went into that in some depth in the classified 
meeting, especially among field grade officers--and I believe 
that such incidents set a terrible example for the Iraqis who 
we are now meant to be mentoring--I am hopeful that the various 
investigations will show that the number of bribery cases we 
are seeing is an aberration caused by bad choices made by 
people in a localized environment, rather than a pervasive 
culture of corruption.
    I am also hopeful that we will hear today that the system 
did work in catching these individuals, because there will 
always be individuals who make bad choices, and we expect to 
hear more about the lessons that the Army has learned and the 
changes it will implement to make the system work more 
effectively.
    More troubling are the implications of the reports that 
weapons we have provided to the ISF may have fallen into the 
wrong hands. I think we have got to be realistic enough to know 
that we can't maintain 100 percent control of property we 
provide to other nations' security forces.
    But if, in fact, there is a wholesale movement of weapons 
that U.S. taxpayers have paid for into the hands of those who 
would do us harm or further destabilize the region, we must 
make resolving this problem one of our top priorities in 
theater.
    General Kicklighter has promised us that this will be his 
number one goal, to ensure that this is not happening.
    My judgment is that these two distinct issues share a root 
cause, which is a lack of experience and standardized 
procedures for planning the administrative side of contingency 
operations.
    On one hand, we have a small contracting office ill-
equipped to handle the volume of work it received when 
operations in Iraq began in earnest. As a result, the system 
was slower in catching irregularities than it otherwise would 
have.
    We have also inadvertently created an environment where 
those with less experience and those who might be more easily 
tempted to make self-serving decisions lack the support 
structure to enable better decision-making, although I would 
say that at least the classified information that we have seen 
goes far beyond those descriptions.
    Traditionally, this primary responsibility for equipping 
Iraqi Security Forces has been a State Department function 
supported by the Defense Security Cooperation Agency. There are 
policies and procedures in place for such foreign military 
assistance.
    Yet in this case, the military entered uncharted waters. 
They made organizational changes to facilitate the training and 
equipping of the ISF in order to secure transition to Iraq.
    But the new organization didn't have the accountability 
procedures in place to maintain adequate records of weapons and 
equipment that they transferred to these forces.
    Again we see a situation where an organization was ill-
equipped to handle the administrative burden of contingency 
operations because it lacked the personnel and systems 
necessary to enable accountability.
    And that takes me to something that this committee did 
three years ago. Three years ago, Mr. Skelton and I put in a 
provision in the 2006 National Defense Authorization Act, 
Section 813, in which we required the secretary of defense to 
establish a contingency contracting corps.
    And the idea was to have a robust contracting corps in 
theater that was responsive to and under the command of the 
combatant commander in theater, so that you didn't have a 
disconnect of an operational military which is out there trying 
to win the war on the battlefield and a bureaucracy which is 
many thousands of miles away in Washington, D.C.
    Now, we put this together, and I want to quote what we put 
together in the law that we passed or the legislation that we 
passed out of this committee.
    We said, ``This corps would be directed by a senior 
commissioned officer with appropriate acquisition experience 
and qualifications who, when deployed, would report directly to 
the combatant commander in an area of operations requiring 
contingency contracting support. Training of the corps would 
take into account all relevant laws, regulations and policies 
related to contingency contracting and would be required even 
when the corps is not deployed.
    ``The committee intends that the contingency contracting 
corps maintain a sufficient level of readiness in peacetime to 
be able to rapidly deploy to emerging contingency operations. 
The commander of the contingency contracting corps should 
consider the development of a standardized contingency 
contracting handbook which summarizes all relevant laws, 
directives and regulations related to contingency contracting 
to assist the day-to-day operations of the contingency 
contracting workforce.
    ``Finally, the committee urges a contingency contracting 
corps utilize an integrated contracting and financial 
management system to ensure that contracting operations are not 
hindered by technological limitations that can be easily 
avoided through the use of readily available systems.''
    Now, we put that in our markup in 2005, and if we had had 
that, some of the problems that we have today might not have 
occurred.
    Naturally, when we took this to the conference with the 
Senate, the Senate, in their inimitable fashion, managed to 
water it down to some degree, but nonetheless we came out of 
conference with a direction to DOD that it was our policy that 
this contingency contracting corps be stood up and be utilized.
    So one thing that I am interested in today is any 
information that you have on this incipient operation that, as 
I understand you have now stood up--or you have teams of 
contingency contracting personnel.
    And I understand there are not too many of them, but that 
you have a few personnel now who are basically carrying out the 
directive that we put into law several years ago. So I would be 
interested in what we actually have done and have on the ground 
in Iraq and how that is operating.
    So thank you for being with us today.
    And, Mr. Chairman, this is a sad day for the United States, 
especially coming out of this classified briefing, not because 
occurrences like this aren't present in every major military 
operation to some degree, but that the size and scope and the 
number of folks who have enormous responsibility to this 
country are involved has, I think, made this a real tragedy for 
our country.
    On the other hand, we have a military which is resilient 
and capable of recovering and has strong leadership and lots of 
people who do have a high standard of honor and integrity.
    And I think that if we will put this contingency 
contracting corps in place, where we have a strong team that 
responds directly to the war fighting commander in theater, we 
are going to be able to avoid problems like this in the future.
    So thank you, Mr. Chairman, for teeing up this hearing.
    I thank our witnesses, and I look forward to their 
testimony.
    The Chairman. Mr. Hunter, thank you very much.
    This is a reminder to those of us that are interested in 
the history of procurement that my fellow Missourian Harry 
Truman had his very own committee that looked at problems like 
this.
    However, during the Second World War, weapons systems and 
other materiel was not sent directly to the front. It went 
through, as I understand it, various military depots here 
within our country, and consequently Senator Truman's committee 
did not have to go outside the boundaries of our country as we 
are doing today, sadly.
    Mr. Gimble, we are going to start with you, and I am not 
sure the order to whom we should call. I assume Mr. Assad and 
General Thompson would be next, but I will call on you first. 
And if you have other suggestions, please make them to us.
    Mr. Gimble.

   STATEMENT OF THOMAS F. GIMBLE, PRINCIPAL DEPUTY INSPECTOR 
                 GENERAL, DEPARTMENT OF DEFENSE

    Mr. Gimble. Mr. Chairman, Ranking Member Hunter and members 
of the committee, thank you for the opportunity to appear 
before the committee today and testify on accountability issues 
during contingency operations and also to discuss the work of 
the Department of Defense (DOD) Inspector General (IG) in 
Southwest Asia.
    Specifically, I will discuss our ongoing assessment of the 
accountability of weapons, munitions and explosives, and 
overall contracting issues.
    To date, over $550 billion has been appropriated to the 
Department of Defense in support of our armed forces in 
Southwest Asia and to the fight against terrorism. We have over 
225 personnel working on 29 audits and 90 investigations 
providing oversight on matters such as accountability in 
contracting.
    The DOD I.G. has been concerned about the accountability 
and control of equipment provided to the security forces in 
Afghanistan and Iraq since 2005.
    More recently, the DOD Inspector General, Claude M. 
Kicklighter, briefed Members of Congress and the Department of 
Defense leadership on specific issues related to these 
concerns. As a result, an interagency, interservice assessment 
team lead led by the inspector general is on the ground in 
theater assessing current conditions.
    An objective of the munitions assessment team is to 
determine whether there is adequate control and accountability 
over the munitions provided to the security forces and to 
whether the underlying contracting process also contains an 
appropriate level of control and accountability.
    In addition, the team is focused on reducing the risk of 
contract fraud and corruption and will continue to investigate 
and refer those who broke the law for prosecution.
    The Government Accountability Office continues to designate 
DOD contract management as a high-risk area. And since fiscal 
year 2000, over 240 DOD I.G. reports have identified 
contracting problems and recommended corrective actions.
    These problems include contract administration, source 
selection procedures, contract payments. Such problems are 
recurring and continue to impact the effectiveness of U.S. 
forces forward deployed in Operations Iraqi Freedom and 
Enduring Freedom.
    As stated earlier, the DOD I.G. has 29 ongoing audit 
efforts to address overall accountability of wartime 
expenditures.
    This work has generated efforts to improve the 
collaboration between support organizations and forward 
deployed forces to help standardize procedures in a wartime 
environment, such as procedures for the retention of 
accounting, disbursing, and property records.
    The DOD I.G. is also working to identify any systemic 
problems and control weaknesses and to also determine the 
status of any corrective actions that are in place.
    Also, the DOD I.G. is summarizing 210 GAO, DOD I.G., Army 
Audit Agency and Air Force Audit Agency audit reports and 
testimonies on accountability issues impacting support to 
operations in Southwest Asia.
    The Defense Criminal Investigative Service, or DCIS, is the 
criminal investigative arm of the DOD Inspector General, and it 
has been investigating DOD-related matters pertaining to the 
Iraqi theater, to include Kuwait, since the start of the war.
    As previously noted, the DOD I.G. has about 90 ongoing 
investigations related to the war effort, to include war 
profiteering, contract fraud, and contract corruption. Most of 
these investigations are being conducted as part of a joint 
effort with other law enforcement organizations.
    As an example, in January of 2004, an investigation was 
initiated on information from the Defense Contract Audit Agency 
concerning allegations of kickbacks and gratuities solicited 
and/or received by Kellogg Brown & Root (KBR) employees--also 
charges that KBR was overcharging for food, meals, and fuel.
    These criminal allegations continue to be examined, but 
some associated prosecutions have occurred and others are 
anticipated.
    More recently, as a result of the magnitude of alleged 
criminal activities in the Iraqi theater, a group of federal 
agencies has formalized a partnership to combine resources to 
investigate and prosecute cases of contract fraud and public 
corruption that are related to the U.S. Government expenditures 
for Iraqi reconstruction.
    The participating agencies include: on the International 
Contract Corruption Task Force are the DOD I.G., Army Criminal 
Investigation Division (CID), Department of State Inspector 
General, the FBI, the Special Inspector General for Iraq 
Reconstruction, and the Agency for International Development, 
the Office of Inspector General.
    In closing, the DOD Inspector General assessment on 
accountability and control of weapons, ammunition, and 
explosives provided to the Afghan and Iraq security forces is 
one of our highest priorities.
    If we find shortfalls, we will make the appropriate 
recommendations and work with commanders on the ground and the 
senior leadership in the Department to find solutions.
    We will continue to work on contracting issues to tighten 
up controls and strengthen processes and also to continue work 
with U.S. law enforcement agencies to identify potential 
criminal activity for investigation and prosecution.
    We will also attempt to apply the lessons learned and work 
with the Department and Congress to fix the systemic issues. 
And I look forward to your questions.
    [The prepared statement of Mr. Gimble can be found in the 
Appendix on page 43.]
    The Chairman. Mr. Gimble, thank you.
    Mr. Assad.

 STATEMENT OF SHAY D. ASSAD, DIRECTOR, DEFENSE PROCUREMENT AND 
 ACQUISITION POLICY, OFFICE OF THE UNDER SECRETARY OF DEFENSE 
       (ACQUISITION & TECHNOLOGY), DEPARTMENT OF DEFENSE

    Mr. Assad. Thank you, Mr. Chairman, Representative Hunter, 
distinguished members of the House Armed Services Committee.
    Thank you for the opportunity to discuss the Department of 
Defense's initiatives in the area of contracting integrity in 
contracting in a combat environment in general.
    Contracting integrity is a topic that we always consider to 
be of key importance within the Department. Integrity in all 
endeavors, including our contracting function, is and must 
remain a core value of the Department of Defense.
    My name is Shay Assad, and I serve as the director of 
defense procurement and acquisition policy and strategic 
sourcing for the Department.
    Before assuming this position in April of 2006, I served as 
a senior contracting official with the Marine Corps for a 
period of two years.
    Prior to government service, I spent 25 years in industry, 
serving in a number of operational and contract management 
positions, primarily with the Raytheon Company.
    My experience includes senior vice president of contracts. 
I was the president and chief operating officer of one of 
Raytheon's many subsidiaries, and finally, as an executive vice 
president of the company and chairman and chief executive of 
one of its major subsidiaries.
    I am a graduate of the United States Naval Academy, and I 
started my career as an officer in the United States Navy, 
serving two tours on Navy destroyers, and finally as a Navy 
procurement officer at the Naval Sea Systems Command.
    In recent years, the Department of Defense has increasingly 
relied on supplies and services provided by the private sector 
under contract. In fiscal year 2006 alone, DOD obligated over 
$300 billion on contracts for goods and services, becoming the 
largest purchasing organization in the world.
    Given the magnitude of the dollars involved, it is 
essential that DOD acquisitions be handled efficiently, 
effectively, and with integrity. In other words, DOD needs to 
ensure that it buys the right things the right way.
    In your invitation to appear before this committee, you 
stated that you were interested in hearing what DOD is doing to 
prevent and fight corruption in contracting. The Department has 
and is taking several steps in this area. Let me give you some 
examples.
    On February 16th, 2007, the Department established a panel 
on contracting integrity in accordance with the requirements of 
Section 813 of the 2007 National Defense Authorization Act.
    Although the statute provides a sunset date of 2009 for the 
panel, we as a matter of policy will continue this panel 
indefinitely.
    As required by Section 813, the panel is conducting a 
review of the progress made by DOD to eliminate areas of 
vulnerability that allow for fraud, waste and abuse to occur.
    The under secretary established Dr. James Finley, the 
deputy under secretary of defense, as the panel chairman, and I 
serve as the executive director of the panel.
    To date, there have been eight subcommittees established, 
five which address five areas of fraud and vulnerability that 
the GAO report addressed.
    One addresses contracting structure, and I mean the 
organizational structures under which we do contracting. We 
have a seventh panel that addresses what legislative action we 
believe is necessary to assist us in this regard.
    And the eighth panel is on contracting integrity in a 
combat environment, and I have placed myself responsible for 
that subcommittee.
    We are also doing work with the procurement fraud working 
group. The Department established a DOD-wide procurement fraud 
working group in January of 2005. The working group provides a 
forum for acquisition professionals to address contracting 
vulnerabilities.
    This working group of over 300 men and women within the 
Department in various I.G. and fraud activities meets monthly 
and attends the Department of Justice Procurement Fraud Task 
Force meetings.
    We have updated acquisition regulations relating to ethics. 
The Department has initiated several changes to the Federal 
Acquisition Regulation (FAR) to update the regulations 
pertaining to ethics in contracting.
    The Defense Acquisition Regulations Council, in concert 
with the Civilian Agency Acquisition Council, proposed an 
amendment to the FAR to address a contractor code of ethics and 
business conduct.
    DOD will continue to work with the Office of Federal 
Procurement Policy to recommend changes in laws, regulations 
and policy that would serve to clarify or strengthen issues 
identified through the work of the panel on contracting 
integrity.
    We have also taken a serious look at our training. The DOD 
Standards of Conduct Office has updated the mandatory annual 
ethics training yearly to ensure that it is always current and 
that it is relevant.
    The latest revisions issued, this August, modify the 
curriculum to focus beyond just rote understanding of law and 
regulations and rules, but now provides interactive decision 
exercises so people can make judgments about how to do 
contracting properly. We also provide an ongoing employees 
guide to the standards of conduct.
    In closing, I would like to emphasize that the Department 
views integrity in contracting as the most essential feature of 
our defense procurement system. We are taking a number of 
actions to ensure that we deal appropriately with vulnerability 
in our system to waste, fraud, and abuse.
    We fully understand the foundation of our ability to assure 
our taxpayers that we are being good stewards of their money is 
to ensure that the Department conducts business with integrity 
to acquire the supplies and services necessary to meet the 
needs of our war fighters.
    And I stand ready to answer your questions, Mr. Chairman 
and members of the committee, on this very important matter.
    [The prepared statement of Mr. Assad can be found in the 
Appendix on page 74.]
    The Chairman. Looks like General Thompson.

STATEMENT OF LT. GEN. N. ROSS THOMPSON, III, MILITARY DEPUTY TO 
THE ASSISTANT SECRETARY OF THE ARMY FOR ACQUISITION, LOGISTICS 
                   AND TECHNOLOGY, U.S. ARMY

    General Thompson. Good afternoon, Chairman Skelton, 
Congressman Hunter and distinguished committee members. I want 
to thank you for this opportunity to appear today before the 
committee.
    And with me--and she will speak in just a minute--is Ms. 
Kathryn Condon, who is the Executive Deputy to the Commanding 
General at the Army Materiel Command, as indicated by 
Congressman Skelton in his opening remarks.
    We have a joint written statement that I respectfully 
request be made part of the record for today's hearing.
    The Chairman. Without objection.
    [The joint statement of General Thompson and Ms. Condon can 
be found in the Appendix on page 83.]
    General Thompson. As is normal procedure, the Army 
conducted audits and investigations into the oversight, 
execution, and management of our contracting in the theater of 
operations.
    While most of our military and civilian contracting 
personnel performed well in extreme conditions, auditors and 
investigators discovered cases of potential fraud in 
contracting operations, with the worst cases originating in 
Kuwait.
    The Army, in a comprehensive effort involving the Audit 
Agency, the Criminal Investigation Command, the Army Materiel 
Command, the Sustainment Command underneath the Army Materiel 
Command, Defense Contract Management Agency and Defense 
Contract Audit Agency, acted decisively to correct those 
deficiencies.
    Last February, then-Secretary of the Army Dr. Harvey asked 
my boss, the assistant secretary of the Army for acquisition, 
logistics, and technology, to assess contracting activities 
throughout Central Command and to implement an action plan.
    After a review of all the contract operations, the Army in 
April of 2007 began implementing an action plan that 
reorganized the Kuwait contracting office, installed new 
leadership, established a joint logistics procurement support 
board together with the requiring activities, the operational 
commanders that that contracting office supports.
    We increased the staffing level, deployed more senior 
contracting professionals and attorneys to be part of the 
office in Kuwait, and provided additional ethics training and 
assigned legal support.
    To broaden the Army's ongoing efforts, Secretary of the 
Army Pete Geren recently announced a Special Commission on Army 
Contracting to examine the big picture.
    This commission is headed by Dr. Jacques Gansler and has 
distinguished military and civilian leaders that will fully 
examine theater acquisition and program management processes; 
review management controls to prevent fraud, waste, and abuse; 
assess legislative needs; and recommend changes in policies and 
procedures.
    The internal Army contracting task force which Ms. Condon 
and I co-chair will coordinate with and reinforce the work of 
the commission headed by Dr. Gansler.
    Ms. Condon and I will look at contracting activities across 
the Army. Part of our plan will be to increase both the scope 
and the frequency of contracting operation reviews, which is 
part of the routine examination of contracting activities.
    We are also going to examine the size, the structure, and 
the training of the Army's military and civilian contracting 
workforce.
    The Army acquisition workforce has declined in the last 
decade while our workload has increased substantially, and this 
is probably one of the key things that is going to come out of 
the work of both Dr. Gansler's group and the Army internal task 
force, is what is the proper size of the military and civilian 
contracting workforce.
    Mr. Chairman, weight or emphasis must continue to be placed 
on the management and oversight of all types of service and 
construction contracts. These contracts now represent an ever-
increasing percentage of our overall contract dollars, 
surpassing even the dollars awarded for major weapons systems 
programs.
    We look forward to working closely with the Special 
Commission on Army Contracting headed by Dr. Gansler and all 
the other entities in support of the many initiatives ongoing 
in the Department of Defense to improve contracting. Many of 
them were mentioned today as part of the integrity panel talked 
about by Mr. Assad.
    We also look forward to our continued positive work with 
this committee and the Congress.
    And for Congressman Hunter, a lot of the things that are in 
the Section 813 law are things that are well under way, and I 
will be happy to answer your questions and other members of the 
committee today about what we have done to put the specific 
procedures in place to make sure that we do contingency 
contracting right.
    We are committed to providing our war fighters the very 
best equipment they deserve and are mindful of our obligation 
to be good stewards of the taxpayers' funds.
    This concludes my opening remarks, Mr. Chairman. And with 
your permission, Ms. Condon has a very brief statement. We look 
forward to your questions.
    The Chairman. General, thank you.
    Ms. Condon.

    STATEMENT OF KATHRYN A. CONDON, EXECUTIVE DEPUTY TO THE 
         COMMANDING GENERAL, U.S. ARMY MATERIAL COMMAND

    Ms. Condon. Mr. Chairman, Mr. Hunter and members of the 
distinguished committee, I am Kathryn Condon, and I am the 
deputy to the commanding general of the United States Army 
Materiel Command.
    And as you are aware, the 50-plus members of Army Materiel 
Command provide technology, acquisition support, and logistics 
to our war fighter. And each and every one of our civilians and 
military are committed to provide our war fighters what they 
need when and where they need it.
    Contracting, especially complex contracting, is one of the 
core competencies of Army Materiel Command. And because of this 
capability, we are building upon it to provide contracting to 
support to our forward deployed forces.
    Army Materiel Command recently established four contracting 
support brigades, and these brigades are designed to provide 
our contracting force structure that will support our Army 
modular force.
    We are committed to fixing the contracting issues that have 
been identified in Southwest Asia through reach-back to one of 
our Army acquisition centers.
    Along with General Thompson, we will examine current Army 
operations and future plans for how we plan to provide 
contracting support to contingency operations.
    I look forward to your questions as well. Thank you.
    [The joint statement of Ms. Condon and General Thompson can 
be found in the Appendix on page 83.]
    The Chairman. Ms. Condon, thank you very much.
    And, Mr. Velz.

  STATEMENT OF PETER M. VELZ, FOREIGN AFFAIRS SPECIALIST FOR 
 IRAQ, OFFICE OF THE DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR 
        MIDDLE EAST, OFFICE OF THE SECRETARY OF DEFENSE

    Mr. Velz. Thank you, Mr. Chairman.
    Mr. Chairman, Ranking Member Hunter, members of the 
committee, thank you for this opportunity to appear before the 
House Armed Services Committee to discuss the subject of 
accountability for weapons and other equipment that has been 
procured by the Department of Defense for the Iraqi ministries 
of defense and interior as part of our effort to reconstruct 
and stabilize Iraq.
    This is an important program that has enjoyed generous 
support from the American taxpayers, and I want to assure the 
committee that DOD fully recognizes the imperative to be good 
stewards of these funds and to ensure that they are put to 
their intended uses.
    We particularly acknowledge that DOD must ensure that 
weapons we buy for the Iraqi military and police forces are, in 
fact, being used by those forces.
    In this regard, we expect that the Department of Defense 
Inspector General munitions inspection team that Mr. Gimble 
mentioned will make an important contribution to ensuring the 
materiel handling processes used by the Multi-National Security 
Transition Command-Iraq, known as MNSTC-I, are robust and fully 
meet, if not surpass, DOD standards.
    DOD has worked closely with GAO on a number of its reviews 
and audits of efforts to stabilize Iraq during the past few 
years. The GAO, in its audit on equipment accountability, 
identified some weaknesses in the Department's ability to fully 
ensure that we can account for the transfer of weapons to the 
Iraqis.
    It is important to point out that while the audit trail for 
some of these weapons is incomplete, the GAO did not draw any 
conclusions that suggest the weapons in question are physically 
missing.
    I point this out only to make it clear that these are 
audits. They are accountability audits. They were not criminal 
investigations. They were not physical inspections of the 
weapons.
    The DOD I.G. team will get into those issues in more detail 
in the work they are currently doing, and we are working 
closely with them on that effort.
    The problem at the time was that walking back from the 
point of transfer of the weapons to the Iraqi government, to 
Iraqi army or police forces, some portion of the documentation 
that can show the chain of custody, mainly in the form of 
entries in MNSTC-I's property book, was found to be incomplete 
by the GAO.
    So therefore, they could not verify whether or not the 
number of weapons that were reported as given to the Iraqis 
were, in fact, given to the Iraqis.
    It is important to note that the GAO and Special Inspector 
General for Iraq Reconstruction, or SIGIR, as it is commonly 
known, which completed a somewhat similar audit in October of 
2006, again only did an audit of accountability and record-
keeping.
    They did not look at the physical disposition of those 
weapons while it was in MNSTC-I custody en route to being 
transferred to the Iraqi government.
    This is not to minimize the shortcomings that GAO and SIGIR 
found. Rather, the key point to understand is that at the time 
that these problems with accountability occurred there were 
extremely difficult Spartan conditions in which MNSTC-I found 
itself, and Mr. Hunter referred very articulately to some of 
those problems in his opening remarks.
    The GAO noted the various factors that contributed to this 
in its audit, such as the lack of sufficient staff and a 
nascent distribution network that was essentially an ad-hoc 
operation in a contingency environment.
    The GAO has made a number of recommendations, and we are 
working very closely with them on implementing them, and I will 
be glad to discuss what we are doing about that, and I look 
forward to answering questions from the committee. Thank you.
    [The prepared statement of Mr. Velz can be found in the 
Appendix on page 93.]
    The Chairman. Thank you very much.
    Before I call on Mr. Hunter and we begin our questioning, 
let me comment first that Congress got it right again. Last 
year, this committee established the Panel on Contracting 
Integrity. As I understand it, this panel today fully endorses 
what we did last year.
    Am I correct, Mr. Gimble?
    Mr. Gimble. Yes, sir.
    The Chairman. Let me ask Mr. Gimble, from your point of 
view, my one question. How did this culture of corruption come 
to pass in the office in Kuwait? And further, how do we prevent 
it from reoccurring?
    Mr. Gimble. Mr. Chairman, I think the environment that 
allowed this to occur was a lack of controls. Also it had to be 
the intent of the people that were involved.
    I think it will be important as we unfold these 
investigations and audits that we determine what the percentage 
of the so-called ``bad apples'' are.
    I think there is a lot of hard-working people, and I think 
the environment will fix itself. But it is important that we 
put the proper controls in place, the checks and balances, and 
we believe that that is under way from what we see.
    But General Kicklighter, I think, will have a lot of good 
information to give an assessment as to how successful this is 
becoming. I don't think there is a short-term solution to this. 
I think it is going to take a lot of hard work for an extended 
period.
    But I think we will have a good assessment as to how well 
that is progressing.
    The Chairman. Mr. Hunter.
    Mr. Hunter. Thank you, Mr. Chairman.
    Gentlemen, we put this contingency contracting corps 
requirement in place in the fiscal year 2006 law. Tell us what 
we have stood up at this point.
    General.
    General Thompson. Sir, what the Army has done is created 
contracting support brigades and contingency contracting teams.
    The brigades are, as all brigades in the Army, commanded by 
a colonel. But they are just now standing up in the structure. 
The effective date for beginning that structure is just this 
month.
    It is what we think is the long-term solution to have the 
proper structure and make sure that the people in that 
structure are properly trained.
    Up until this point, we did not have a deployable 
contingency contracting capability in the United States Army.
    So from 2003 even up until today, to meet the demands for 
contracting in that theater, were a series of evolutionary 
changes to manning documents in Kuwait and Afghanistan and Iraq 
in order to put the right number of people over there with the 
right expertise to do contracting.
    We think that it is going to take us a while to fill out 
that structure. The entire structure in the Army for 
contingency contracting is about 240 people.
    I think it needs to be bigger than that based on our 
initial assessments in looking at that, and that is one of the 
recommendations that Ms. Condon and I will take back to our 
leadership. And that is the military structure.
    The other thing that we have got to do is we have got to 
use the authorities that we have got for our civilian workforce 
that do contracting, which is the majority of the contracting 
professionals in the Army and in the other services, and use 
those authorities to get the expertise that many of those 
civilian contracting professionals have got, to be able to 
deploy them to overseas locations when we need them.
    One of the issues, to follow on to the question that the 
chairman asked Mr. Gimble on the conditions that caused the 
specific issues in Kuwait--the office was undermanned. It was 
undermanned from the beginning. We never caught up with the 
manning needs and the total numbers of people.
    And then the training of the people that we did have there 
was not up to the complexity of the contracting actions or the 
volume of contracts that they were being asked to deal with.
    Mr. Hunter. Yes. I would say, though, General, that 
dishonesty is not a function of manning levels. And that is, I 
think, the tragedy that is reflected in the deeper scrutiny of 
this thing that we undertook during the classified hearing.
    But, General, let me ask you this. We passed this thing--in 
fact, the first thing that we wrote that Mr. Skelton and I put 
in the bill--it was the fiscal year 2006 bill. That was 
calendar year 2005. That is two years ago.
    To have a contingency contracting corps led by a senior 
officer--and as I said, in the House we put it answerable 
directly to the combatant commander. The Senate didn't like 
that, but they did go along with having a contingency corps, 
and that was emplaced in law in the fiscal year 2006 law.
    Now, correct me if I am wrong, but that has been a couple 
of years. And you can't, within two years, move a team of 
individuals across that water and have them undertake this 
operation?
    I mean, that is half the time it took us to win World War 
II, and you can't move a team of folks over there and get them 
into the theater and have them undertake these operations?
    General Thompson. Sir, the individuals that are doing that 
contracting over there are the very individuals that will fill 
out this structure. The people, both military and civilian, are 
over there in all three of the countries in the Central Command 
area--Iraq, Afghanistan, and Kuwait.
    They are not over there in the structure and in a 
deployable way like we built the modular organizations in the 
rest of the Army. They are over there on joint manning 
documents and temporary duty assignments (TDAs), and that is 
clearly not the way to go.
    It is not that we didn't move out with this. It just takes 
a while to both build the structure--and our challenge is going 
to be properly manning that structure, because the size of the 
military contracting workforce in the Army is not large enough 
to do all the things it is being asked to do.
    Mr. Hunter. But, General, we are talking about a war. We 
are talking about two years. World War II only lasted four 
years.
    In that time, we totally mobilized, put together a massive 
industrial base, expanded, brought in millions of troops, 
trained them and defeated the Axis powers.
    And it is not within the capability of the Army to field a 
team of contingency contracting corps, the little small team, 
in less than a couple of years? And as I understand it, you 
don't have it fielded yet? I mean, that just occurs to me.
    Maybe Mr. Assad has got more information. That seems awful 
doggone slow.
    Mr. Assad. Yes, sir.
    If I might, General.
    The general has really been addressing the Army's progress 
in going toward increasing its contracting capability, but the 
concept and the structure, Congressman, that the Congress 
recommended we proceed with, in fact, is on the ground right 
now.
    We have a two-star major general, Major General Daryl 
Scott, who is the Joint Contracting Command commander. He is 
the most capable military officer who does contracting that we 
have in the Department of Defense.
    Mr. Hunter. Well, now, is that in response to the 
legislation, or are you saying that is status quo?
    Mr. Assad. No, sir, that is not status quo. We were moving 
in that direction, and it is--I will call it a transitionary 
phase. But General Scott reports directly to the combatant 
commander. And he is responsible for the contracting that is 
being done in theater.
    Now, there are a number of other folks who do contracting 
who are adjunct to him, and in this case there was a Kuwait 
office doing contracting responsible for the operations in 
Kuwait, and I think that is where the general is addressing.
    But that Joint Contracting Command structure, that kind of 
a concept, is what we are moving toward. One of the other 
things that you recommended we do was to develop a joint 
contingency contracting handbook. That is what this is.
    It did not exist a year ago. It is now online for all of 
our contingency contracting officers to use.
    Mr. Hunter. When did that come online?
    Mr. Assad. That came online about two months ago, sir, but 
this is still being printed, but this is what it is going to 
look like in everybody's hands, hard copy, and this is what 
they will train with to take to the fight.
    But it has been online for a while now, and it was 
developed----
    Mr. Hunter. Well, you say it has been online for a while--
for two months?
    Mr. Assad. For a couple of months. It took us a year----
    Mr. Hunter. Okay.
    Mr. Assad [continuing]. To put this together, Mr. Chairman.
    Mr. Hunter. Okay. Now, do you have this identification of a 
deployable cadre of experts?
    Mr. Assad. We are in process. One of the other things we 
had to do was we didn't have any joint doctrine on how to do 
contracting in a combat environment. We now have joint 
doctrine. That started a year ago.
    This publication was put online on May 27th. This is the 
first draft of it. It is being reviewed by all the military 
services right now.
    It addresses the very issues that you are talking about in 
terms of how we should be structured, who should be in charge, 
and what should this contingency contracting workforce consist 
of. There is a lot of discussion going on as to how it should 
be properly manned.
    And I think that was one of the points that the general was 
trying to make in terms of we need to look at how is the Army 
approaching its contingency contracting corps, how is the Air 
Force structured, how do the Marines do it, and how do we bring 
that force together as one contingency combating fighting unit.
    Mr. Hunter. Okay.
    Mr. Assad. And that is what we are trying to----
    Mr. Hunter. Well, Mr. Assad, here is what I have got. I 
just got this from staff. They say the handbook is still in 
print, but it has not been used for training yet, nor is it in 
the field.
    And they also tell me that General Scott, who heads the 
Joint Contracting Command, the JCC, has a number of 
responsibilities, but the JCC is not a group with contingency 
contracting expertise or deployable corps for future conflicts. 
Is that accurate?
    Mr. Assad. No, it is not, sir.
    Mr. Hunter. Okay. Explain.
    Mr. Assad. This document, I said, has been in print. We are 
trying to get it hard copy. It has been online for a couple of 
months. It is true that----
    Mr. Hunter. Well, does that mean it is in the field in 
Iraq?
    Mr. Assad. It is online and available to our folks in the 
field in Iraq, yes, sir.
    Mr. Hunter. Okay, for a few months.
    Mr. Assad. But they don't have these yet. These are being 
printed right now for them to be sent to Iraq.
    Mr. Hunter. Okay.
    Mr. Assad. It is our intention to incorporate this into all 
of the training for our Marines, our airmen and our soldiers. 
We are not there yet. It took us a year to put this together.
    This was done by folks with boots on the ground. Nobody 
touched this unless they were in a combat environment and 
understood what was the environment that they had to exercise 
in.
    Mr. Hunter. Okay.
    Mr. Assad. But the point with General Scott--the Joint 
Contracting Command that we have--the structure, as I 
mentioned, is transitionary. It is where we want to go, but it 
is what we have got. And there are approximately 200 officers 
and enlisted that make up the Joint Contracting Command right 
now.
    It needs a lot of work. We did not properly train our 
officers and enlisted to function in this environment. The fact 
is that the capability set that is needed for what is there 
right now requires someone to be able to do engineering and 
construction contracting, major systems acquisition, support to 
major systems, base operations and stations.
    And that breadth of experience is very difficult to have in 
an environment here in CONUS. Now to bring that forward in a 
combat arena, it is going to take us some time, as the general 
mentioned, to fill out that structure.
    What we are doing right now is we are overlaying the 
training that we are doing in all three services, because we 
want to make sure that when an officer or an enlisted, either a 
Marine, an airmen, a sailor, or a soldier--that they can 
execute in the joint fight.
    And what we have got right now are very good technical 
training courses in contracting. What we don't have, for 
example, is if I am a young major and I am being brought to a 
forward operating base, how do I set my office up?
    What are the checks and balances that I should have in 
place? What are the fraud indicators that I should look for in 
my turnover to know that there may be a problem? What documents 
and training should my people have? What if I don't have any 
power, how do I execute in that environment?
    So this is where we are going. And we are all headed in the 
right direction, all the services, and----
    Mr. Hunter. Mr. Assad, let me interrupt. I think you are 
heading in the right direction. I think you are heading kind of 
slow. And I think you need all those things that you have 
talked about.
    But in the meantime, you could have folks on the ground who 
do simple stuff that doesn't require a lot of hand-holding or a 
lot of time or a lot of slow policy development, things like 
how many trucks have we got? What are the serial numbers? Where 
are the weapons that we issued to the ISF? How do we issue 
them?
    Those are simple things, but they require people, and they 
require folks that just have basic training in being able to 
account for items that are issued under government authority. 
Those aren't complicated things.
    And I think the fact that it has taken us two years from 
the time that this committee put this requirement in place is 
an indication of a system that is quite slow. That means we got 
halfway through World War II without getting this little team 
of contractors in place.
    So there are lots of folks on the battlefield that have 
lots more complicated requirements than what you have just 
described for this young major who is going to be part of a 
contracting corps.
    I think we could put the basics in place and try to stop 
the hemorrhage of these systems that manifest in these reports 
in the classified briefings that we have had.
    So I think, Mr. Chairman, that is my contribution to this 
hearing this morning.
    You have got the direction from Congress. We wrote it on 
this committee. We need to get it in place.
    Mr. Assad. Yes, sir.
    Mr. Hunter. Thank you.
    The Chairman. I thank the gentleman.
    You know, there is an old saying, and I don't think it is 
limited to Missouri, that the horse has gone out of the barn, 
then you shut the door. I think that is probably what happened 
here.
    Mr. Gimble, can you give this committee a general scope of 
the dollars amount involved in the procurement and fraud 
problems that you have uncovered to date?
    Mr. Gimble. Mr. Chairman, we can get that information. I 
don't have it at hand. I would like to get back for the record 
with----
    The Chairman. My question is: Can you say that in an open 
hearing such as this?
    Mr. Gimble. You are talking about the criminal 
investigations that we have ongoing, the value of the 
contracts? I believe we can say that.
    The Chairman. We would like to have a general scope of the 
dollar amount involved in your investigation.
    I am not asking for the specific dollars and cents, but can 
you give us a general scope of what you have thus far 
uncovered?
    Mr. Gimble. Mr. Chairman, we would like to get back with an 
answer.
    The Chairman. Do you know if it is classified or not?
    Mr. Gimble. I don't think it will be classified. I think we 
can give you an unclassified answer. But we just don't have 
that in hand.
    The Chairman. Can we do it during this hearing?
    Mr. Gimble. We can try that, yes, sir.
    The Chairman. I would certainly appreciate it.
    Mr. Taylor.
    Mr. Taylor. Thank you, Mr. Chairman.
    General, for your uniformed personnel under existing law, 
what is the time line that they would have to wait for a 
decision maker once he leaves the service to go to work with 
one of the firms that he has awarded with contracts?
    General Thompson. The time line that individual would have 
to wait depends on the rank of the individual and the kind of 
job that they had.
    Mr. Taylor. Okay, so if the individuals involved--which I 
understand were majors and colonels. Those time lines would 
be----
    General Thompson. I don't know the exact answer on how long 
a major would have to wait before he would go to work for a 
firm, especially one that he had dealings with while he was in 
an acquisition position or a contracting position.
    Mr. Taylor. Do you think the major would know?
    General Thompson. He has to know, because it is part of his 
ethics training that he goes through.
    Mr. Taylor. Okay. For a lieutenant general, what would it 
be, sir?
    General Thompson. It is a year.
    Mr. Taylor. General, I am not an attorney, and I am told an 
attorney's rule is you never ask a question that you don't know 
the answer to, so I don't know the answer to this one.
    But given the reports of the vice president's ties to 
Halliburton, given Halliburton's huge contracts in the area, I 
am just curious. In your interviews with the people suspected 
of these crimes--because I don't think anyone has been 
convicted yet, is that correct?
    General Thompson. I would have to defer that to the 
investigators. I know there are a number of people that have 
been turned over for prosecution, but there are more people----
    Mr. Taylor. I would like to open this up to the panel.
    In your interviews with those people, I am curious if any 
of the suspects replied, ``Well, everybody is doing it,'' 
because I would sure hate to think that that was part of their 
answer.
    And I would sure hate to think that the vice president's 
ties to Halliburton--although severed, but the compensation 
package did continue for five years--was a part of that.
    And I will open that up to the panel. Did any of the 
suspects at any time somehow throw that back out in their 
defense?
    Mr. Gimble. Representative Taylor, according to my 
information on our interviews and the criminal investigations, 
no one has offered that back in the course of a subject 
interview, that everybody is doing it.
    Mr. Taylor. Okay. Well, how about the explicit mention of 
Halliburton and the vice president?
    Mr. Gimble. No, sir.
    Mr. Taylor. Okay. Mr. Gimble, I am curious, in the course 
of this, has your group made a recommendation to lengthen the 
period of time from which a decision maker, someone who 
actually awards contracts, once they retired, could go to work 
for one of these companies?
    Because we are dealing with enormous amounts of money. And 
I have got to believe human beings, being human beings, that 
that temptation would just be astronomical for someone to favor 
one company over another if they thought that that company was 
going to turn around and hire them for a substantial amount of 
money.
    Mr. Gimble. Sir, there are set ethics laws on the books 
today that would limit the time that someone could retire. For 
example, if I retire from the government service, I have a 
cooling-off period before I can deal with government--the 
people I worked with or represent, contractors.
    So there are a number of different rules, and they change 
the higher up your rank is. It gets a little more restrictive 
the higher rank you are. But those are a good part of the 
process.
    Mr. Taylor. But again, my question was: Has your group 
offered, as a recommendation, to extend those times? I mean, 
let's face it. A lieutenant general is an extremely important 
individual.
    If the waiting period for a lieutenant general, of which 
there are very few and of great influence, is only one year, 
that is not very long.
    Mr. Gimble. Our organization has not made a recommendation 
to lengthen the waiting period in the ethics law.
    Mr. Taylor. Okay.
    Mr. Chairman, I yield back the balance of my time.
    The Chairman. Thank you.
    Mr. Saxton.
    Mr. Saxton. Thank you, Mr. Chairman.
    And thank you all for being here today with us. It is a day 
of obviously great concern when we come together to address 
issues like this one.
    Ranking Member Hunter pointed out that in our Fiscal Year 
2006 Authorization Bill there was specific language that was 
included, which I have here, which required the, for example, 
identification of a deployable cadre of experts with the 
appropriate tools and authority and training to--and trained in 
the process, under paragraph six, which refers to this process; 
and the requirement to provide training under a program to be 
created by the Department of Acquisition and appropriate steps 
to ensure that training is maintained for such personnel; and a 
requirement that not later than 365 days after the date of 
enactment of this act, the Secretary of Defense shall submit to 
the Committees on Armed Services of the Senate and the House of 
Representatives an interim report on requirements, definition, 
contingency contracting, and program management.
    And my first question is what is the status of that report?
    Mr. Assad. General, I think I can answer that. Sir, it is 
in draft form right now, and it should be submitted shortly.
    Mr. Saxton. I understand that the 365 days expires on 
October 17th. Will we have it by October 17th?
    Mr. Assad. You should, sir.
    Mr. Saxton. Let me ask this question. We are here to review 
a situation in which military officers apparently carried out 
dishonest acts for their own aggrandizement.
    As of 12 September, there are 78 criminal investigations 
and 20 indictments, we are told, related to contract fraud in 
theater. The 20 indictments are a combination of civilian and 
military personnel, which General Thompson pointed out a few 
minutes ago.
    Of the billions of dollars and thousands of contracts that 
have flowed through theater since 2003, in your opinions, each 
of you, does this situation indicate that we have a cultural 
issue within the officer corps of individuals who are involved 
in procurement or management of procurement?
    Or does it appear to be a series of isolated events? I just 
guess we would like to start with General Thompson and just 
kind of move through the panel to get your impressions of this.
    General Thompson. Congressman Saxton, I have heard the 
briefings and the details from both the criminal investigation 
in the Army and the auditors. I do not think it is a culture. 
They are, for the most part, isolated incidences.
    Some of these cases are connected by the individuals and by 
geography. You know, somebody that was in the Kuwait office, 
and then another case that has turned up in the Kuwait office. 
But from what I can tell, there is no conspiracy here.
    I think I can speak for the great majority, nearly the 100 
percent majority, of military officers. This sickens me when 
there is even one case of an officer or non-commissioned 
officer who is involved in a case of fraud or accepting a 
bribe.
    And the initial hotline tip that came that started the 
investigations that the Criminal Investigative Command (CID) 
and the DOJ, Department of Justice, are now heavily involved in 
was somebody that saw that this was not proper and reported 
that to the proper authorities.
    I think the checks and balances are there. In many cases, 
it also comes down to just basic leadership. And in some cases 
you might not have the strongest leader, but where you have got 
good leadership you don't have problems like we are seeing 
here.
    And I think you are going to come back down to that we 
didn't have the right leadership and the right command climate 
in some of the places where you have got some of these 
investigations, but I do not think it is a widespread 
conspiracy and a culture issue out there.
    We have embedded ethics training in every acquisition 
course that we have got that deals with contracting. All the 
services have annual ethics training requirements for the 
acquisition folks. Those annual ethics requirements are greater 
than the normal civilian and military member of the service.
    And that is how I would answer that question, and I will 
ask anybody else to comment on that as well.
    Mr. Gimble. Mr. Chairman, we think that at this point, now, 
it is more of an isolated incident. We think the----
    The Chairman. Please proceed and answer the question. 
Please proceed and answer the question. Mr. Gimble, go ahead.
    Mr. Gimble. I am sorry. What we think this is is pretty 
much isolated incidents as we could see now, a little more 
widespread than we would like. It does cause great concern.
    But we think the real issues here--it was a lack of 
controls, a lack of integrity and a lot of opportunity with a 
lot of money, and the temptation was there. And we have to work 
very hard to put those controls in place to mitigate that 
temptation and also reemphasize the ethical training of the 
corps, both civilian and military.
    Mr. Assad. Mr. Chairman, I would like to start my comments 
off by saying I have the highest degree of respect for the 
folks in our military, both men and women, who do what we do 
for a living, and that is contracting.
    And the vast majority of them have incredibly high ethics 
and a great deal of honor. But one of the reasons why we set up 
the Integrity in Contracting in a Combat Environment 
subcommittee in the integrity panel process that we are going 
in is because we really need to look at this very closely and 
very deeply.
    And we really do need to examine the entire process of how 
we are training our officers, the information we are giving 
them, as well as our enlisted, to ensure that there isn't some 
underlying aspect to this that we are not getting at.
    And that is the reason why I think the panel will be very 
effective in doing that. And, in addition to that, one of the 
holes that we found, for example, is that we have not done a 
very good job of educating our leadership, our officers who are 
on the ground doing contracting, on what fraud indicators are, 
what they should be looking for.
    And that is a failure in terms of our training process, and 
we need to include that. But we need to look at this more 
deeply and examine it very carefully, because this is at the 
root of what we do, and we need to make sure that if there is 
some type of an issue that is not obvious on its surface that 
we root it out.
    The Chairman. Dr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman.
    One of the worst incidents of fraud in the military history 
of the United States was at the end of the Civil War when the 
steamship The Sultana, the ferryboat on the Mississippi River, 
was contracted to haul a substantial number of former POWs who 
were released from Confederate prisoner-of-war camps at the end 
of the war.
    They were loaded up on the steamship. A lot of them were 
emaciated--you all know this history--very weak. The ship was 
not properly inspected. It was terribly overloaded.
    At a time of flooding a few miles up the river from 
Memphis, the boilers blew up, and we lost more personnel than 
died on the sinking of the Titanic. Family members tried to get 
investigations done, and there were investigations done, but 
the Nation was really tired of war. And it is an event that is 
not very well known.
    Maybe, General Thompson, I will direct this question to 
you. In all the things that you are looking at--and you don't 
have to tell me about a specific case--of all the potential 
infractions out there, are there any that you are investigating 
that you think may have the potential to have led to problems 
in safety for our men and women in uniform?
    I am asking: Is it something more than just somebody taking 
a cut or making money, or was there some kind of product sold 
or not delivered in a timely fashion or not in the amounts 
necessary to put at risk some of our troops?
    General Thompson. I would defer the details on all the 
investigations to the investigative agencies. But the things 
that they are looking at, for the most part, involve services 
being delivered in Iraq, Afghanistan, and Kuwait, not the 
weapons systems or the products that our soldiers, sailors, 
airmen, and Marines use.
    The checks and balances in the procurement of those 
systems, which are done back here, and the testing that goes on 
for those things that we put in the hands of our war fighters--
I am highly confident that those procedures are proper and that 
we have a very rigorous process with an independent testing 
organization in all the services, overseen by the director of 
operational testing and evaluation of the Defense Department.
    So I am highly confident that the weapons systems that we 
give to our men and women in uniform do not have any of the 
issues like a faulty ship that has been under contract----
    Dr. Snyder. So at this point you all think that the 
services are being provided. It is just the contractors that 
are providing them either shouldn't have got the contracts 
because they paid money to get them, or somebody is making 
money off the contract itself.
    It is a question of funds, not necessarily the quality of 
the product. Is that a fair statement, Mr. Gimble?
    Mr. Gimble. I think the one exception we have--we did have 
a product substitution issue dealing with food, but not of 
any--when we typically think of product substitutions, it is 
critical parts on weapons systems, and we haven't investigated 
any of that in this theater up until now, and hopefully we 
won't have cases of it.
    Dr. Snyder. General Thompson, in your written statement you 
talked about--you are apparently doing file reviews of 18,000 
contract actions out of Kuwait. How many different contractors 
does that involve?
    General Thompson. I don't know the answer to the number of 
contractors. The contract actions is a greater number than the 
number of contracts.
    We are doing the file reviews both in Kuwait for the lesser 
expensive, less complicated ones and we are moving the more 
complicated contracts and the contract actions associated with 
them back to the acquisition center as part of Army Materiel 
Command.
    And we will very systemically go through those with a team 
of very highly trained contract professionals augmented with 
auditors and augmented with CID fraud investigators. And we are 
doing what Mr. Assad alluded to a while ago, putting together a 
very comprehensive fraud checklist that we will use, using the 
checklist at all the different agencies that have 
responsibility in this area.
    And out of that, I think one of the things that will come 
is a comprehensive, maybe DOD-wide, checklist that we will be 
able to use in the training and in future incidents where we 
have to go in, as part of our contract operations reviews, and 
look at the integrity of a contracting operation no matter 
where it may be.
    Dr. Snyder. Who gave us this handout?
    Mr. Assad. I did, sir.
    Dr. Snyder. What the hell does this thing mean?
    Mr. Assad. I didn't know whether it would come up, but this 
is another tool that we are providing now to our contracting 
officers. It didn't exist a year ago. And it is on the Web, and 
any contingency contracting officer in the world can enter into 
this site. It is made for them.
    It gives them all their policy and guidance, deployment 
information to different theaters. They can click on--there is 
a map behind it. Do you see? They click on their combatant 
command. It tells them all the policies and procedures that are 
now applicable to their combatant command.
    This is information they never had before, all in one 
place. Now they have got it.
    Dr. Snyder. So this is not a chart that I should follow 
this trail around here. That is where I was--this is just----
    Mr. Assad. It is a Web site.
    Dr. Snyder. These are icons to take me to----
    Mr. Assad. Yes, sir, the Web site. Yes, sir.
    Dr. Snyder. Now, what does ``Ask A Professor'' mean?
    Mr. Assad. ``Ask A Professor'' means that you are a 
contracting officer, you are in the field, you are trying to 
place a contract. You don't quite understand a technical term, 
or you have got a problem with a source selection, and you 
don't know how to solve it.
    You can go online. You can ask a Defense Acquisition 
University (DAU) professor, and he will get back to you within 
24 hours with the answer.
    Dr. Snyder. Okay, thank you.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Hayes.
    Mr. Hayes. Thank you, Mr. Chairman.
    And, ladies and gentlemen, thank you for being here. This 
is a critically important matter, the fact that you are here--
and thank you for doing this, Mr. Chairman--out in the open 
reemphasizing again and again how vitally important it is that 
we maintain the integrity of the process.
    Having said that, this is a unique set of circumstances. We 
are at war. We in the committee have every day said to you and 
the military, ``We need you to get everything you need as 
quickly as you need to get it.''
    We are all a part of this. But again, going forward, what 
are the lessons learned? That is a good question to ask. And I 
am sure that people will look at us today and say, ``Oh, if I 
had any doubt, this is important.''
    And we are moving aggressively to make certain that human 
nature doesn't do what it has done throughout the ages, as Dr. 
Snyder and others pointed out.
    Having said all that, the question that I would ask as 
clearly as I can--and, Ms. Condon, ladies usually understand 
these questions better than the men, so I am going to start 
with you.
    There are two policies that seem to potentially conflict 
here. We have the policy that you use to equip--and I am 
talking specifically of arms, weapons--the multi-national 
force, MNSTC.
    And to my knowledge, that is a different policy from the 
one that we use when we are equipping foreign forces under more 
traditional circumstances. If I am correct, what is the history 
there?
    And is the policy that we now have effective, given the 
urgency of the circumstances and the situation we find 
ourselves in?
    Ms. Condon. Sir, I apologize. I am probably not the 
appropriate one----
    Mr. Hayes. Okay.
    Ms. Condon [continuing]. Discuss policy issues.
    Mr. Velz. I will address that.
    Mr. Hayes. Whoever would like to----
    Mr. Velz. Congressman Hayes, I will address that. 
Traditionally, when the Department of Defense, working with 
Department of State, does security assistance to foreign 
militaries, it is subjected to the Arms Export Control Act and 
the Foreign Assistance Act.
    The type of money, the appropriations, that are used by 
Multi-National Security Transition Command-Iraq are 
supplemental appropriations that are, if you will, not 
subjected to the same laws.
    This basically enables MNSTC-I to do direct commercial 
contracting, to procure stuff, outside of the FMS world, 
outside of the foreign military sales world.
    This is a policy that Congress has supported since the 
first appropriations in 2004 in the Iraq Relief and 
Reconstruction Fund, which was the initial appropriation that 
provided $3.2 billion to really begin to train and equip the 
Iraqi forces.
    And then there have been three subsequent appropriations, 
in 2005, 2006 and 2007, for the Iraq Security Forces Fund, and 
those have basically the same--the same language attaches to 
that that attached to the earlier appropriation, that, if you 
will, puts this outside of the foreign military sales/security 
assistance type of arena.
    Mr. Hayes. I guess another way to expand on what you said 
is: Have we taken the parts that are most effective for our 
normal foreign military sales (FMS) contracts and applied them 
again to these circumstances?
    Are there any policy changes that we need to be working on 
through the committee here that would make you more effective 
in pursuing your duties here?
    Mr. Velz. Well, sir, I can address what we are doing with 
the GAO in response to their recommendations that highlight 
some of these problems.
    There clearly has been a lack of guidance to MNSTC-I on 
what accountability requirements apply to them. There have been 
debates over whether some apply or some don't apply.
    Working with the Joint Staff J-4, we are making sure that 
we go through all of the DOD instructions and guidance and make 
sure that we extract out the relevant and applicable guidelines 
and instructions that can, if you will, form a clear, 
unambiguous policy for MNSTC-I that, despite the fact that it 
is ambiguous, what accountability applies to them.
    But we will develop that guidance. And this is a result of 
the very good work that GAO did in highlighting this issue.
    Mr. Hayes. So you think you have got a handle on that.
    Mr. Velz. Yes, sir.
    Mr. Hayes. Mr. Chairman, I yield back my time. Thank you.
    The Chairman. I thank the gentleman.
    For clarification, whoever wishes to answer the question, 
where do most of the problems come from? Do they come prior to 
the warehouse in Kuwait, after the warehouse in Kuwait? Where 
along the line is the major problem that you have run into 
regarding fraud and corruption?
    Mr. Velz. Sir, are you referring to the procurement of 
equipment for the Iraqi Security Forces?
    The Chairman. Correct. That is correct.
    Mr. Velz. Well, you know, I wouldn't want to comment on 
anything that involves any potential investigations, but I can 
speak generally.
    The Chairman. That is what I am asking.
    Mr. Velz. Yes, sir. The problem that GAO identified was 
that the equipment was basically coming into Iraq via multiple 
paths, sometimes over land, sometimes over sea--or, I am sorry, 
sometimes through the air being delivered to Baghdad 
International Airport.
    And then in some cases, it would go directly out to an 
Iraqi unit. In other cases, it would go into the warehouse. And 
there simply weren't enough people on the ground handling all 
this materiel flow to make sure that every single item got a 
serial number reported on MNSTC-I's property book.
    There was an imperative to get this equipment out to the 
fighting forces as quickly as possible. And that was done 
through multiple means that, as GAO found, meant that the 
documentation was just lacking in many cases.
    And therefore, we cannot tell if the number of weapons that 
MNSTC-I believes it transferred to the Iraqis were, in fact, 
transferred.
    The Chairman. Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    And I wish to greet the witnesses, the gentlemen and the 
gentlewoman. Thank you very much for being here.
    To me, this is a very important subject matter, and my 
question to you, Mr. Gimble, is how will the Department of 
Defense record, analyze, and disseminate the lessons learned 
from contracting mistakes and abuses and apply them during 
future contingencies and large contracting efforts?
    And I ask this because to successfully relocate the 3rd 
Marine Expeditionary Force from Okinawa, Japan to Guam--and I 
represent Guam--in the coming years will require a significant 
amount of DOD contracting activity to occur.
    So while the relocation of Marines to Guam is not a 
contingency operation as is Iraq and Afghanistan and Hurricane 
Katrina relief, it will require massive, complex contracting 
operations to occur during a relatively short period of time 
and, I might add, in a remote area.
    The challenges the DOD will face in the process will be 
very similar. Is working to incorporate lessons learned today 
into future activities a priority for the Department inspector 
general?
    What is being done now in relation to the estimated $14 
billion move of the U.S. Marines from Okinawa and enhancing 
other military forces on Guam? Are we on your radar screen?
    Mr. Gimble. Yes, you are on our radar screen, but let me 
maybe answer that in just a couple of ways. Lessons learned can 
come from two things. We in the inspector general oversight 
community do a number of reports, audit reports, inspections, 
also, the results of the investigations on the criminal side.
    And periodically, we summarize those reports into a summary 
report that identifies trends and corrective actions or an 
assessment of the actions being taken.
    We are in the process of doing that right now on 210 
reports that are more than just DOD I.G. reports. There was a 
number of GAO reports, Army audit, Air Force audit and our own. 
That is one set of contracting issues that we are doing to help 
come up with some lessons learned.
    Also, in another project that we are doing, and this is 
where we take DOD I.G. only, and it is not necessarily limited 
to Southwest Asia, but just work we have done over the past. 
Since the year 2000 there was about 240 reports that we have 
issued that identify contracting issues, and so we are looking 
at those to make recommendations. Now, that is on the oversight 
side of the house.
    Also, you know, the Army stood up their big study on 
contracting issues. Mr. Assad has studies ongoing. So there is 
lessons learned off of the acquisition side that will be 
forthcoming.
    I think the challenge for all of us in the Department is to 
bring all of those factors together and, you know, have a good 
robust lessons learned, particularly in the contracting 
process.
    Now, to address your Guam issue, we and DOD I.G. are now in 
the process of trying to establish a presence off the audit 
side in the Pacific Command (PACOM) arena which would cover 
Guam.
    We recognize that this move out of, you know, Okinawa into 
PACOM, as an example, is a huge challenge, and we are looking 
at that, and you can expect to see some audit reports coming 
forth on that as this progresses on.
    Mr. Chairman, I would like to just provide a bit of 
information you asked me for just a moment ago, if I could, 
ma'am.
    I don't have the specific number of contracts that you 
asked for----
    The Chairman. This is in response to my question to you, 
Mr. Gimble, regarding the dollar scope involved in your 
investigations, is that correct?
    Mr. Gimble. Yes, sir, it is. Under criminal investigation, 
the value of the contracts and actions that they are currently 
looking at is about $6 billion, okay?
    Now, on the audit side of the house, we have 29 projects in 
the DOD I.G. that are addressing a scope of contracts and 
programs valued at $88 billion.
    The Chairman. Eighty-eight----
    Mr. Gimble. Billion.
    The Chairman. Billion with a ``B.''
    Mr. Gimble. Yes, sir, acquisition programs. Now, those are 
all--this is not criminal investigations. And I must say, on 
the $6 billion under criminal investigation, that is not to say 
that all of that is, you know, tainted, or there is actual 
criminal--there is just some activity on those contracts, but 
the contracts are valued at about a total, as I am told today, 
about $6 billion.
    The Chairman. Thank you very much.
    Ms. Bordallo. Mr. Chairman.
    The Chairman. Yes.
    Ms. Bordallo. Mr. Chairman, I would just like to ask Mr. 
Gimble, just for the record, in answer to my question, then. 
This move, this $14 billion move that we are anticipating very 
soon, it is on your radar. You are monitoring it now, yes or 
no?
    Mr. Gimble. Yes, ma'am, we are, and I might add that we 
have issued an audit report that has budget implications on 
this move, and we can----
    Ms. Bordallo. Very good.
    Mr. Gimble. I think it is classified, but we can make it 
available to you.
    Ms. Bordallo. Very good. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Dr. Gingrey.
    Dr. Gingrey. Thank you, Mr. Chairman.
    I do want to ask a question but, you know, it is hard to 
come up with one. I am really appalled today. I appreciate the 
witnesses being here.
    This is almost as sad a day to me as hearing that another 
patriot has fallen from my district. That has happened seven 
times in the five years that I have been a member and been on 
this committee.
    But this is a pretty dark day. I mean, this is just as, 
almost as bad as a blue-on-blue death, as far as I am 
concerned. And I don't think I am overstating that.
    Some of the witnesses have said that we need more ethics 
training. Ethics training for a full colonel in the United 
States Army to me is like asking a Catholic bishop to re-read 
the Baltimore catechism. I am just absolutely appalled to hear 
about this, and I am concerned.
    I don't know whether to be more concerned about the 
corruption from officers of the United States military as I am 
about the diversion of weapons that ended up not only in the 
hands of people fighting in Turkey, the Kurdish terrorist 
organization in northern Iraq, but also the possibility that 
weapons are being diverted to the bad guys in Iraq that are 
killing our soldiers.
    So this is, to me--I am very depressed and upset to hear 
about this, and I will ask this specific question, and any of 
you can respond to it.
    The number of cases of fraud and corruption that seem to 
have developed in Kuwait--is this an indication of a cultural 
problem within the Army or any of its components?
    And as a follow on to that, how confident are we that the 
problems identified in a fairly small office in Kuwait are not 
representative of similar problems in large contracting offices 
engaged in contracting in Iraq? Anybody.
    General Thompson, let's start with you.
    General Thompson. Well, sir, as I said previously, I don't 
think we have got a cultural issue. You have got a number of 
individual cases, all the ones that we know about, being 
actively investigated today by the right investigative 
agencies.
    We do have internal controls and procedures both on the 
audit side and the investigative side to make sure that we 
don't have problems in other places.
    One of the things that Ms. Condon and I are looking at is 
the frequency and the scope of those periodic reviews--
adequate, to make sure we don't have something like this happen 
again. And that is all part of what is on our radar screen, and 
it is all----
    Dr. Gingrey. Well, General, with all due respect, and I 
think Mr. Hunter said this earlier, I think you are looking a 
little bit too long. And it is time for some action.
    And I hope these people that are responsible are brought to 
justice in the same manner that Lieutenant Calley was brought 
to justice in the Vietnam War. I think you ought to lock them 
up and throw away the key.
    You have got bad guys. You need to make an example of them.
    General Thompson. And, sir, I am confident that with the 
judicial process and the investigative process, they are doing 
what they need to do to make sure that they gather the 
evidence, and those people that need to be indicted will be 
prosecuted and appropriate punishment handed out.
    There has been no delay, once the problem was identified, 
in turning it over to the right investigative authorities. 
There is no delay there at all.
    Mr. Gimble. I would like to add just this thought. We in 
the oversight community, both in investigative and audit, we 
don't know that this is isolated. We have said it is isolated 
incidents. I think the jury is out. We are still looking 
aggressively.
    We are committed to--if we find waste, fraud, and abuse or 
corruption, it will be referred with appropriate authorities, 
and it is a very high priority with us in the DOD I.G.
    Mr. Assad. Mr. Congressman, I met a couple weeks ago with 
Major General Scott. I mentioned he is the commander of the 
Joint Contracting Command over in Iraq. And we talked about 
this.
    And the discussion was centered around what more can we do 
to support him in this whole idea of ensuring that we get 
contracting with integrity. And you know, he and I concluded 
that this is all about leadership.
    And in his particular case I asked him is this look-in-
your-eye ethics. In other words, are you looking in the eyes of 
the people that work for you so they understand from your point 
of view what you expect from them in this regard. And his 
answer was unequivocally ``yes.''
    And I think that, you know, it is at the fundamental root. 
It sickens all of us when someone suggests that an officer in 
our armed services is doing something inappropriate with regard 
to his honor. It is hard to understand that more than one would 
be.
    And so this is more--you are absolutely right. This is more 
than just putting ethics courses on Web sites. It is really 
more than just running people through ethics courses.
    And it is ensuring that every one of us who does what we do 
for a living know that if you do something inappropriate, we 
will find you, and we will refer you to the appropriate 
authorities, and we will prosecute you as much as we possibly 
can, that, you know, if you are going to go down that path, we 
are going to find you.
    Dr. Gingrey. Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you.
    Before I call Ms. Davis, Mr. Gimble, let me clarify. 
Contracts under investigation for criminal irregularities total 
$6 billion. Is that correct?
    Mr. Gimble. Yes, Mr. Chairman, that is correct.
    The Chairman. Contracts being audited by the Department of 
Defense and inspector general total $88 billion.
    Mr. Gimble. It is funds. It is not just contracts, but----
    The Chairman. Is that correct?
    Mr. Gimble. Well, it is a combination of funds. In other 
words, when they--the Iraqi Security Fund--some of that is not 
contracted. But we are looking at the funds, so it is a total 
of $88 billion being looked at on those 29 projects.
    The Chairman. Thank you so much.
    Ms. Davis.
    Mrs. Davis of California. Thank you, Mr. Chairman. And I 
join my colleagues as well. I think that this is a--really does 
sadden me personally as well, and I think it is of great 
concern.
    You have talked about the fact that you don't think this 
is, you know, so-called ``bad apple,'' perhaps bad apples, and 
not necessarily the culture. But you have also said that you 
believe that there was an opportunity.
    And we know that environments can be conducive to bad 
behavior. Certainly environments can give people the impression 
that either no one is watching, or it is okay, or we are too 
busy, we can't focus, all those things.
    Talk a little bit more about that in terms of what we can 
take away from this and the kind of opportunity that you, I 
think several of you, suggested existed. What should we know 
about that?
    Mr. Assad. Maybe I could just address, ma'am--world-class 
companies, world-class organizations, have very effective 
checks and balances. They have separations of responsibilities. 
And I think what we are going to find is that those checks and 
balances and separations of responsibilities were very fuzzy, 
were unclear.
    When we are operating in an operation within the United 
States, we have a number of organizations--Defense Contract 
Audit Agency, Defense Contract Management Agency, the DOD I.G., 
CID and CIS--a number of activities which provide the 
foundation of our checks and balances.
    It is fair to say that when we got into a combat 
environment, we didn't have those checks and balances in place 
in all cases.
    And if you have a chaotic environment to begin with, very 
hectic, you have folks who may be trained but don't have a lot 
of experience, and then you don't have the necessary checks and 
balances, there is a higher likelihood that those people who 
don't have ethics or integrity are going to be successful in 
doing inappropriate things.
    So I think that what we are really getting from this, from 
a Department of Defense point of view, is, as we look toward 
providing the joint contracting force, is to ensure that we 
have those checks and balances in place, not just contracting 
folks, controllers folks and the folks that accept the 
materials and goods and services, that there is a separation--
--
    Mrs. Davis of California. Is that something that also would 
apply? I know that the New York Times article highlighted the 
fact that in a war theater people are trying to do things 
quickly, very quickly.
    And in fact, even General Petraeus, I think, indicated that 
it was more important to get ammunition, to get weapons, out to 
those who were going to help us as opposed to trying to have a 
data system, a tracking system, in place at that particular 
time.
    Does that also apply in that case, and would it--how would 
you assess that?
    Mr. Assad. My view is that we always need adequate checks 
and balances in place.
    General Thompson. Ma'am, if I can just--you know, my answer 
would be very, very similar to what Mr. Assad said. And I will 
make a point of clarification here.
    In simple terms, there are three different things involved. 
It is the requirement. What do you want to buy, or what service 
do you want to provide? The contract instrument itself--and 
there is multiple contract instruments. And then it is the 
management of the delivery of that service or product and the 
execution.
    Those checks and balances--if you have a separate requiring 
activity, a separate contracting activity or individual, and a 
separate individual or activity that is managing the delivery 
of that product or service, that is one of the best checks and 
balances.
    And then there is oversight on top of that, oversight in 
the contracting organization, and then the oversight agencies 
like the DOD I.G. and the audit agencies.
    Even on something that you need very, very quickly, you can 
still have those three separable pieces there.
    And I think it is fair to say in general that there is a 
number of cases under investigation right now where a 
contracting official was also the official that was monitoring 
the execution of that contract, as opposed to a different 
individual, and the necessary oversight wasn't there.
    And so that is one of the systemic issues that we have got 
to address.
    Mrs. Davis of California. Were these checks and balances in 
place as we went to Iraq? I mean, what was in place? Because we 
talked about the law that was put in place in 2006, but in 
essence, I mean, what was in place prior to that--those same 
checks and balances?
    And were there plans to implement those? What happened to 
that?
    Mr. Gimble. Let me address just a piece of that, if I 
could. One of the things that we see continually is that a part 
of this contract surveillance that the general is talking about 
is that when you have somebody that receives the materiel and 
how they document the receipt of the materiel--all through 
these audit reports and investigations, one of the things you 
see as a critical failure is the closing out the loop that, if 
I received a weapon, a truck or whatever, who signed for it, 
and how is it identified, and how did it get back into the 
repository to be paid, and so forth.
    We see that as being a critical weakness, and that is one 
of the things which we have done a lot of work on. In fact, we 
started working collaboratively with the Defense Finance and 
Accounting Center, and they are working also with the command, 
to determine how do we best put a repository of these needed 
documents.
    One, do you have them? But also, when you have them, do you 
have them stored in a manner that you can find them and close 
the loop on that? That in itself is a control that would take 
away a lot of temptation.
    In other words, if I take a good in, and I have got to put 
my name on the document, well, there is a paper trail there 
that, if I didn't have to put my name on it, there is no paper 
trail and it could disappear and----
    Mrs. Davis of California. I think that we have always 
assumed, and I know I always believed, that we had those kinds 
of logistics controls in place. And we are obviously teaching 
the Iraqi army how to do this now, so we would certainly be 
concerned about how we are transmitting that.
    Thank you.
    The Chairman. Before I call on Mr. Kline, it is interesting 
to note that in the corporate world, there are some large 
corporations, international in scope, that do a great deal of 
work involving billions of dollars and billions of sales, and 
they don't have a problem like this.
    Why is it that the United States military has this problem, 
as opposed to large multinational corporations, Mr. Gimble?
    Mr. Gimble. Mr. Chairman, that is a great question, and if 
I could give you a really definitive answer, I think I would be 
in pretty good shape.
    I think the issue, really, though, is that when you have 
the large multinational corporations, a lot of times they don't 
go into a combat zone.
    I am not trying to say that as an excuse, but one of the 
issues that we saw, like on this documentation, is you are 
rotating the core groups in and out. Initially it was at four 
months to six months. And there would be whole units of these 
people that were doing the paying and contracting, and the 
files got separated.
    And I think there is a point that firmly needs to be 
brought out, too, is that just because you can't account for a 
piece of equipment or a weapon, that doesn't necessarily mean 
it is missing. It may be somewhere in the warehouse.
    And we have seen some evidence where there wasn't a record 
of where the weapon came in. You could go in the warehouse, and 
it would actually be in the warehouse. We have seen a couple of 
examples of that.
    So I don't think I have answered your question very well, 
but why does this happen? I think it happens because you have a 
huge turmoil and, you know, a combat situation. And I don't 
necessarily think that is a good answer, but I think that is 
what caused the issue.
    The Chairman. Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman, and thank the panel for 
being here.
    We have some interlocking issues here, but following along 
General Thompson's idea of sort of breaking this down into a 
couple of pieces, one of them is that we had what has made this 
a very dark day for me.
    We had apparently some senior officers who solicited, 
accepted bribes, were involved in just horrific illegal 
conduct. And as the general said, I think there are a number of 
things involved here, but one of them is a breakdown in 
leadership in this.
    And I concur with a number of statements made here today. 
This isn't a matter of holding another ethics training class 
for a colonel, but it is a matter of making sure that colonel 
goes to jail, or whatever the appropriate punishment is.
    But I would also hope that the Army--and I am just looking 
at the general here; he happens to be the man in uniform--that 
the Army is going to look at the leadership failures which 
occurred here. Because I am convinced they did occur, and 
whether they were civilian leadership or uniformed leadership, 
that those people are held accountable.
    There is another issue that we have been going at, and that 
is a matter of process and controls. And I have a question I am 
going to ask Mr. Gimble here in just a minute.
    But I want to identify with some of the remarks that my 
colleagues have made about this. There has been a lot of stress 
here. There is no question.
    We in this Congress and commanders and troops in the field 
and parents and all manner of people have put a great deal of 
pressure on the system, if you will, to get the appropriate 
services and equipment in the hands of our soldiers as quickly 
as possible.
    We didn't want soldiers to continue to operate in 130-
degree temperature without having some air conditioned 
quarters. We didn't want them to eat meals ready to eat (MREs) 
indefinitely. We wanted them to have a place to go and have 
good chow.
    And we certainly wanted the armor on those trucks and 
vehicles faster than immediately, and we didn't want to delay 
and have a six-month contract letting bidding process.
    We wanted to get the armor on the trucks and start saving 
lives. So I understand that there was pressure to do that.
    But to Mr. Gimble's point about major corporations, in 
response to the chairman, not going to combat, the United 
States Army and the United States Marine Corps do go to combat 
and have gone to combat. And this isn't the first time. And it 
isn't the first time we have had to let contracts in such a 
circumstance.
    So I am doubly, triply, quadruply appalled at this day, at 
the horrific conduct of commissioned officers and a clear 
breakdown in leadership. The fact that the Army is unprepared 
to respond in these circumstances is--I am sorry, I know it is 
tough. I explained the pressures. But it is also inexcusable.
    So the question: When do you think--and it can be to 
anybody, but Mr. Gimble brought it up, that part of the problem 
is we have got a process, and we don't have controls--when are 
we going to have those controls that we can count on so we are 
not back here at another hearing in six months? When is that 
going to happen?
    I know Mr. Assad addressed it, Mr. Velz. We have got all 
sorts of things going, panels and subpanels and things. When 
are we going to have the controls?
    Mr. Gimble. Let me maybe take the first crack at that. We 
issued a report in 2005, and one of the recommendations that 
was in there was the fact that the MOI, or the ministry of 
interior police, did not have the accountability on their 
weapons.
    And the Department has responded back to us, MNSTC-I in 
particular, that they have got the procedures in place, and 
they have got to detail all the things that you are doing.
    Now, one of the things that I would tell you is that it 
looks good on paper, and General Kicklighter is over in 
theater, and that will be one of the things that that team 
follows up on, is to test--okay, you say you have these 
controls in place.
    And I can tell you, looking on paper, they look pretty 
good. They look pretty robust. But it is one of those trust but 
verify, and it will be--I hope that we can come back to you 
when he gets back to make his report and have good news on 
that.
    I will have to hold that in abeyance until we see what the 
results of his review, you know, turns up.
    Mr. Kline. Thanks for that answer. I would hope that inside 
the United States Army and in our contracting process, not just 
in the ministry of the interior or ministry of defense in Iraq, 
that we have got some controls and processes in effect.
    We have American contracting officers here. How are we 
doing there?
    Mr. Gimble. Well, I probably should explain. The event that 
led us to make that recommendation was our review in the 
ministry of interior looking for those weapons.
    But the procedures that they have come back with are the 
warehouse procedures that would take care of, you know, not 
just the ministry of interior but it is a MNSTC-I total look at 
how they do their process, procedures. They have developed 
internal controls.
    Mr. Kline. Okay.
    Mr. Chairman, I yield back.
    The Chairman. Thank you, Mr. Kline.
    Mr. Ellsworth from Indiana, please.
    Mr. Ellsworth. Thank you, Mr. Chairman.
    Thank you, witnesses, for coming today. I was sitting over 
here listening to everybody and had a lot of the same comments. 
The chairman took one of my questions about multinational 
corporations.
    I was going to say if UPS can tell me where a package is on 
any--in real time--why can't we track some of our things.
    And Dr. Gingrey said a blue day and talked about appalled. 
And I got to thinking about that, you know, this is not just 
the military. In fact, our own body of Congress has several 
cases pending of bribery, theft, taking money, crashing and 
burning in shame, both in the House and the Senate.
    Members of the clergy certainly have been shamed in media 
reports, as well as past presidents have been accused. And we 
all ask ourselves how could this happen. And I heard that 
today: How could this happen?
    And really, I think the bigger question is that--are we 
doing everything we can do to prevent this? And that is what we 
really have to do, is find the best and the brightest.
    I was a cop for 25 years before coming to Congress in 
January. I had a jail full of people, 512 people, and a 
percentage of those, everybody said, ``How could this person 
have done this?'' Some people you might expect by their past 
record.
    And so there is always going to be people that will try to, 
out of greed or whatever, will try to do things. Our 
responsibility in this Congress is to try--and then by hiring 
you and the Administration hiring you, to try to combat that as 
best you can, with the best. And we expect our government to 
have that best process in place.
    One thing I found since being here in January is that--and 
I wrote down a couple of quotes today. And it is not just Armed 
Services. I was in a Small Business hearing yesterday and I 
heard the exact same--we were kind of beating up on the Small 
Business Administration (SBA) a little bit.
    And I heard some of the same things: We need to look at 
this more deeply, we are moving toward, recently formed, we are 
going to, we need to form, and we are in the process.
    And I am not against that, but these, as we said before, 
these are not the first cases of waste, fraud, abuse, and theft 
in any branch of government, and you know, we had these before. 
We probably had it in Vietnam, Korea, Bosnia. You name the 
conflict, we had these.
    And the American public expects us to do a better job and 
find the best. And if we can't, if we aren't the best, then 
hire the people away from UPS or FedEx, to be fair, and whoever 
that person is.
    The one thing I don't want our troops to get the message is 
that--I gave out public-owned equipment to my deputies. I told 
them, ``Take care of it. Do the best you can. But if you have 
to break that piece of equipment to defend your life, if you 
have to throw it away or do something with it, that is okay; 
just be able to explain it later.''
    And I think I don't want to send the troops a message that 
two guys in the field can't exchange their clip because I have 
to account for--I only get three and I can't trade that. That 
is not what our troops need to hear.
    But we are public, and this Congress has sunk a ton of 
money into what the gentleman just said--MRAPs. Do it now 
better than later.
    But our public, no matter how they feel about this war--
whether we should be there, whether we shouldn't, come home, 
stay there, whatever it is--want us to spend their dollars 
wisely and give the best accounting.
    They know people will steal. It is going to happen. But 
then they expect us to catch them and punish them. That being 
said, I would go forward from here and find those people, do 
the best we can, and in the fastest manner we can so, as I 
said, we don't have to come do this a lot, and our whole entire 
government, from Congress down to the leaders, get egg on our 
face again.
    And with that, Mr. Chairman, I would yield back.
    The Chairman. I thank the gentleman.
    Ms. Shea-Porter from New Hampshire.
    Ms. Shea-Porter. Thank you, Chairman.
    As a former military spouse, my heart is sickened by what I 
have heard today. I am hearing all the little words like ``put 
proper controls,'' ``lessons learned,'' ``checks and 
balances,'' ``teach them to look for fraud.''
    That is probably one of my favorites, because I know how to 
look for fraud, and I know the American public knows how to 
look for fraud.
    As a matter of fact, they have been hollering, absolutely 
hollering, in the papers for several years now, very suspicious 
of certain companies which we don't need to name again, and 
suspicious of connections to companies.
    We knew there was fraud. I cannot understand this at all. 
And then saying that our troops were not up to the complexity 
of the job of finding the fraud. Now, I don't mean to sound 
facetious, but we have contracted everything else out. Why 
didn't we contract that out, so that we could at least have 
somebody who knew how to look for it and would look for it?
    And the reason that you are hearing this kind of controlled 
rage right now is because we have other decisions to make when 
we go to votes, and we have to be fiscally responsible. We have 
the greatest deficits in history.
    And so I am looking, saying, ``No, we can't vote for this 
program which would help our people,'' but $6 billion here, $9 
billion unaccounted for--you know, I feel sorry for you all, 
because you are here defending the indefensible, and you and I 
know that.
    But Americans are asking us how could this have happened, 
and what was the climate for this?
    And another problem that I am having here is what about our 
troops?
    You made a comment, Mr. Velz, about the small arms, that we 
wanted to get things out, not all of them were registered with 
serial numbers. I would like to tell you how many were not 
registered--370,000. Ten thousand were registered.
    Now, is anybody else worried about the safety of our troops 
if we are not even tracking this? And when we see certain 
people--I mean, everybody can recognize when suddenly somebody 
is living better than the other guys. That should send a flag, 
even if they never had a bit of training.
    But I do remember reading something in the paper about when 
they were trying to send over accountability teams to do this, 
that it was stopped. And so my question is painful, but I am 
going to ask it.
    Mr. Velz, I will start with you. Mr. Gimble, I don't even 
know who would have had this. Was the former Secretary of 
Defense, Donald Rumsfeld, ever discouraging any of this? Was 
this ever brought to his attention?
    Mr. Velz. Ma'am, I just don't know the answer to that 
question. I have never met him. I don't know.
    Ms. Shea-Porter. Okay. Does anybody know? And I am sure you 
know what I am talking about when I read in the papers before I 
was in Congress that they wanted to send some teams there to 
take a look at, and have financial accountability, and that was 
not allowed.
    Does anybody remember that part?
    Mr. Velz. Ma'am, I can tell you, I have been on assessment 
teams that have been sent by the Secretary of Defense. And 
among the issues we looked at was the capacity and capabilities 
of MNSTC-I and other organizations doing reconstruction 
activities in Iraq.
    And we did report back honestly that we thought they needed 
many more people. I don't know what the results of that were, 
though.
    Ms. Shea-Porter. So you don't know where the report went.
    Mr. Velz. I was just one of the staffers working on the 
report in the field, gathering the data, building the response. 
I was not involved in any of the briefings that reported that 
back to the secretary.
    Ms. Shea-Porter. What year was that?
    Mr. Velz. 2005 and 2006. I have done others.
    Ms. Shea-Porter. Okay. So two years ago you knew that we 
didn't have enough people there to----
    Mr. Velz. Yes, ma'am. I mean, that has been an issue that 
many people have raised. General Petraeus, when he was the 
commander of MNSTC-I, told us he needed many more people. We 
reported back that recommendation as well.
    But there are limitations on the availability of personnel 
throughout the military with the right skill sets to do these 
very unique types of jobs that they are doing there.
    Can I just address the small arms issue really quickly?
    Ms. Shea-Porter. Sure.
    Mr. Velz. You are right, that was a significant problem 
that most of the weapons were not being registered in the small 
arms registry.
    SIGIR, Special Inspector General for Iraq Reconstruction, 
pointed that out to MNSTC-I last year. MNSTC-I at first was 
resistant to entering that data into the----
    Ms. Shea-Porter. Okay, I will have to cut you off because I 
am almost done with my time. But we are talking only 10,000 of 
370,000, so----
    Mr. Velz. Ma'am, they are entering all the records now, and 
they are--retroactively, they have entered as many as they can 
find.
    Ms. Shea-Porter. Well, the problem is that we have troops 
there who could be exposed to our weapons that we lost track 
of, and that we had dishonest contractors.
    And what I have heard today, while I certainly appreciate 
the fact that we have checks and balances and lessons learned 
and paper controls, we are in our fifth year with a war that 
has just absolutely, absolutely divided this Nation in money 
and in lives and in political world.
    And how do we go out and explain to the American public 
what you just said to us today? That we have learned lessons 
and we have checks and balances now, when they knew--the 
Americans knew--they could read the front page--that we were 
having problems two years ago, three years ago, four years ago.
    I can't explain the gap in time, and I really don't think 
you can either. And that is probably the reason for the 
heaviness in my heart today, hearing what I heard. But I thank 
you for being here.
    The Chairman. I thank the gentlelady.
    Lake City Army Ammunition Plant is in Jackson County, edge 
of Independence, Missouri, near my district. For 52 years, the 
chief civilian employee, though a lieutenant colonel was always 
technically in charge--the chief civilian employee was a man by 
the name of Dale Pollard.
    And Dale Pollard treated every contract--because it was a 
GOCO plant, a government-owned, company-operated plant--treated 
every contract as if it were his dollars. And he was one of the 
most frugal persons I had ever known. His home was my home town 
of Lexington, Missouri.
    And out of all this today, some people may get the idea 
that we are riddled with corruption out there. But there are 
Dale Pollards in this world.
    And to them, let's tell them through your actions, through 
our actions here in Congress, to keep doing a good job. Keep 
setting an example. Those that sully their name or the process 
by which we support our troops should come to light and be 
dealt with.
    So we thank you for your efforts in culling those bad 
apples out, but in the meantime let's keep in mind and be 
grateful to those who do their job, never ask for anything 
except an honest day's sleep.
    So with that, we thank you for a revealing, sad hearing, 
but it is one that we needed to have. So you continue to do 
your job, and we will do our best to do ours. Thank you.
    [Whereupon, at 1:39 p.m., the committee was adjourned.]



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