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


 
      CONTRACTING REFORM: EXPERT RECOMMENDATIONS AND PENDING BILLS 

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                     ORGANIZATION, AND PROCUREMENT

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 27, 2007

                               __________

                           Serial No. 110-101

                               __________

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


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                               index.html
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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

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

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
               Lawrence Halloran, Minority Staff Director

  Subcommittee on Government Management, Organization, and Procurement

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      BRIAN P. BILBRAY, California
CHRISTOPHER S. MURPHY, Connecticut   TODD RUSSELL PLATTS, Pennsylvania,
PETER WELCH, Vermont                 JOHN J. DUNCAN, Jr., Tennessee
CAROLYN B. MALONEY, New York
                    Michael McCarthy, Staff Director




















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 27, 2008................................     1
Statement of:
    Amey, Scott, general counsel, Project on Government 
      Oversight; and Alan Chvotkin, senior vice president and 
      counsel, Professional Services Council.....................    84
        Amey, Scott..............................................    84
        Chvotkin, Alan...........................................    96
    Denett, Paul A., Administrator, Office of Federal Procurement 
      Policy, Office of Management and Budget; John Hutton, 
      Director, Acquisition and Sourcing Management, U.S. 
      Government Accountability Office; and Marcia Madsen, CHAIR, 
      Acquisition Advisory Panel.................................    10
        Denett, Paul A...........................................    10
        Hutton, John.............................................    28
        Madsen, Marcia...........................................    45
Letters, statements, etc., submitted for the record by:
    Amey, Scott, general counsel, Project on Government 
      Oversight, prepared statement of...........................    87
    Chvotkin, Alan, senior vice president and counsel, 
      Professional Services Council, prepared statement of.......    99
    Davis, Hon. Tom, a Representative in Congress from the State 
      of Virginia, prepared statement of.........................    26
    Denett, Paul A., Administrator, Office of Federal Procurement 
      Policy, Office of Management and Budget, prepared statement 
      of.........................................................    13
    Hutton, John, Director, Acquisition and Sourcing Management, 
      U.S. Government Accountability Office, prepared statement 
      of.........................................................    31
    Madsen, Marcia, CHAIR, Acquisition Advisory Panel, prepared 
      statement of...............................................    47
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, prepared statement of...............    82
    Murphy, Hon. Christopher S., a Representative in Congress 
      from the State of Connecticut, prepared statement of.......     8
    Towns, Hon. Edolphus, a Representative in Congress from the 
      State of New York, prepared statement of...................     3


      CONTRACTING REFORM: EXPERT RECOMMENDATIONS AND PENDING BILLS

                              ----------                              


                      WEDNESDAY, FEBRUARY 27, 2008

                  House of Representatives,
            Subcommittee on Government Management, 
                     Organization, and Procurement,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m. in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the subcommittee) presiding.
    Present: Representatives Towns, Maloney, Murphy, Welch, 
Davis of Virginia, Platts, and Duncan.
    Staff present: Michael McCarthy, staff director; Velvet 
Johnson, counsel; Kwane Drabo, clerk; Earley Green, chief 
clerk; Mark Stevenson, professional staff member; Larry 
Halloran, minority staff director; Keith Ausbrook, minority 
general counsel; Mason Alinger, minority legislative director; 
John Brosnan, minority senior procurement counsel; Benjamin 
Chance, minority clerk; and Ali Ahmad, minority deputy press 
secretary.
    Mr. Towns. Today's hearing is focused on one of the most 
important parts of the subcommittee's oversight jurisdiction, 
the acquisition of goods and services by the Federal 
Government.
    As stewards of taxpayer dollars, we owe American citizens 
no less than full transparency and accountability over the 
Federal Government's operations. We need to be certain that 
Federal assets are protected from loss or misuse.
    Today we will examine the recommendations made by the 
Services Acquisition Advisory Panel for improving Federal 
Government acquisition practices. We will also get input in 
three bills related to contracting reform.
    The Federal Government is the largest buyer of goods and 
services in the world. Between 2000 and 2006, spending on 
Government contracts has grown from almost $219 billion to $415 
billion. That is an astounding 89 percent increase in the past 
6 years.
    Anyone who has been paying attention to the news in recent 
years has heard time and time again of the waste, fraud, and 
abuse involving a number of Government agencies and 
contractors. We are all familiar with the report on acquisition 
problems that arose in response to Hurricane Katrina and in the 
reconstruction efforts in Iraq and Afghanistan.
    These problems aren't just one-time occurrences; they often 
occur in routine Federal acquisition projects. It is clear that 
our Government has serious problems with the way it manages 
contractors and contracts.
    The purpose of this hearing is not just to talk about the 
problems with the system, but to find meaningful solutions. We 
want to know how we can make the system better.
    I am eager to hear ideas from our witnesses on how we can 
improve our Federal acquisition system. GAO has written 
numerous reports on government contracting, and, likewise, Ms. 
Marcia Madsen, legal background in contracting, and her service 
with the panel establishes her as an expert in this area. We 
are delighted to have you, as well.
    Also, we look forward to getting feedback from the 
administration and members of the contractor community on three 
contracting reform bills that we have before us today. One bill 
is the Government Contract Accountability Act of 2007, which 
has been introduced by my good friend, Representative Chris 
Murphy. This bill would require disclosure of the names and 
salaries of top executives of companies that receive more than 
80 percent of its annual gross revenues and more than $5 
million annually from Federal contracts.
    The Contractors and Federal Spending Accountability Act of 
2007 requires a data base of information on contractor 
performance and integrity. This bill is sponsored by 
Representative Maloney. The intent is to gather together in one 
place information from evaluations, audits, and legal 
proceedings so contracting officers have a full picture of a 
contractor's track record.
    We will also examine a bill introduced by Representative 
Brad Ellsworth designed to prevent companies with seriously 
delinquent Federal tax debt from receiving new contracts. This 
is a bill that Mr. Ellsworth and I worked on together based on 
the input from a hearing held last April.
    I look forward to hearing from our witnesses and gaining 
their perspective as we work together to find a workable 
solution to something that we can all agree is a continuing 
problem.
    [The prepared statement of Hon. Edolphus Towns follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Towns. At this time I recognize Congressman Murphy for 
an opening statement.
    Mr. Murphy. Thank you very much, Mr. Chairman. I thank you 
greatly for holding today's hearing. I look forward to hearing 
from the panel, especially with regard to how we can improve 
our procurement process, increase competition, establish clear 
performance requirements, including how we measure performance.
    As Mr. Towns elucidated in his explanation of the bill 
before us today, I think it is necessary to add one more 
recommendation to the list of those put before this committee 
today. I am pleased that we will be able to talk about a bill 
presented by both myself and by another member of this 
subcommittee, Peter Welch.
    Our legislation, the Government Contractor Accountability 
Act, seeks one simple thing with regard to Government 
contracting, and that is transparency. As pointed out by the 
GAO study, buying services account for 60 percent of the total 
fiscal year 2006 procurement dollars, a staggering number. 
Expenditures on security services due to our engagement in Iraq 
and Afghanistan have increased substantially.
    Obviously, the most high-profile company involved in those 
security services is Blackwater, a subject of a major, 
important hearing before the full committee some months ago.
    This Nation spends billions of dollars on private 
Government contractors overseas. The American taxpayers and 
this Congress, as we have found out, know very little about 
these companies and the windfalls that they may be reaping from 
those contracts. Their management practices, their financial 
statements, and their employment policies are tightly held 
secrets not subject to public scrutiny, unlike their public 
company that are competing in many cases for the very same 
contracts.
    Not surprisingly, at that hearing in October by the full 
committee, the CEO of Blackwater refused to provide Congress 
with details of the company's profits or his personal 
compensation.
    I found and still find that refusal unacceptable. In the 
case of Blackwater, the American people pay 90 percent of the 
CEO's salary and 90 percent of the salaries of his employees. 
Congress and the American people have a right to know how its 
money is being spent.
    And this principle shouldn't be held just for private 
contractors in Iraq. While Blackwater is the clearest example 
of why this legislation is needed, this principle should be 
required of all those private businesses that make a vast 
amount of their earnings from the Federal Government and, more 
importantly, the Federal taxpayer.
    The Government Contractor Accountability Act, which I am 
pleased to say is also cosponsored by the chairman of the 
subcommittee, Mr. Towns, and the chairman of the full 
committee, Mr. Waxman, requires that contractors who receive 
more than 80 percent of their annual gross revenue from Federal 
contracts and have contracts worth more than $5 million in any 
fiscal year disclose the salaries of their most highly 
compensated employees.
    I hardly believe this is an onerous requirement and 
certainly should do nothing to diminish the competitiveness of 
Government contractors reaping an enormous benefit from the 
Federal taxpayer, highlighted by the fact that public 
companies, those that must open their books to the world, 
compete and win Government contracts every day. Our legislation 
would merely align the disclosure requirements for Government 
contractors with existing requirements for publicly traded 
companies and nonprofit corporations.
    Government contractors should be held responsible to the 
American taxpayer, and we should have a right to know where our 
money is being spent. If a private company is making multi-
million dollar profits off of Government contracts and can 
still afford lavish payments to its executives, then we should 
closely explore why Government continues to do business with 
these contractors. Unfortunately, without our legislation, we 
will never have access to this information.
    Again, Mr. Chairman, I thank you for the opportunity to 
have this bill before us, and I look forward to hearing from 
the panel on this bill and on other very important matters 
related to government contracting.
    [The prepared statement of Hon. Christopher S. Murphy 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Towns. Thank you very much.
    It is a longstanding policy of this committee that we swear 
our witnesses in, so will you please stand and raise your right 
hands.
    [Witnesses sworn.]
    Mr. Towns. Let the record reflect that the witnesses 
answered in the affirmative.
    Let me introduce our first panel.
    Paul Denett is the Administrator of the Office of Federal 
Procurement Policy at OMB, where he is the point person for the 
administration on issues of Federal contracting and 
acquisition.
    John Hutton is the Director of Acquisition and Sourcing 
Management at the Government Accountability Office.
    Marcia Madsen served as the Chair of the Services 
Acquisition Advisory Panel. Ms. Madsen has nearly 20 years 
experience in Government contract law. She has served as Chair 
of the ABA's Section of Public Contract Law and was also 
president of the Board of Contract Appeals Bar Association.
    Let me just indicate to you that your entire statement will 
be included in the record. I ask that you summarize your 
testimony in 5 minutes.
    Let me just point out one other thing. There is a light. 
When you start out, the light is on green. Then, as you 
proceed, it moves to yellow. That means that you should begin 
to summarize up. Then, when the red comes on, that means you 
should shut up. OK? Thank you. Thank you so much.
    Now that we've got the rules straight, we can move forward. 
Thank you. We will now begin with you, Mr. Denett.

STATEMENTS OF PAUL A. DENETT, ADMINISTRATOR, OFFICE OF FEDERAL 
   PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET; JOHN 
  HUTTON, DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT, U.S. 
  GOVERNMENT ACCOUNTABILITY OFFICE; AND MARCIA MADSEN, CHAIR, 
                   ACQUISITION ADVISORY PANEL

                  STATEMENT OF PAUL A. DENETT

    Mr. Denett. Thank you, Mr. Chairman.
    Chairman Towns, Ranking Member Bilbray, and members of the 
subcommittee, I appreciate the opportunity to appear before you 
today to discuss the efforts of the Office of Federal 
Procurement Policy to implement the recommendations of the 
Acquisition Advisory Panel.
    You have also asked for comments on several bills. I have 
prepared written remarks that I would like the subcommittee to 
enter into the record, and you indicated that it would be, so 
let me briefly summarize some of those comments for you.
    Many of the recommendations made by the panel fit well with 
the priorities I have set as administrator at OFPP. These 
priorities include strengthening the professionalism, agility, 
and quality of the acquisition work force, using competition 
more effectively, and ensuring good stewardship of taxpayer 
resources.
    I am happy to report that my office has either implemented 
or is in the process of implementing more than 40 of the 60 
recommendations that the panel directed toward OFPP for action. 
Here is just a taste of what we have done or are doing, both as 
part of our efforts to implement the panel recommendations and 
beyond:
    We have launched certification programs to standardize 
training and experience requirements for contracting officers, 
their technical representatives, and our program managers. We 
have given agencies the tools they need to identify and close 
skill gaps as part of their human capital planning. We are 
working with regulatory drafters to come up with clear 
competition rules for multiple-award contracts, which account 
for a growing percentage of our growing acquisition 
expenditures.
    We are institutionalizing results-oriented buying practices 
such as strategic sourcing, where agencies work together to 
pursue multi-agency solutions for commonly purchased goods and 
services. Strategic sourcing has the potential to produce tens 
of millions of savings for our taxpayers in 2008.
    We are identifying models and best practices for agencies 
to get the most out of our buying tools. For example, we will 
soon publish a model inter-agency agreement to ensure agencies 
understand their roles and responsibilities and assist in 
acquisitions.
    We are also developing a checklist to help our 
professionals evaluate if the performance-based acquisitions 
are structured in the best manner possible. We are integrating 
acquisition into the formal agency internal control program 
outlined in OMB Circular A-123 so that agencies will have a 
process to formally and comprehensively assess their progress 
on a broad range of acquisition initiatives, including those 
that carry out panel recommendations.
    With respect to improving contractor tax compliance, I am 
pleased to report that final changes will be made to the 
Federal acquisition regulation in March to address how tax 
delinquency may be used as grounds for potential debarment or 
suspension. I believe this regulatory change, in combination 
with the ongoing efforts by the Federal Contractor Tax 
Compliance Task Force, will achieve the goals envisioned by the 
Contracting and Tax Accountability Act, H.R. 4881.
    I hope the subcommittee will wait to see the beneficial 
results of these actions before making a final decision on the 
need for legislation.
    Additional comments on the bills mentioned in your letter 
of invitation are in my written statement.
    Before concluding, I would like to acknowledge the 
exceptional achievements of three SHINE Award winners. The 
SHINE initiative is another example of how we are promoting 
best in class behavior. It is the first coordinated Government-
wide effort dedicated exclusively to recognizing individuals 
and team achievements of outstanding performance within our 
acquisition work force.
    Ms. Jean Todd of the Army Corps of Engineers supported 
numerous reconstruction efforts in the wake of Hurricanes 
Katrina and Rita, including accelerated removal of water and 
construction of over 81,000 temporary roofs.
    The late Commander Philip Murphy-Sweet volunteered to be 
the onsite contracting officer in central Iraq, supporting the 
establishment of a Criminal Investigative Court and helped 
ensure the project stayed on track.
    The Bureau of Prisons Acquisition Team used an innovative 
alternative dispute resolution partnering approach in 
construction of a new environmentally friendly Federal 
correctional facility on time and budget.
    Finally, I would like to express my appreciation for the 
steps Congress has taken to strengthen the work force by making 
permanent the acquisition work force training fund and 
extending direct hire authority. Both of these are immense help 
to us in strengthening the acquisition work force.
    I look forward to working with the subcommittee as we 
continue to strengthen the acquisition process.
    This concludes my prepared remarks. I will be happy to 
answer any questions you might have.
    [The prepared statement of Mr. Denett follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Towns. Thank you very much, Mr. Denett.
    I would like to yield now for an opening statement to my 
colleague, Congressman Davis.
    Mr. Davis of Virginia. Thank you. I may not be able to 
stay. We have a lot of conflicting meetings. This is a very 
important one today, obviously.
    I want to thank you, Chairman Towns, for holding this 
hearing on the recommendations of the SARA panel established to 
review the laws and the regulations regarding the use of 
commercial practices, performance-based contracting, the 
performance of acquisition functions across agency lines and 
responsibility, and the use of GWACS, the Government-wide 
contracts.
    As you know, the Advisory Panel was created by section 1423 
of the Services Acquisition Reform Act of 2003, which I 
authored. The act charged the panel with making recommendations 
for reforms to the acquisition system, with a focus on ensuring 
the effective and appropriate use of commercial practices and 
encouraging the most innovative firms to compete in the 
Government market.
    My intent was to ensure that the Federal Government could 
harness the commercial market to acquire the best value of 
goods and services through a fair and a reasonable process. The 
SARA panel made a number of recommendations which I support, 
including those regarding the recruitment and retention of the 
Federal acquisition work force and the consolidation of inter-
agency contracts.
    Workforce issues, by the way, are issues where there is no 
partisan divide that we ought to be getting the work force. 
This is absolutely critical. Most of the major contracts that 
go under are because of lack of appropriate supervision and 
training and the like. That is something we ought to be able to 
move on quickly.
    But, there are a number of recommendations I don't support. 
Still, the panel has helped foster a productive and a very 
reasoned debate, and I hope will lead to positive reforms to 
the Federal acquisition system.
    Which leads me to the other focus of today's hearing. The 
subcommittee will also review a number of legislative 
proposals, all of which pertain to Federal acquisition. The 
three bills under consideration are the Contractors and Federal 
Spending Accountability Act, the Government Contractor 
Accountability Act, and the Contracting and Tax Accountability 
Act.
    The titles of these bills more or less say it all. These 
proposals are not attempts to improve the Government 
acquisition system and process, but, instead, focus on 
punishing companies conducting business with the Federal 
Government. These bills would require increased disclosure of 
proprietary information or limit the pool of businesses 
eligible to receive Federal contracts.
    The bills' sponsors presumably believe they are promoting 
the interests of the Federal Government by championing these 
reforms, because there have been press reports in recent years 
of bad conduct by certain companies doing business with the 
Federal Government. However well intentioned, though, these 
proposals don't focus on creating the most effective and 
efficient Federal acquisition system possible, and, instead, 
will have a chilling effect upon firms wishing to participate 
in the Federal marketplace. This could result in decreased 
competition for Federal contracts as companies decide doing 
business with the Federal Government is not really worth the 
price.
    At this crucial time, we should be seeking ways to bring 
more companies into the Federal marketplace, making it easier 
for them to participate, demanding more competition to ensure 
that American taxpayers receive the most for their precious tax 
dollars.
    It is unclear to me how any of these proposals improve the 
Federal procurement system. If anything, I think they are a 
step in the wrong direction.
    It is ironic that, while we focus today on the panel's 
efforts to improve the system, not one of the proposals we are 
considering today has any relationship to the panel's 
recommendations. There is nothing here to remedy poorly defined 
requirements, which lead to so many acquisition failures. 
Nothing here, by the way, to look at the security clearance 
backlog, which is a huge problem where the Federal Government 
is paying the price. Security clearances are almost a commodity 
today, because of the scarcity of them and the inability of the 
Government to move them through the process.
    Nothing will provide us with a sufficient number of 
acquisition trained professionals with the right skills to 
select the best contractor and manage contract performance, 
probably the No. 1 change we can make to bring about 
improvements to the system.
    That being said, it is important we hear from the witnesses 
today on the legislation and from the panel of experts on the 
recommendations of the panel.
    Chairman Towns, I look forward to continued robust 
discussion on this and to seeing you in Columbia this weekend.
    Thank you.
    [The prepared statement of Hon. Tom Davis follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Towns. Thank you very much for your comments.
    At this time I yield to Congressman Duncan from Tennessee 
for an opening statement.
    Mr. Duncan. I have no opening statement.
    Mr. Towns. Thank you very much.
    We now go to you, Mr. Hutton.

                    STATEMENT OF JOHN HUTTON

    Mr. Hutton. Chairman Towns and members of the subcommittee, 
thank you for inviting me to discuss our recent report on the 
Acquisition Advisory Panel's findings and recommendations. In 
2003, Congress established the panel to review acquisition laws 
and regulations and to make recommendations to improve the 
Federal acquisition practices.
    The panel issued its report last year and made 
recommendations covering seven areas, including commercial 
practices and the Federal acquisition work force. The panel 
directed most of its recommendations to the Office of Federal 
Procurement Policy, while others were directed to Congress and 
Federal agencies.
    In view of our past work and broad institutional knowledge, 
we were asked to review the panel's findings and 
recommendations.
    The panel's results are important to consider, given that 
each year, the Federal Government spends billions of dollars to 
procure goods and services. In fiscal year 2006, it spent over 
$400 billion, and services now account for about 60 percent of 
the total procurement dollars.
    At your request, my testimony today will highlight how the 
panel's findings and recommendations compare with our past work 
and OFPP's plans to address the panel's recommendations.
    Overall, the panel's findings and recommendations are 
largely consistent with our past work. Like the panel, our past 
work has pointed out the need for competition, the need for 
clear performance requirements, measurable performance 
standards, and quality assurance plans to improve the use of 
performance-based acquisitions, the risks inherent in the use 
of inter-agency contracts, because of the rapid growth and 
their improper management, the stresses on the Federal 
acquisition work force and the need for a strategic approach to 
assess work force needs, concerns about contractors engaged in 
activities traditionally performed by Government employees, and 
the proper roles for contract employees in a blended work 
force, and, finally, the adverse effects of inaccurate Federal 
procurement data that cannot be relied on to conduct 
procurement analyses.
    I will now highlight a couple of areas the panel reviewed, 
the general thrust of the panel's recommendations, and our 
views on them.
    One area the panel focused on was commercial practices. The 
panel noted that the bedrock principle of commercial 
acquisitions is competition. It found that defining 
requirements is key to achieving the benefits competition and 
procurements, with clear requirements--are far more likely to 
produce competitive, fixed-price offers that meet customers' 
needs.
    Further, the panel found that commercial organizations used 
multi-disciplinary teams to plan their procurements, conduct 
competition for award, and monitor the contractor performance, 
and their recommendations included, among other things, that 
the requirements process be improved and competitive procedures 
be strengthened.
    Our work is generally consistent with the panel's results, 
and we have issued numerous products that address the 
importance of well-defined requirements and the need for 
competition. Our past work has shown that poorly defined or 
broadly described requirements complicate the efforts to hold 
agencies and contractors accountable for poor acquisition 
outcomes. Further, our reports have noted the lack of 
competition in acquisition of goods and services.
    The panel also focused on the Federal acquisition work 
force. It recognized the significant mismatch between the 
demands placed on the work force and the personnel and skills 
available within the work force to meet those demands.
    For example, the panel found that work force demands have 
grown substantially, while at the same time the complexity of 
the Federal acquisitions system, as a whole, has increased. 
Accordingly, the panel made a number of recommendations 
designed to define, assess, train, and collect data on the 
acquisition work force, the recruitment of talented personnel, 
and the retainment of its senior work force.
    Again, our work is generally consistent with the panel's 
findings. For example, our work at DOD has shown that effective 
work force skills were essential for ensuring that DOD receives 
fair and reasonable prices for the goods and services it buys.
    We also noted increased demands on the acquisition work 
force as one of a number of conditions that increased DOD's 
vulnerabilities to contracting waste and abuse. We presently 
have ongoing work focusing on acquisition work force issues at 
DOD, DHS, and NASA.
    Now, turning to OFPP's efforts to address the 
recommendations, OFPP has acted on some, while other actions 
are pending or under consideration. Generally, it expects 
implementation of the recommendation to fall into broad 
categories of legislative actions, changes to the Federal 
acquisition regulations, OFPP actions such as issue and 
revising policy, and Federal agency action.
    OFPP noted that legislative actions and pending FAR cases 
could address about one-third of the recommendations, and they 
expect to address most of the remaining and plan to work with 
the chief acquisition officer or senior procurement officials 
within each agency to do so.
    Mr. Chairman, OFPP, as the lead agency for responding to 
the panel report, is now in a key position to help sustain the 
panel's work. In some cases, it has established milestones, 
reporting requirements to help provide it with visibility over 
the progress and results of implementing the recommendations, 
but not for all.
    As such, we recommended that OFPP work with the chief 
acquisition officers and senior procurement officials to lay 
out an overall strategy or plan to help engage how the panel's 
recommendations are being implemented and how they improve 
Federal acquisitions.
    Mr. Chairman and members of the subcommittee, this 
concludes my statement, and I will be pleased to answer any 
questions.
    Thank you.
    [The prepared statement of Mr. Hutton follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Towns. Thank you very much, Mr. Hutton.
    Ms. Madsen.

                   STATEMENT OF MARCIA MADSEN

    Ms. Madsen. Mr. Chairman, members of the subcommittee, 
thank you for inviting me here today to talk about the 
Acquisition Advisory Panel. Mr. Davis did a good job of summing 
up the panel's charter. Sometimes people think that we were 
tasked to look at the entire acquisition process, so I always 
feel compelled to talk about what the panel's charter was, 
which was commercial practices, performance-based contracting, 
and use of inter-agency contracts.
    I should recognize that there are two other panel members 
with me today. Sitting behind me, Mr. Ty Hughes, a Deputy 
General Counsel for the Air Force for Acquisition and Mr. Roger 
Waldron, formerly of GSA. Also, several of our panel staff came 
today: Laura Latta, who was our Executive Director, Ms. Ann 
Terry, and Mr. Eric Cho.
    It is no small challenge to sum up the panel's report in 5 
minutes, but I will be happy to try to do that. I actually need 
one of these timers at home. I think it would be a great idea.
    With respect to commercial practices, the one thing I think 
that we did differently is nobody has really looked at 
commercial practices in about 10 years since FAS or FARA were 
enacted, so we asked big commercial buyers to come and talk to 
the panel about what works for them in acquisition of services. 
The things they emphasized to us were requirements--that is 
where they invest, requirement's definition, and competition. 
That is what our recommendations reflect. I think most of our 
recommendations, actually, in this area have been picked up in 
the Defense Authorization Act and in S. 680, and we are very 
happy about that progress.
    On inter-agency contracts, we recommended a number of steps 
to improve the management of inter-agency contracts. Our 
findings and recommendations recognized that they are important 
to helping the Government meet its mission, but that there were 
significant issues with proliferation and failure, really, of 
management between agencies that owned those vehicles and 
agencies that used them, so we have a number of recommendations 
there. Again, many of those have been picked up in pending 
legislation.
    I was asked specifically to address our work force 
recommendations. Although they are not called out in the 
statute specifically, we felt that we couldn't do our work 
justice without talking about the Federal acquisition work 
force.
    The panel determined that there was a significant mismatch 
between the demands placed on the work force and the personnel 
and skills available to meet those demands, but we also 
realized, after a lot of work, that there wasn't much in the 
way of reliable information about the size, competencies, and 
composition of the Federal acquisition work force, or, I might 
add, of contractors supporting that work force.
    One can't understand the transitive affect of the work 
force without adequate data, so we commissioned a study, the 
executive summary of which I have provided a copy to the staff. 
It is actually available in a nine-CD set. We are happy to 
provide the whole thing to you if you want to take a look at 
it.
    But our recommendations start with prompt and aggressive 
action to improve the work force, consistent definitions, a 
single Government-wide data base, and an emphasis on human 
capital planning by the agencies. I would like to add, again, a 
number of these recommendations have been picked up in the 
Defense Authorization bill, as well as in S. 680, including the 
importance of providing funds, which are in the work force 
development fund, and the SARA training fund, both of which are 
in the National Defense Authorization Act, and the SARA 
training fund made permanent, which is in S. 680.
    We did not recommend that agencies rush out and hire scores 
of new acquisition professionals, because we did not have 
enough information to tell us the relationship between numbers 
of acquisition professionals and competencies of those people, 
gaps in skills, and the use of contractors. But, we did state 
that a flexible planning process should be used and begun 
immediately so that changes could begin as soon as the 
information was available, and OFPP has recently completed a 
work force assessment process, and DOD has one underway.
    Again, although not called out in the statute, the panel 
also determined that our findings and recommendations would 
have an impact on small business. So, we set up a cross-cutting 
working group to take a look at small business issues, and we 
recognized that particularly the growth of task and delivery 
order contracts for multi-agency use created challenges for 
small businesses. This is because, basically, most of the small 
business laws were written in the era before it became common 
practice to use these contracts that have delivery order or 
task order mechanism.
    So, we have some recommendations in our report to deal with 
this issue, including statutory revisions that would allow 
contracting officers to reserve a portion of awards and a full 
and open competition. For small businesses, we also recommended 
express authority to reserve orders for competition among the 
small business contract holders only.
    I would be happy to answer more questions about the panel's 
findings and recommendations when you all are ready to ask 
them. I appreciate the opportunity to be here today.
    Thank you.
    [The prepared statement of Ms. Madsen follows:]

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    Mr. Towns. Thank you very much for your testimony.
    Let me begin with you, Mr. Denett. In your testimony, you 
discussed that you have started the process of implementing 
most of the changes recommended by the SARA panel. I think GAO 
and SARA panel agree that you are off to a good start, but I 
want more details on how you will finish the job. I understand 
you are off to a good start, but are there any timetables for 
the changes to be finalized? I mean, could you just tell us 
more about it?
    Mr. Denett. Sure. Many of them are going to be put in our 
Federal acquisition regulation, and that is a process. It is a 
deliberative process where we go out, we propose it, we get 
comments from industry, citizenry, and everybody else. After we 
cull through all that and complete the analysis, then we issue 
regulations.
    We have groups, both within the Defense Department and the 
civilian agencies, that spent a lot of time and months on that, 
so those will be coming out almost every month. Every month 
there is a new issuance, which includes more and more of them.
    I think one of the most important things we are going to be 
doing for tracking a lot of this--I am pretty excited about 
this--is we are going to include an acquisition component in 
the existing OMB Circular A-123, where departments go out and 
check on their progress on a wide range of management things 
and see what they are accomplishing. We are going to have a 
detailed listing of all our things that we want tracked in the 
acquisition area, and individual departments, when they go out 
and make their field visits and checks, they will now, for the 
first time, incorporate acquisition into that to tell us if, in 
fact, the policies that we are putting out to implement the 
SARA panel, in fact, are being done by the agencies in the 
field.
    Mr. Towns. So have you ranked them in order of priority in 
terms of the recommendations in order of priority? Have you 
ranked them?
    Mr. Denett. Not a specific ranking. Of the 60 that are 
pointed toward us, over 70 percent of them we have already 
moved out on and are taking action. The remaining ones we have 
work groups analyzing it to make a recommendation to us as to 
which ones we should aggressively implement or which ones we 
might be coming back to you, talking more with Marcia and 
others to better understand to see if, in fact, we should move 
out on those.
    Mr. Towns. Right.
    Mr. Denett. Like one is the creation of the Federal 
Acquisition University. That was one that I was hoping to get 
more guidance in terms of--let's do it, but that recommendation 
said let's study it, so we will study it. But, that is one that 
I view favorably, and I can see a lot of benefits of having a 
Federal Acquisition University.
    Mr. Towns. All right. Thank you.
    I guess to you, Ms. Madsen, and also Mr. Hutton, everyone 
agrees that there are serious issues with the acquisition work 
force. Of course, there are a lot of questions throughout 
Government about how to fill the gaps when the large number of 
baby boomers start to retire. How are these issues for the 
acquisition work force similar or different than the issues of 
the overall Federal work force?
    Ms. Madsen. Mr. Chairman, I am not sure I feel competent to 
comment on the overall Federal work force, but, with respect to 
the acquisition work force, certainly one of the things that we 
saw, and it is very visible in the data collection that we did, 
is that in the mid-1990's, just to use DOD as an example, the 
acquisition work force at DOD was cut by 50 percent. It looks 
like maybe acquisition jobs were viewed as expendable because 
of the post cold war defense build-down. The problem with that 
is, of course, no one anticipated what was going to happen on 
September 11th and that we would be in the situation we are 
today where we have sort of a convergence of a very complex 
acquisition system and not enough people, and not only that. I 
think not enough people with the right skill set.
    I mean, one of the things the panel report points out is 
that 60 percent of the Federal procurement budget today, 
including at the Department of Defense, is being spent on 
services. A lot of those are complex IT-related services. Much 
of it are services that are purchased in the commercial sector. 
It may well be that there is a different skill set than the 
traditional acquisition skill set that is required. That is why 
our recommendations talk about doing an assessment, doing very 
capable human capital planning, and making decisions about 
where agencies' core needs are and what kinds of people they 
need before just adding to the number of traditional 
procurement people who they employ.
    Mr. Towns. Thank you.
    Mr. Hutton. Mr. Chairman, just to build on that response, 
GAO does look at human capital issues across Government, and I 
think, more broadly, there are issues Government-wide. But, GAO 
has offered various principles that one can use to look at the 
human capital situation in Government, and Ms. Madsen has 
mentioned some of the key components, but having a human 
capital strategy where you are trying to identify what are the 
missions and how you are going to conduct those missions, what 
kind of skills and abilities do you need, how many do you need, 
and whether, even the extent to which these are things that you 
need for issues that are more tasked that the Government 
employees ought to be doing versus contractors.
    So, I think the human capital strategy is probably an 
underpinning to get at not only the Government-wide issues, but 
I think some of the things that we are talking about here today 
with respect to acquisition work force.
    Mr. Towns. All right. Yes?
    Mr. Denett. I would like to build on that also. I mean, I 
believe the acquisition area, one of the reasons that perhaps 
were worse than some of the other functions is because people 
that know acquisition are so employable. Private industry has a 
lot of need for people that really know how to do contracting, 
so we really have to take initiatives to bring in new blood. We 
have launched aggressive intern coalition where we are taking 
in over 500, 600 new people out of college each year to help 
fill the pipeline.
    We have gotten big help in two areas already from Congress. 
One is direct hire authority now, where we can hire people more 
rapidly, because we are competing with industry, and when 
somebody has to wait several months before they actually get a 
job offer, that puts us at a big disadvantage. By giving us the 
direct hire authority, that helps us a lot.
    The other is for us to re-employ annuitants when they 
retire. They used to have the retirement money taken away from 
them. Now we are allowed to hire newly retired acquisition 
people to come back and assist us with the training and filling 
in some of the holes while we get staffed up adequately.
    Mr. Towns. Right. Thank you very much.
    Congressman Duncan.
    Mr. Duncan. Thank you, Mr. Chairman.
    Let me just make a couple of comments. I remember several 
years ago Governor Rendell of Pennsylvania, when he was mayor 
of Philadelphia, he testified in front of a subcommittee here 
in the Congress, and he said the problem with Government is 
that there is no incentive for people to work hard, so many do 
not. There is no incentive to save money, so much of it is 
squandered. Because of that, we found out years ago that we 
could get almost anything done in the Federal Government by 
private contractors more cheaply, efficiently, quicker, and so 
forth, by going to private contractors.
    Now, what has happened, though, over the last few years--
and the chairman did a real good job in his opening statement--
these contracts have been exploding over the last 6 years, and 
now we are continually reading stories about the waste, the 
fraud, and abuse that the chairman mentioned, and just 
excessive, ridiculous, exorbitant profits. These Government 
contracts have become the most profitable contracts, far 
exceeding profits that companies would make in the private 
sector.
    So now some of these contractors are about to kill the 
goose that laid the golden egg. It started most heavily and to 
be seen most vividly in the Defense Department. The 
International Tribune had an article about the revolving door 
at the Pentagon. We found out the Defense contractors were 
hiring all the retired admirals and generals, but then it 
started going to all the departments and agencies, where they 
would hire these retired high-level Federal employees. Then, 
these companies would go back and get these contracts, so that 
it was beginning to look to some of us that every major Federal 
contract was a sweetheart deal of some sort or another.
    I want to read to you something I had in one of my last 
newsletters. The Washington Post carried a front-page story 
reporting that one no-bid $2 million contract awarded by the 
Department of Homeland Security in 2003 ballooned up to $124 
million by July of this year. In December 2004 Department 
lawyers said payments to Booz Allen Hamilton, one of the 
largest Federal contractors to provide consultants, had gone 
``grossly beyond the scope'' of the original contract. The 
lawyers advised the Department to allow other companies to 
compete.
    At that point, payments had reached $30 million. The 
competition did not take place for more than a year. During 
that time, payments under a no-bid arrangement went to $73 
million. Then, DHS broke it up into five contracts totaling $51 
million. Shock of all shocks, Booz Allen Hamilton won ``the 
competition'' for all five contracts, thus adding up to $124 
million so far.
    Then I added, The Department of Homeland Security 
apparently has turned into a very lucrative gravy train for 
some people.
    Now, first of all, I appreciate the fact that Congressman 
Murphy said, because I want to cosponsor your bill. Put me down 
on that. These things are getting out of control.
    It seems to me there are two major problems. Most Federal 
bureaucrats think that it is easier and they feel more 
important if they are dealing with one big, huge, giant company 
instead of 100 small companies, but you have to get more 
competition into these contracts, for one thing. Then we have 
to put some restrictions or limitations of some sort on the 
revolving door that we are getting in every department and 
agency where all these Federal contracts are sweetheart deals 
that are going to high-level Federal employees who have retired 
and gone to work in the private sector, and then those 
companies are coming back and getting those contracts.
    These things are getting ridiculously out of control, and 
the profits are just almost obscene. It is just totally unfair 
to the taxpayers.
    I was going to ask for your comments. Unfortunately, we 
have this vote going on, so I will try to come back in a little 
bit and hear what you have to say. But it seems to me that 
those are the problems, and they are really getting to be very, 
very serious.
    Thank you very much, Mr. Chairman.
    Mr. Murphy [presiding]. Thank you.
    I apologize for the inconvenience, but we have one vote on 
the House floor, so it is our intention to take a short recess 
and then reconvene here for further questioning in about 10 
minutes.
    [Recess.]
    Mr. Murphy. If the witnesses could take their seats.
    Mr. Duncan, I know that we were a little hasty in having to 
run over to vote. I don't know if you have anything further.
    Mr. Duncan. Thank you, Mr. Chairman. I guess I got 
everything off my chest all at once there, but if any of the 
panel has any comments about anything that I have said, or do 
they feel that any of these reforms that have been suggested 
will help cure any of the problems that I raised--yes, sir, Mr. 
Hutton, or whoever?
    Ms. Madsen. Mr. Duncan, a couple of things I think that are 
in our report, and some of which are making their way into some 
of the bills, I think will help. I mean, as I listened to you, 
I thought at the bottom of what you were talking about were 
some structural issues that are addressed in our report.
    Requirements definition--typically when you see a contract 
that sounds like the one you are describing, the agency hasn't 
really thought that hard about what it really needed and hasn't 
really specified its needs.
    Competition--effective competition has to be built on a 
good requirements base.
    Another recommendation we made that I didn't have a chance 
to talk about is, we strongly recommended that the agencies 
do--particularly when they are acquiring consulting services--
IT-type services, that they do the same kind of market research 
that the private sector does so they know what their options 
are. It sounds like that didn't happen there, either.
    So all of those recommendations that we made would have 
helped the situation that you described.
    Mr. Duncan. All right.
    Mr. Hutton. Mr. Duncan, I would like to just add to that 
comment. It is very important, as we know, to have sound 
policies and very good policies to help direct us to good 
outcomes, but the important thing, as well, is just having that 
sustained leadership and being able to drive these policies 
down through an organization at the practitioner level, making 
sure that the people that have to work on these things on the 
ground have the tools, they are properly trained, and they have 
sufficient oversight to basically plan for these acquisitions 
in a way that you are going to have a higher likelihood of a 
good outcome.
    I think Ms. Madsen does underscore some of the key 
principles for that, and that is the whole issue of commercial 
practice and competition.
    Mr. Duncan. All right.
    Mr. Denett. I would tack on that I agree completely. We 
have to define our requirements properly. When we don't, it 
leads to problems. Strongly for competition, we have issued 
some additional guidance for the reinvigorated position, called 
the competition advocate in the departments that had fallen 
dormant over the years, so we have revitalized that. We are 
collecting information.
    But, I have to, also, mention that the percentage of 
dollars that are competed are at about 64 percent, and that is 
a constant number. It has been that way for about 10 years, so 
even though we have had a huge surge, increase in spending, the 
amount of dollars that were competed is staying right around 64 
percent.
    We want to educate our contracting officers so they can do 
a stronger job on competition, so they can search the 
marketplace. We want to limit the one case you gave at Homeland 
Security that kept going on and on and on. We have proposed to 
put a limit on those to 1 year without having to get the direct 
approval of a much higher authority. There are some bills being 
proposed by the Congress that would make it less than a year. I 
think one of them is 270 days. But, regardless, we want to put 
a limit to it. Now there is not one.
    Those are some of the things we are doing to try to address 
some of the concerns that you have raised.
    Mr. Duncan. Thank you very much. It is frustrating. I mean, 
I am a very pro-business, conservative Republican. I would like 
to see many, many things done in the Federal Government by 
private contractors, but it is getting almost embarrassing to 
people like me who support Government contracting to see some 
of the waste, the fraud, the abuse, the sweetheart deals, the 
sham competitions. I mean, 64 percent doesn't impress me when I 
read that a lot of these competitions are rigged or set up so 
that a contract is almost guaranteed to go to one contractor or 
another. And, when I see that all these contracts end up going 
just to the big giants, and even fairly large and medium-sized 
companies can't even compete fairly, so there is just a lot of 
problems throughout this Federal contracting process. I don't 
know how much we can get done on it, but we sure need to make 
some changes.
    Thank you, Mr. Chairman.
    Mr. Murphy. Thank you, Mr. Duncan.
    I wanted to turn to one of the bills at issue here that, 
Mr. Denett, you offered testimony on in your written remarks to 
the committee, and that is H.R. 3928, which Mr. Duncan spoke so 
kindly of, which requires certain companies doing a percentage 
of their business--80 percent or above--with the Federal 
Government have and should have an obligation to disclose the 
amount of profit or, at the very least, the salaries of their 
top executives when those salaries are, in effect, paid 80, 90, 
potentially 100 percent in taxpayer dollars.
    Your remark in your written testimony was expressing 
concerns on how that would potentially stifle competition. I 
certainly understand that concern here.
    I guess my first question is: we already have this 
information with regard to profit and executive compensation 
when it comes to public companies, and, as we know, public 
companies have done very well with regard to Government 
contracts. In Connecticut, home for several incredibly 
successful Defense contractors, those are public companies that 
disclose that information, and they not only compete, I think 
very effectively, with their other public companies, but they 
compete very effectively with private companies, as well. In 
fact, conversely, private companies right now seem to compete 
with public companies, as well.
    So, my question is: if we haven't seen a stifling of 
competition with regard to public companies that disclose this 
type of information, why are we concerned that simply requiring 
private companies to disclose a modicum of the same amount of 
information the public companies disclose, why are we concerned 
that would, all of a sudden, result in a decrease in 
competition?
    Mr. Denett. Well, you know, contracting officers on cost 
reimbursement contracts have access to all that information 
anyway. I guess, making it known to the world can have a 
chilling effect, especially with the dollar threshold that you 
currently selected of $5 million. If you were to go through 
with it, I would highly recommend that you raise the threshold 
to maybe $25 million, because there are a lot of small 
businesses that would be discouraged from jumping into the 
Government space or pursuing it, and we are trying to bring 
along more small businesses. And, those presidents of those 
private companies, they don't want their employees to know what 
they are making, so I believe in those instances some of them 
might decide not to jump into the public space.
    We are trying to encourage more of them to get in. We want 
to increase small business, so I would hope that you would see 
that the ones, when it digs down that low, that it could have a 
chilling effect on those small businesses. So, you might 
consider a higher dollar amount, which would get at some of the 
much larger ones that I would conjecture are causing you the 
most consternation.
    Mr. Murphy. I think I and those that support the bill would 
be very willing to enter into that conversation. I think you 
are very right that we are really getting at private companies 
that operate and look like some of the bigger public companies 
that provide that information.
    I guess, let me just followup on a statement that you made. 
Can you just give a window into the type of information that 
the contracting agents and personnel that are reviewing and 
awarding these contracts, what kind of information regarding 
profit and executive compensation do those contracting agents 
have?
    Mr. Denett. Well, on cost reimbursement contracts they get 
all the cost data on the larger ones. I mean, it breaks down 
all the overhead, where the money is going, and there is 
actually caps on compensation that have been around for many 
years for the executives on these cost reimbursement contracts.
    Mr. Murphy. So then how do we get into a situation in which 
we have reports? I don't want to keep on harping on Blackwater, 
because I think it is the most high-profile case, but I think 
we have seen examples in some of the contractors involved in 
the Gulf Coast recovery and others where you have executive 
compensation that is exorbitant in comparison to what similar 
public employees are getting. How do we have those private 
employees making compensation amounts in the multiple-millions 
of dollars with those caps in existence?
    Mr. Denett. Well, most of it, they are fixed-price 
contracts, and on fixed-price contracts we do not dissect, get 
cost information, and see what people are getting. If it is a 
fixed-price one, we are just trying to make sure that the price 
is fair and reasonable, and we don't get involved with what the 
compensation is.
    Mr. Murphy. And, I guess the thought behind this bill is 
that in understanding what price is fair and reasonable, it 
would seem to be that the amount of money that is being taken 
off the top for profit--and for private companies, profit 
really effectively means compensation of employees-- that is a 
relevant piece of information in deciding what price is 
reasonable or fair; that if we find out that 10 to 15 to 20 
percent is being taken off of the top for executive salaries, 
that is a relevant piece of information in deciding whether 
what we believed was a fair and reasonable price is actually 
fair and reasonable, given the amount of money that is being 
taken for compensation.
    Would you agree with that?
    Mr. Denett. Let's say we have three offers to provide 
widgets to the Federal Government, and they are all close and 
we go to the lowest-priced one. Maybe they have been in 
existence 20 years; maybe they have superior manufacturing 
techniques. Who knows what goes into that? But, if we get the 
best possible price, if the head of that company, you know, 
makes $1 million a year, as long as I am getting a really good 
price for the widget I generally--especially on fixed price--I 
just would not get involved with when is he making too much. 
When he or she breaks $200,000, is it too much? $400,000? I 
don't get into that, especially on fixed price.
    Mr. Murphy. Thank you for your testimony.
    My time is up.
    I guess for any private investor that was investing in that 
firm, that would be part of the decisionmaking process in 
whether they were getting a fair price or not, and I think it 
should be part of our consideration. But, thank you for your 
testimony.
    Mr. Davis.
    Mr. Davis of Virginia. Thank you.
    Let me ask all of you--I will start, Mr. Denett, with you--
do you think legislation mandating the publication of 
proprietary salary data, establishing a data base of 
information of allegedly wrongdoing, and using the acquisition 
system to collect back taxes addresses the fundamental problems 
that are plaguing our acquisition system?
    Mr. Denett. No, I do not. I mean, you know, what we need is 
some of the things that we have already been provided, the 
direct hire authority, being allowed to get re-employed 
annuitants without it impacting their annuity. Those are the 
things that are helpful. The training fund, the skill gap 
analysis that we are doing, these are all proactive steps that 
are going to improve the process.
    Having to add to all of the things that we have to do to 
try to get a data base that includes information from States--
and every State has different information--I mean, that would 
be very cumbersome, costly, difficult to administer. And, as I 
was explaining a short while ago, I don't see that the salary 
of the executives and posting those, how that is going to help 
us do a good job.
    Mr. Davis of Virginia. Let me just stop here. Under cost 
contracts, the cost type contracts, data related to a company's 
executive salaries are available to contracting officials, and 
you only get a certain reimbursement level anyway. Isn't that 
correct?
    Mr. Denett. That is correct.
    Mr. Davis of Virginia. All right. Thank you.
    Let me ask Mr. Hutton and Ms. Madsen to just react to that, 
as well.
    Mr. Hutton. Mr. Davis, we weren't asked to formally comment 
on those bills, but I did look at them before the hearing. I 
think, more broadly, GAO tends to look at, again, the policies 
that are in play in the Federal acquisition arena and the 
extent to which there is the leadership to drill it down into 
the practitioners on the ground level.
    Mr. Davis of Virginia. But, this doesn't address the 
fundamental problems. That is the whole point here. We know 
there are some fundamental issues that need to be addressed, 
and we have talked about whose contracting officers and 
procurement personnel, and giving them appropriate training, 
and the brain drain, but this doesn't really go to any of those 
issues, does it?
    Mr. Hutton. Well, sir, in our work when we looked at 
contracting, what we find is: was there sufficient acquisition 
planning? There are existing policies and practices in place. 
Do you get adequate competition? Do you have good oversight--
tools like that?
    I don't have a formal comment on any of these three bills, 
and if there is any interest in that we could----
    Mr. Davis of Virginia. I am not asking, except that these 
bills don't address the fundamental problems, do they?
    Mr. Hutton. Again, I will take it back to the process, what 
we----
    Mr. Davis of Virginia. Let me ask you this. I am surprised 
to hear you say that you think that publication of proprietary 
salary data is a fundamental problem in the system.
    Mr. Hutton. I would ask, sir--I don't even know how many 
that bill would affect, how many contractors that would affect. 
I don't even know where to start with that particular----
    Mr. Davis of Virginia. Is that one of the fundamental 
issues that you have identified in terms of what is wrong with 
the contracting?
    Mr. Hutton. I would say that the basis of our work over the 
years--that is not an issue that GAO is----
    Mr. Davis of Virginia. Of course it isn't. It isn't even 
close.
    Ms. Madsen.
    Ms. Madsen. Good morning.
    Mr. Davis of Virginia. Hi.
    Ms. Madsen. I am here in my panel capacity today, and these 
are obviously not issues that the panel looked at.
    Mr. Davis of Virginia. So the SARA panel didn't even look 
at these issues?
    Ms. Madsen. The SARA panel didn't look at any of these 
issues.
    Mr. Davis of Virginia. These weren't part of your 
recommendations, were they?
    Ms. Madsen. No.
    Mr. Davis of Virginia. OK.
    Ms. Madsen. The issues we looked at really are more 
structural, and that is what the committee asked us to look at 
in the legislation.
    Mr. Davis of Virginia. So none of these bills really were 
before the SARA panel or a result of your recommendations?
    Ms. Madsen. No. That is correct.
    Mr. Davis of Virginia. You agreed that under cost type 
contracts data related to a company's executive salaries are 
available to contracting officials?
    Ms. Madsen. The rules--speaking generally with respect to 
the rules for cost type contracts, which have been in place 
actually for a long time--the contracting officer has access to 
all of the costs. There are restrictions in a number of areas 
on cost type contracts, and one of the restrictions is that the 
costs that are passed through to the Government under that type 
of arrangement, the salary levels are capped. I couldn't tell 
you off the top of my head----
    Mr. Davis of Virginia. If they want to pay more, they can 
pay more, but they are not going to get reimbursed for it?
    Ms. Madsen. Right. They are not going to get reimbursed for 
it. The Government is not going to pay for it under----
    Mr. Davis of Virginia. So we already take care of that in 
acquisition regulations?
    Ms. Madsen. Right. Regulations have addressed this since 
probably the 1980's.
    Mr. Davis of Virginia. So it is addressing an issue that 
isn't even there. It goes to the committee looking at what 
corporate salaries, next week across the board, but the reality 
is in most of these contracts you only get reimbursed for a 
certain amount. If the company wants to take it out of profits 
or something else to pay people, they are certainly free to do 
that, and that is really the shareholders' issue. But, the 
taxpayers don't pay for it, and that is the point I want to 
make.
    Thank you.
    Mr. Murphy. Thank you.
    Mr. Welch.
    Mr. Welch. Thank you.
    I just want to followup on some of my colleague, Mr. 
Davis', questions. My understanding of this legislation, it is 
not expected that it gets to ``the core of the problem'' on 
this contractor compensation issue. We had testimony from Mr. 
Prince that the profit was about 10 percent. We asked him the 
question how much ``he made'' on contracts of $1 billion. 
Straightforward math is $100 million. That is not a bad payday.
    The point of this is just to have some public disclosure, 
something that the SEC requires for corporations and then 
provides information that becomes the basis for appropriators 
to evaluate whether this is a wise use of taxpayer money.
    So, I guess I would ask the question a little bit 
differently than Congressman Davis did, and ask each of you: is 
it helpful to us in a procurement contract process to have 
more, rather than less, information about the expenditures and 
how our money is actually being spent? Mr. Denett, you look 
confused. I probably didn't ask the question right.
    Mr. Denett. I was listening. It is not an area that 
contracting officers need added to their information they have 
to make a determination as to who the low offerer is. They have 
all the cost and pricing data they need. So, I think they have 
what they need to make an appropriate determination. To get 
into the area of is a president of a corporation making too 
much money--as long as we are getting a good deal, fair and 
reasonable price for what we need, and they are delivering it 
in the best manner, that is what the contracting officer 
focuses on.
    So I see requiring additional information to be provided to 
him as something that they don't need. On cost reimbursement, 
as has already been said, they already have that information. 
So if we are talking about fixed-price ones, I just don't see 
the need for having that information.
    Mr. Welch. Well, let me ask you this: if you have a fixed-
price contract and you have made a determination that it is a 
so-called fair price, the price we can get, but then, upon 
reexamination, it turns out that they were buying widgets, 
let's say, that was a part of the contract, and they were 
paying $50, when they would be available for $25. So, the cost 
embedded in the contract price that we are paying is higher 
than if there were more aggressive management was necessary. 
That would be relevant information in evaluating whether the 
next contract would be adjusted to get the widgets at the $25 
instead of $50, right?
    Mr. Denett. Well, if we find out there are ones available 
for $25, then we ought to terminate the contract for 
convenience and go get the $25 one.
    Mr. Welch. Yes. You know, it may be that it is more helpful 
to Congress to have this to decide whether it makes sense for 
us to be signing contracts where there is an individual who, in 
effect, is making $100 million on these contracts. We might 
think that he could suffer at $50 million.
    Mr. Hutton, how about you? Do you have any opinions one way 
or the other about this legislation?
    Mr. Hutton. Sir, when I look back at how GAO approaches its 
work, typically we look at the policies and the guidance and we 
look at how those things are implemented. And, what Mr. Denett 
is mentioning are things that we share as the importance of 
competition, and if you have competition those market forces 
are going to help put pressures on what the Government is 
paying.
    We don't have a position on this particular bill, but I 
think that our focus has always been on ensuring that the 
folks, the practitioners on the ground, have the tools and the 
capacity to make sure that the existing policies and guidances 
are followed through. And, that is what we typically focus on 
and make recommendations to help improve that.
    Mr. Welch. Well, is it any problem to you if this 
legislation were passed and information about CEO compensation 
was public and made known to appropriators? That wouldn't cause 
you any problem, right?
    Mr. Hutton. Me personally, sir?
    Mr. Welch. No, you professionally in your capacity?
    Mr. Hutton. Professionally?
    Mr. Welch. Yes.
    Mr. Hutton. Well, I think Mr. Denett points out just things 
that would have to be considered and understood as this or any 
other alternatives are looked at as to what one is trying to 
address with this particular legislation.
    Mr. Welch. I don't understand what you just said.
    Mr. Hutton. OK, sir. What I am saying is that, you know, 
there is an outcome perhaps that one is trying to obtain 
through a piece of legislation, and there may be alternatives 
or other ways that one might approach how best to get that 
outcome. I haven't reviewed this to have an official position, 
or GAO doesn't have an official position on this, but there are 
just basic things that we would want to consider and look at as 
to whether this is something that would, in our view, 
strengthen, or there are other alternatives out there.
    Mr. Welch. Wait. This is just about public information.
    Mr. Hutton. Yes.
    Mr. Welch. In the case of Congressman Murphy's bill here, 
of which I am a cosponsor, it is taxpayer dollars that largely 
are spent on all the activities of a particular company. In 
other words, if a company gets over 80 percent of its revenues 
from you and me, we are just simply asking for some 
information, in this case salary information. I don't see how 
it would in any way interfere with the procurement process. Are 
you suggesting that it might, or there is some doubt about 
that?
    Mr. Hutton. No, sir. I just think, as a typical approach to 
these types of things, when we do our work we are always 
looking at what the condition is and what the existing policies 
and practices are. And, if there is a particular problem, then 
it is what options are available to best address it. Like I 
said, sir, we just don't have a position on this particular 
piece of legislation.
    Mr. Welch. Thank you.
    Ms. Madsen, how about you? Let me just preface it. I am a 
little bit puzzled what the big deal here is. We're talking 
about companies where 80 percent of the revenues come from 
taxpayers, so we obviously have an interest in getting as much 
information as we can. We are also talking oftentimes about 
contracts where, as a practical matter, there is either no 
competition or very limited competition, and where it is 
probably difficult to put a price on what is ``a fair price.'' 
So, the sole request here in this legislation is some 
transparency that applies to these essentially taxpayer 
financed corporations for their revenues about what CEO 
compensation is, and it is the same standard that applies to 
our public corporations. Then, of course, the shareholders have 
the benefit of at least knowing what the compensation schedule 
is.
    Is there any reason that we wouldn't want to know that?
    Ms. Madsen. Congressman, I was not asked to comment on the 
legislation. I am here really as the Chair of the Acquisition 
Advisory Panel to talk about the Panel's report. I mean, I can 
talk to you about how the system works and how there are some 
recommendations in our report that I think potentially would 
address this question. Our report talks a lot about the 
acquisition of services, and we talk about how, in the private 
sector, for example, companies that acquire services use the 
requirements process and the competitive process to get the 
best possible deal that they can get, and the Government--and 
part of our charter was to look at how the Government acquires 
commercial services, for example.
    So, we have recommendations in our report that talk about 
that, and we also talk about we have recommendations that deal 
with the issue of what happens in the Government when contracts 
are awarded without adequate competition and what kinds of data 
the Government should be able to get under those circumstances. 
You have cost-type contracts. The Government gets tons of data; 
the Government gets cost or pricing data. Most of these large 
contractors are subject to the cost accounting standards. They 
are subject to sort of ongoing audit for compliance with all of 
these requirements. So, for those kinds of contracts the data 
is there.
    When they are fixed price, if they are not competitive, one 
of the issues the panel looked at was what kinds of information 
should the taxpayers be getting, should the contracting 
officers be getting, and we made some recommendations about 
something called--other than cost or pricing data, which will 
get into a level of arcanity that you probably don't want me to 
talk about--but some recommendations about what kinds of data 
that they should get and some revisions to the regulations that 
would provide a little more detail into data in that area.
    I haven't looked at the bill, so I really can't comment 
further on that.
    I would suggest you might want to look at that part of our 
report.
    Mr. Welch. Thank you.
    Mr. Murphy. Thank you very much, Mr. Welch.
    Mrs. Maloney.
    Mrs. Maloney. First of all I want to thank you for holding 
this hearing. I think that better management of our $419 
billion that we spend in procurement is really important, and I 
have a bill H.R. 3033, the Contractors Federal Spending 
Accountability Act, which would work to really help the Federal 
Government's watchdog, suspension and debarment officials, give 
them the information they need to really protect the taxpayers' 
dollars in a better way.
    I was in another hearing that we had with Chairman Bernanke 
on the state of the economy. I apologize that I am somewhat 
late.
    I would like to ask all three panelists: do you believe 
that contracting officers have adequate information to 
determine if a company should be awarded a Government contract 
at this time?
    Mr. Denett. Yes, I do believe they do. I mean, they have to 
take the time to obtain it. They check the debarred mailing 
list. We now require----
    Mrs. Maloney. You are saying if they took the time to 
obtain it?
    Mr. Denett. Well, if they follow the proper procedures, 
they do have adequate information. They have to check to see if 
any company is on a debarred bidders list or suspended. We also 
initiated a new requirement where agencies are required to 
share administrative actions they may have taken against a 
company so that EPA can be aware that the Defense Department 
took an administrative action against a company short of a 
suspension or a debarment. So that, added to the information 
pool that they already have, is sufficient.
    Mrs. Maloney. Well, do you think it would be more efficient 
if all of this information was gathered together by the various 
data bases and agencies were hosted in one data base where you 
could get this information would be very, very efficient.
    Mr. Denett. Well, we already have a single location for 
debarment and suspension, so I am not sure what additional 
things you would feed into that. If you are talking about any 
of the ones with States, I am concerned about that, because 
every State is different, and I think it would be a huge 
undertaking to try to encompass all State activity and meld it 
with the Feds.
    Mrs. Maloney. But your data base now only says whether or 
not they have been debarred; is that correct?
    Mr. Denett. Well, we have a list of debarred or suspended.
    Mrs. Maloney. Debarred or suspended.
    Mr. Denett. Right.
    Mrs. Maloney. Do you think it would be helpful if there was 
other information in this data base such as they are 
consistently a low bidder but they always come in with 
alterations to contracts or contract overruns, which then end 
up costing millions of dollars? I think information about 
whether or not they complete the contract on time, whether or 
not they complete it within budget, whether or not it is done 
appropriately--you can complete a project and it not work. So 
there is a lot of information that could help our procurement 
officers make better decisions on our taxpayer dollars.
    Mr. Denett. We do have people rate the performance on 
contracts with contracting----
    Mrs. Maloney. Is that kept in your central data base?
    Mr. Denett. It is not kept with the suspend and debar 
thing; it is kept in another system.
    Mrs. Maloney. So my question is: wouldn't it be more 
efficient if we pulled together all of this relevant 
information and had it in one data base so that our procurement 
officers could be held accountable for the decisions they are 
making?
    Mr. Denett. I guess the point would be where do you draw 
the line. I would be glad to engage in a discussion with you or 
the Congress as to looking at the full array of all the data 
and figuring out which ones would make sense. I am concerned if 
we launch into it too quickly without fully understanding the 
ramifications, especially if it goes so broad as to pulling in 
State information.
    Mrs. Maloney. Well, information such as whether or not they 
are members of organized crime, listed in organized crime 
list--New York City that I grew up in, the rough and tumble of 
New York City contracts, after numerous scandals we created a 
law--actually, I wrote that law--that created a central data 
base called Vendex, which allowed our procurement officers to 
be responsible and accountable for the decisions they are 
making. And, we had relevant data on various important things.
    I was wondering if you had looked at that data base or 
looked at that legislation, what New York City is doing in 
terms of a centralized data base?
    Mr. Denett. I have not. I would be glad to.
    Mrs. Maloney. I would really appreciate it if you would 
look at it, and maybe we could have a meeting and see what you 
think of it. It did not go into what other States were doing, 
but it certainly had relevant information on whether or not 
they complete contracts, whether or not they are members of 
organized crime in the crime data base, whether or not it was 
completed in time, on budget, whether they had a history of 
constantly having cost overruns and increased cost estimates 
that ended up really making the contract more costly and really 
abusive to the taxpayers.
    Anyway, I thank you all for your testimony and your time, 
and I thank all my colleagues.
    Mrs. Maloney. Thank you.
    Mr. Davis.
    [The prepared statement of Hon. Carolyn B. Maloney 
follows:]

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    Mr. Davis of Virginia. Thank you.
    Let me just say to my friend from New York that the thing 
that troubles me about this big data base that is going to have 
all of this information--this information includes, in many 
cases, just allegations. It includes something somebody 
brought, but we are not talking about any adjudication. We are 
not talking about convictions. We are talking about 
allegations. Then, she is bringing in organized----
    Mrs. Maloney. Would the gentleman yield?
    Mr. Davis of Virginia. Yes. That is what the bill says.
    Mrs. Maloney. Well, that was not the intent of the bill. In 
the New York City law it is not allegations. It is facts. It is 
a factual item whether or not you are overpricing your 
contract.
    Mr. Davis of Virginia. This says an administrative 
proceeding brought against the firm, not the adjudication. It 
talks about administrative proceedings initiative. Those don't 
give anybody an opportunity to come back and rebut the 
substance of that. It doesn't give them their day in court. 
They are blacklisted from day one. They go on this big list.
    I mean, what we are talking about here really is the 
institutionalization of gossip. That gives me great concern.
    If you want to put a blacklisting group together, let's 
talk about adjudications. We already have some of that in 
debarment proceedings that are part of the law. Past 
performance is taken into account when you are giving that.
    I think there is an appropriate way to do that and I would 
be happy to work with the gentlelady to try to make something 
that works. But, putting down mere allegations or charges and 
trying to make this a part of what a contracting officer or 
procurement official looks at in allowing who gets it I think 
makes this an open season that does not help the contracting 
process at all.
    Mrs. Maloney. Would the gentleman yield?
    Mr. Davis of Virginia. I understand the panel's reluctance 
to embrace it.
    Yes. I would be happy to.
    Mrs. Maloney. I look forward to working with the gentleman, 
as we have on so many important issues. I congratulate him for 
bringing this point up. It was certainly not my intent for it 
to be allegations, but only fact. I look forward to working 
with him to put forward facts and concrete examples.
    Mr. Davis of Virginia. We will have some discussion.
    Mrs. Maloney. Certainly not gossip. As politicians, we know 
how damaging gossip can be, and there is always a lot of it out 
there.
    Mr. Davis of Virginia. Well, I look forward to working with 
my friend.
    Mrs. Maloney. And a lot of it is not true, and we certainly 
don't want to bring that into the contracting process.
    Mr. Davis of Virginia. Thank you.
    Mrs. Maloney. We want our contracting process to be 
factual, accurate, streamlined, and helpful to business and 
helpful to taxpayers and helpful to Government.
    Mr. Davis of Virginia. Thank you.
    Mr. Murphy. Thank you, Mr. Davis. I think we can say safely 
that we do look forward to working with you on these pieces of 
legislation as they move forward, and we thank you very much 
for your testimony here today. Thank you very much.
    We are going to take just a brief break while we get set up 
for our second panel, and then we will conduct the second 
panel.
    [Recess.]
    Mr. Murphy. Good afternoon. The committee will come back to 
order.
    I would like to welcome our second panel here this 
afternoon. As with our first panel, it is the committee's 
policy that all witnesses are sworn in, and so if the two 
witnesses would please rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Murphy. Thank you. The record will show that each 
witness answered in the affirmative.
    Before we hear your testimony before the committee, I would 
just like to briefly introduce each witness.
    Mr. Scott Amey serves as general counsel of the Project on 
Government Oversight. It is a watchdog group that studies 
Federal spending and contracting.
    Alan Chvotkin is the senior vice president and counsel of 
the Professional Services Council, representing many of the 
largest Federal contractors in the United States.
    Your entire statements are on the record and part of the 
record, but I would ask each of the two witnesses to please 
summarize. As Mr. Towns noted to the first panel, you will have 
lights in front of you noting with the yellow light when your 
time is almost up, and a red light alerting you when to 
conclude your remarks.
    We will begin with Mr. Amey.

     STATEMENTS OF SCOTT AMEY, GENERAL COUNSEL, PROJECT ON 
GOVERNMENT OVERSIGHT; AND ALAN CHVOTKIN, SENIOR VICE PRESIDENT 
           AND COUNSEL, PROFESSIONAL SERVICES COUNCIL

                    STATEMENT OF SCOTT AMEY

    Mr. Amey. Good morning to the subcommittee, and thank you 
for inviting me to testify today about the status of Federal 
contracting reform.
    I am Scott Amey, the general counsel of the Project on 
Government Oversight, a nonpartisan watchdog group founded in 
1981. POGO investigates and exposes corruption and other 
misconduct in order to achieve a more accountable Federal 
Government.
    POGO is pleased that this subcommittee is holding this very 
important hearing. First, Government contract spending has 
eclipsed the $40 billion range in fiscal year 2007. Second, 
there are numerous legislative proposals and recommendations 
that require serious attention.
    POGO has been asked to present its views on the 
recommendations made by the Acquisition Advisory Panel, as well 
as the proposals made in H.R. 3033, H.R. 4881, and 3928.
    POGO fully supports H.R. 3033, the Federal Contracting and 
Federal Spending Accountability Act of 2007. As the 
subcommittee may recall, on July 18th I testified before this 
committee and supported H.R. 3033 at that time. That bill will 
propose a data base that will formalize and replicate POGO's 
Federal contractor misconduct data base and address the 
Government's failure to vet contractors to determine whether 
they are truly responsible.
    Since the subcommittee's hearing last year, POGO has been 
working with the Senate to introduce companion legislation. As 
the subcommittee might recall, POGO's Federal contractor 
misconduct data base is a compilation of instances of 
misconduct and alleged misconduct committed by the top Federal 
Government contractors. Currently we have 420 instances of 
misconduct in that data base, totaling $10 billion.
    The pending cases or the allegations that Representative 
Davis had mentioned earlier are not included in those totals.
    H.R. 3033 would correct the Government's inaction in 
collecting and evaluating contractor responsibility 
information. While Congress is considering this legislation, 
the Defense and civilian agencies have initiated a rulemaking 
that would begin to address some of the issues raised in this 
important bill, specifically, notification to contracting 
officers when there are violations of Federal criminal laws 
regarding contracts and subcontracts. The proposed rule also 
stipulates that failure to comply with the notification 
requirement could result in suspension or debarment.
    Although greater in scope, H.R. 3033 would codify into law 
the actions agencies are already taking on their own. More 
importantly, however, those instances needed to be logged into 
a data base created by H.R. 3033 for all Government officials 
and the public to see. Without a data base, those instances are 
not shared between agencies.
    Even the National Procurement Fraud Task Force Legislation 
Committee has proposed a similar data base that will include 
violations of criminal laws, so this isn't far removed from 
what everybody is asking Congress and the agencies to do 
already.
    Sharing information between departments and agencies as 
proposed in the bill would go a long way in improving pre-award 
contracting decisions and enhancing the Government's ability to 
weed out risky contractors, especially those with repeated 
histories of misconduct or poor performance.
    I predict that there will be industry criticism about what 
to call the data base and efforts to scale back the type of 
information that is included. POGO encourages an open debate on 
those topics and will fight to keep all criminal, civil, and 
administrative settlements, even those without any admission of 
guilt or liability by the contractor.
    POGO believes that the Contracting and Tax Accountability 
Act of 2007, H.R. 4881, is also very important. We actually 
think it should be part of Representative Maloney's bill, 3033, 
because that would help put together instances where 
contractors are delinquent in paying their taxes. That should 
be one of the first things entered. That is not an allegation, 
but if they are being held to be delinquent, then at that point 
that is the type of information that should be presented to 
taxpayers.
    The Senate has held three hearings on Federal contractors 
with unpaid tax debt, identifying $6.3 billion in unpaid taxes. 
That is the type of information that should be collected.
    H.R. 4881 is on the right track, but POGO believes that it 
could go further in its scope. The bill is limited to 
negotiated acquisitions, leaving out FAR part 12 commercial 
item purchases. The bill would also only apply to contractors 
that are seriously delinquent in paying their taxes.
    POGO supports H.R. 4881 with the understanding that the 
definition for seriously delinquent encompasses the companies 
that owe the $6.3 billion in delinquent taxes to the Federal 
Government. We see H.R. 4881 as another tool to prevent 
companies with questionable track records from receiving 
Federal taxpayer dollars.
    The third bill that I was asked to speak about is the 
Executive Compensation Disclosure Bill, H.R. 3928, which would 
require certain contractors to disclose the names and salaries 
of their most highly compensated officers. POGO struggled with 
our stance on this bill, because there have been some issues 
that have already been raised in the first panel as far as 
bringing to light private information; however, I think on the 
side of caution, disclosure wins out here. The scope of the 
bill is very limited, and at that point, these are companies 
that are vastly majority funded by the taxpayer, and, 
therefore, their information should be brought to light.
    In conclusion, because I see that my time is running out, I 
think that POGO's worst fear with the Acquisition Advisory 
Panel and some of these other bills is they are things that 
have been batted around for years. If you take a look at the 
GAO's report and the testimony from today, a lot of the issues 
were issues that they have raised for many, many years that 
have been ignored.
    I think that there needs to be a change in the culture in 
the contracting system throughout the Government to promote 
competition and some of the other items and issues that are 
major concerns with our contracting system as it stands. Even 
if all of the 1423 Panel's recommendations are implemented and 
Congress passes the legislation included in today's hearing, 
POGO believes that there is still more work to be done.
    Thank you for inviting me to testify today. I look forward 
to working with Chairman Towns, Ranking Member Bilbray, and the 
entire subcommittee to further explore how the Federal 
Government can improve the buying of goods and services.
    Thank you.
    [The prepared statement of Mr. Amey follows:]

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    Mr. Towns [presiding]. Thank you very much for your 
testimony.
    Mr. Chvotkin.

                   STATEMENT OF ALAN CHVOTKIN

    Mr. Chvotkin. Mr. Chairman, thank you very much for the 
invitation to testify. The Professional Services Council is the 
leading national trade association representing the 
professional, technical, and engineering companies providing 
services to the Federal Government. Our members include small, 
mid-tier, and large businesses.
    Before I comment on the specific legislative proposals 
being addressed today, I want to implore you to address all of 
these issues in a fact-based manner. All too often, the 
complexities and nuances of Federal procurement have either 
been misstated or misinterpreted and led to the creation of 
numerous myths about Federal contracting. In this business, 
words and terms matter, and as you examine avenues to enhance 
the quality of the Federal acquisition process, it is important 
to proceed with well-understood definitions, sound data, and an 
accurate assessment of the current environment.
    It is also important to recognize that many layers exist 
today to protect the Government's interest in equities. The 
Government marketplace is vastly different and far more 
regulated than the commercial marketplace, and we do not 
suggest that the two can or should be identical. While the 
discussion is wholly appropriate, overly simplistic statutory 
or regulatory language that ignores the policy, implementation, 
due process, and other dimensions involved is the wrong way to 
start.
    I also want to address the issue of the Federal acquisition 
work force in its broadest context. Far from simplifying the 
life of the Federal acquisition professional, many of the 
reforms included in enacted legislation and recommended by the 
SARA Panel actually make the acquisition process more demanding 
for the people charged with its execution. While the procedures 
are far easier to execute, they are also far less effective and 
frequently place procedural perfection over mission 
accomplishment.
    Unfortunately, despite the near unanimous agreement that 
actions must be taken to address the challenges of the Federal 
work force, not enough has been done in the executive branch or 
by the Congress to turn the tables. More needs to be done.
    PSC believes that a smart, well-trained, and prepared 
customer makes the best customer. As PSC testified before the 
Senate last July, we need a kind of work force Marshall plan 
that aggressively addresses the hiring, retention, training, 
reward, and development of the Federal work force we are asking 
to manage 40 percent of the discretionary budget of the Federal 
Government.
    Let me address the three bills that you have asked for our 
comments on. With respect to H.R. 3928 by Mr. Murphy, PSC 
supports transparency and accountability in Federal 
contracting, but the reason for this bill is clear and obvious. 
It seems to be focused on only one company under a unique set 
of circumstances. Simply, the bill provides no information that 
the Government can use to determine whether the contractor 
performs under the contract or is profitable. Furthermore, more 
than a decade ago, as the earlier panel pointed out, Congress 
imposed a comprehensive mechanism to annually cap the maximum 
compensation amount that the contractor is allowed to charge 
under any Defense or civilian agency government contract. We 
don't see this bill as necessary.
    With respect to H.R. 4881, another bill pending before the 
subcommittee, private entities providing goods and services to 
the Federal Government should comply with Federal, State, and 
local tax requirements. Companies that do not comply simply 
have an unfair advantage over law-abiding contractors that pay 
their taxes. Yet, there is considerable rhetoric surrounding 
allegations that government contractors have reputedly violated 
tax laws but continue to receive contracts.
    In May of last year, this subcommittee favorably reported a 
revised version of the bill under a substitute offered by you, 
Mr. Chairman, and adopted by the subcommittee. PSC supports the 
Towns substitute, although we had other recommendations that 
were not included in it. Nevertheless, the substitute properly 
relies on the debarment mechanisms under current regulations to 
ensure that a contractor is provided with due process before 
being denied access to Government contracts, as those already 
provided under the responsibility requirements of Federal law 
and the Federal acquisition regulations. Many of those positive 
attributes are also included in H.R. 4881.
    As you know, there were two nearly identical provisions 
related to contractor and grantee tax compliance included in 
the 2007 Appropriations Act. Different formulations were 
included in different stand-alone bills.
    Since the enactment of these two provisions, we are not 
aware of any guidance or inter-procurement regulations that 
have been issued, but we will be watching for them.
    In addition, as Mr. Denett noted, there are administrative 
actions that have been taken and are still in process that 
deserve to be implemented and then assessed before adopting new 
legislation. In light of these actions, we urge the 
subcommittee to hold off pursuing further legislation in this 
area at this time.
    Finally, to address H.R. 3033, another bill pending before 
this subcommittee, PSC supports the objectives of transparency 
and accountability in Federal contracting and recognizes the 
importance of the Government having access to relevant 
information pertaining to contractor responsibility. We do not 
conceptually oppose a Government-wide data base that includes 
objective information based on factual, Government-provided 
input that includes sufficient descriptors to fully explain the 
nature of the reported data, the nature of the remedial action 
taken, and the relative severity of the infractions cited. 
Unfortunately, the legislation does not address these elements.
    Furthermore, to the extent that the data base includes 
information on fines paid or settlements, fundamental due 
process mandates that include only those judicial or 
administrative actions that result in findings or admission of 
guilt.
    In my statement I go on to talk about the Acquisition 
Advisory Panel recommendations. I would be happy to address any 
issues that the subcommittee may have about that.
    We appreciate the invitation to testify and look forward to 
answering any questions you may have.
    [The prepared statement of Mr. Chvotkin follows:]

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    Mr. Towns. Thank you.
    Let me thank both of you for your testimony.
    Let me begin with you, Mr. Chvotkin. You oppose H.R. 3033 
in its current form. That is my understanding, and you said you 
do not oppose a Government-wide data base on factual, 
Government-provided input. Then what needs to be done in order 
for you to come onboard?
    Mr. Chvotkin. Well, I think Mr. Davis pointed out some of 
the issues that are of interest and concern to us where I think 
real progress could be made. I mean, there is a lot of 
information that is dispersed throughout the Government, and we 
don't mind bringing existing information into a more convenient 
form, readily available to the contracting officers so that 
they are not out there searching for relevant information. 
There is already significant information in the online 
representations and certifications system that lists 
information about a company's compliance with numerous laws. 
Mr. Davis mentioned the suspension and debarment list. There is 
other debarment information. So bringing those kinds of factual 
informations from a Federal level together into a single data 
base we have no objection to.
    Mr. Towns. You know, New York City already has a data base, 
of course. Are you familiar with that one?
    Mr. Chvotkin. I am, sir.
    Mr. Towns. Why don't we just copy that?
    Mr. Chvotkin. Well, I am familiar with it. Much of the 
information asked of Vendex, both the companies and principals, 
is very similar to the information that is already available at 
the Federal level. The Vendex system asks for the information 
that maybe should be asked at the Federal level, and it has 
other questions that may not be appropriate. I think it is an 
appropriate model.
    There are some legitimate concerns raised about the 
timeliness of information, how information may be stale, making 
sure that contractors, or anybody who has information in that 
data base, just like your personal credit reporting, you have 
an opportunity to look at it, submit comments. That protection 
needs to be in there. So if the Vendex data base model is a 
starting point, we understand that and we could be supportive 
of it.
    Mr. Towns. All right.
    Mr. Amey, I understand you get a lot of your information 
about lawsuits from SEC filings where companies are required to 
disclose information on pending cases. Could we just write a 
provision in H.R. 3033 saying that if a lawsuit is required to 
be disclosed to the SEC, it is required to be included in the 
contractor data base also?
    Mr. Amey. Mr. Chairman, I think that is a wonderful 
solution, because that has already been vetted and debated for 
many years, and I know that clause that discusses what legal 
proceedings have to be disclosed has been a huge, debatable 
issue. There are lawsuits over it. Many companies have fought 
it.
    I think the tide has turned where companies have erred on 
the side of caution in wanting to disclose information to the 
SEC, because they are fearful of what their shareholders will 
do. That would be a wonderful way to take a look at this.
    But, then you also need to look at, I think, some 
additional items in addition to what is included in the SEC 
data base, because that is not picking up administrative 
agreements, it is not picking up contracts terminated for 
default, and that is where the other language in H.R. 3033 
picks up to ensure that the Government has as much information 
to make its responsibility determination as they can.
    Mr. Towns. Right. On November 14, 2007, the FAR Council 
issued a proposed rule that would make a number of changes 
aimed at reducing fraud in Government contracting. First, it 
would require contractors to notify the Inspector General when 
they have reasonable grounds to believe one of their employees 
has committed a violation of criminal law in connection with 
their Government contract.
    Second, it would add failure to disclose such violations as 
a cause for suspension and debarment.
    Third, it would require full cooperation with Government 
audit and investigative agencies.
    I would be interested in hearing your views on this 
proposed rule.
    Mr. Amey. The Project on Government oversight submitted a 
public comment supporting the rule, but also asking that it be 
expanded to include the other types of issues and the other 
misconduct that has been proposed in H.R. 3033. The one fear--
and I have read other comments that have been submitted--is the 
same issue that Representative Davis has raised on the 
allegations. Even the clarity of the definition for when a 
violation is known creates some problem. Even as a lawyer, it 
creates a problem for me as far as work product issues and 
whether you are being held guilty before you prove your 
innocence. But overall, I think that information is necessary 
to disclose to contracting officers and to the Government to 
make sure that we are not awarding contracts to risky 
contractors.
    We can debate on what is included at what point. I think 
final adjudications is a nice way to go, but there are many 
different types of misconduct that aren't being captured at 
all, whether in the performance retrieval system--and we 
provide grades in that throughout that system. Why can't we do 
the same thing with some type of responsibility grade so that 
when a contracting officer can go to one specific location and 
see a grade for a contractor and be able to factor out right 
away whether they are risky or responsible? If not, we might as 
well take the responsibility determination requirement right 
out of the law and we might as well do away with it, because 
currently the suspension debarment list doesn't get that 
information, and neither does the excluded parties list or the 
performance information retrieval system, so at that point we 
have a huge gap of information that is currently not being 
presented to the government.
    Mr. Towns. The light is on red, but very quickly, Mr. 
Chvotkin, what do you think of that rule?
    Mr. Chvotkin. We also commented extensively on that 
regulation. We are a strong supporter of mandatory, Government-
wide ethics programs that are suitable to the size and the 
nature of the business that companies provide to the Federal 
Government. We were troubled by the mandatory disclosure. We 
have not been convinced that changes to the current voluntary 
disclosure process couldn't improve the process considerably.
    Like Mr. Amey, we raised a number of questions about 
definitions. As I said at the beginning, definitions and words 
are so important in this business.
    In the area of cooperation, there are already Federal laws 
regarding cooperation, and we recognize the value of doing 
that. Here, again, companies have some due process rights, and 
we weren't sure that the regulations, themselves, clearly 
recognized those due process rights.
    Mr. Chvotkin. And if I may add one thing, that rule 
primarily came from the Department of Justice, who feels they 
don't have the tools necessary in their toolbox----
    Mr. Amey. Right.
    Mr. Chvotkin [continuing]. In even receiving voluntary 
disclosures from the contractors to be able to prevent and 
prosecute fraud, so it wasn't something that came from POGO or 
the private sector. This is something where the DOJ is saying, 
``hey, we don't have enough in our toolbox to be able to go 
after some people, and we need those tools.'' I think that is 
vital.
    Mr. Towns. Right.
    Mr. Murphy.
    Mr. Murphy. Thank you very much, Mr. Chairman. Thank you 
both for your testimony.
    Mr. Amey, I want to get at, if I can, some of your inner 
turmoil over 3928. I think what you posited was a challenge in 
reconciling the benefit of the more transparent information 
regarding how much private companies are pulling out of these 
contracts and what you term as private information.
    I certainly understand that the proprietary nature of 
salary data, of profit numbers for truly private companies that 
are deriving their investment sources from private individuals 
and private companies. In this case, this bill--and I think we 
had some good suggestions on how to, maybe, further limit it 
today--is getting at companies that get the lion's share of 
their investment of their revenue from the taxpayers, from the 
citizens of the United States. I don't look at that in the same 
way that I look at private proprietary data in truly private 
sector companies.
    So I guess I want you to just elaborate on sort of why you 
come to a less than conclusive statement in support of this 
bill.
    Mr. Amey. Thank you for the opportunity. I think in our 
written testimony we called it tepid. Obviously, we are always 
supportive of disclosure. I am afraid of the floodgates that 
would open, and I don't mean to make the industry's argument in 
this case, but I think the limited nature of the bill makes it 
more than adequate and appropriate bill to sign on to.
    I have additional problems with the executive compensation 
bills overall, and I think that is also why we are tepid, 
because currently, as was discussed earlier with the first 
panel, there are caps. The Government sees the information. DCA 
audits the information. So you are creating a bill that would 
just be publicly available on the public procurement data 
system, but I have more problems with the fact that it is 
limited to the top five executives. So at the part where you 
get to executive six, all of the sudden that contractor can 
fully bill the Government and the taxpayer for that entire 
salary and not the capped $597,000.
    So I don't mean to throw the baby out with the bath water 
to get to greater reform when it comes to executive 
compensation, but I think the Government has the necessary 
tools, and it collects the information that they need to ensure 
that private contractors aren't taking advantage of taxpayers 
with those salaries, even the private contractors that are in 
cost reimbursement type contracts.
    Mr. Chvotkin. I believe there may be an incorrect 
statement. I don't want to leave the record. No salary in 
excess of the compensation amount is reimbursable. It doesn't 
matter whether you are the 1st, the 6th, the 26th, or the 
106th. The Government on cost reimbursement contracts is not--
the contractors cannot bill the Government for that salary. 
Doesn't matter.
    Mr. Murphy. Let me then ask the next question to both of 
you. It is my understanding from the previous panel that 
compensation limit applies to cost contracts, not to fixed-
price acquisition contracts; is that correct?
    Mr. Chvotkin. That is correct, sir.
    Mr. Murphy. And do we have a sense as to what percentage 
right now of competitive contracts are fixed-price acquisition 
contracts?
    Mr. Amey. There was a recent study that was done--I think I 
cite to it in my testimony--where, I think, they came up with a 
figure of the majority of contracts--well, not the majority, 
but 40 percent of contracts--were in the cost reimbursement 
section, and that was also one of the Advisory Panel's 
recommendations: We need to get into more competitive fixed-
price contracting. The percentage of fixed-price contracting is 
a lot lower. So it would apply to more contracts than in the 
fixed-price sector.
    Mr. Murphy. Mr. Amey, doesn't it concern you that if you 
are talking about such a large number of projects not being 
subject to that compensation limit, that if on fixed-price 
acquisition contracts we don't have a compensation limit--I 
mean, what is our control on those contracts with regard to 
compensation?
    Mr. Amey. When they are fixed-price contracts, the control 
is just the overall result. Did you feel you got a fair and 
reasonable price for the overall contract? And you are just 
looking at the bottom-line figure.
    Mr. Murphy. So let me just ask a question to both of you, 
the final question to both of you. Let's say in a hypothetical 
we have a $10 million contract and we found out through some 
means a year later that there was a $3 million salary to the 
executive of that company. Wouldn't that be incredibly relevant 
data to provide a red flag that what we thought was a 
reasonable price, what we thought was the best deal we could 
get, actually wasn't, because somehow that company found a way 
to pay its executives much more than would be reasonable?
    It seems to me that the amount of money that you are taking 
off the top of the contract is incredibly relevant in 
determining whether or not we got as good a deal as we though 
we were going to get at the outset.
    I will ask that to both of you.
    Mr. Amey. Well, the executive compensation threshold is 
also proportional, so if they only have 85 percent of their 
work with the Federal Government, they can only charge out of 
that threshold 85 percent to the Federal Government, so it 
won't be all. Obviously, contractors find loopholes in every 
law that we pass and find their way around them, but I think 
there is adequate information currently with the Government 
that exposes the issue when it comes to the fact that it is 
reported to contracting officers and DCA is checking and 
enforcing it.
    So, I don't know what we win in the disclosure world, but 
overall to have it there POGO would support it.
    Mr. Chvotkin. Thank you, sir. Let me just make sure, for 
clarity, the contract price does not equal company profits or 
salary, so there is a lot of components that go into price. 
And, on the fixed price, we hope that there are strong 
supporters of competition. We would hope that the competitive 
environment would help ensure that the Government is getting a 
fair and reasonable price for the goods and services that it is 
contracting for, and the Government would retain its rights 
across evaluated companies to know where that information was 
coming from. So, they do have tools to get at that. We want to 
be very careful about opening up repricing fixed-price 
contracts. I think that is a very dangerous precedent.
    Mr. Murphy. Congresswoman Maloney from New York.
    Mrs. Maloney. Thank you, Mr. Chairman, for your leadership 
on these issues.
    I would like to ask Mr. Chvotkin, on your comments on due 
process protections, I believe the safeguards that exist in the 
current FAR are unchanged in H.R. 3033. In your testimony today 
you have repeatedly said that this impairs due process 
protections in some way.
    Can you explain in detail how H.R. 3033 changes current FAR 
due process protections, especially in view of the fact that 
the bill has provisions and provides for rebuttal and allows 
the contractor to show mitigating or remedial factors?
    Mr. Chvotkin. Yes, ma'am. Thank you.
    As you point out, today, with respect to the past 
performance information retrieval system, the Government's twin 
data bases that are collecting information on ongoing work, 
that kind of information, the contractor is given the 
opportunity to review the file and to submit comments, very 
much like the fair credit reporting that applies to you and I 
in the private sector information.
    That same kind of opportunity to review and comment does 
not exist today in FAR for other kinds of information that the 
Government may have. Your bill does provide for some of that 
kind of due process, and we strongly support that. It is to 
make sure that it covers across the universe of information 
that we are going to collect from the data base. If the bill 
does that in its final form, we would be supportive of it.
    Mrs. Maloney. Well, specifically, if you could get back to 
the committee how you would propose that this answers it, it 
seems to me that it does have room or provides for rebuttal, 
mitigating, remedial factors, and a response from the 
contractor.
    Mr. Chvotkin. Yes, ma'am, I would be happy to get back to 
the committee with those details.
    Mrs. Maloney. And on the issue of objective criteria, which 
you brought up, why would you say H.R. 3033 does not establish 
objective criteria? H.R. 3033 uses the FAR standards and 
clearly states the standard of the same offense or similar 
offense twice within a 3-year period. What objective criteria 
would you suggest?
    Mr. Chvotkin. It is the issues of the allegations. It is 
the unsupported audit reports. It is the GAO----
    Mrs. Maloney. What do you mean unsupported audit reports? 
Audit reports are audit reports. What is an unsupported audit 
report?
    Mr. Chvotkin. An unsupported audit report would be the 
initial conclusions of a DCA auditor that has not been reviewed 
and commented on by the contractor and a decision made by the 
contracting officer. That would be an unreviewed, unsupported 
audit report. In our view, simply because an auditor can raise 
questions about cost, legitimately so, there are other factors 
that go into the--other information that goes into the final 
determination of whether the costs are legitimately questioned 
or doubted, and if so at what stage of the process that 
information comes forward.
    This committee addressed that----
    Mrs. Maloney. So you would support it if it had comments 
from the contractor on the auditing and the decision by the 
contract officer?
    Mr. Chvotkin. Yes, ma'am. In fact, in the final version of 
legislation that this committee approved and the House passed 
early last year by Mr. Waxman, H.R. 1362, that same issue was 
addressed, and the committee concluded--and the House adopted 
provision that provides for a final audit report, which 
includes the recommendations of the auditor, the information 
response from the contractor, and a final decision by the 
contracting officer. With that stage, no objection. That is the 
final report.
    Mrs. Maloney. And also on the issue of complex legal 
issues, you said that H.R. 3033 would require contracting 
officers to make complex judgments, but wouldn't you say that 
contracting officers now already have to make a lot of pretty 
very complex judgments? And are you saying more comprehensive 
data in a single place would make their job harder or their 
judgments more difficult to make?
    Mr. Chvotkin. No, I am not saying that at all. On the 
contrary. We support having the factual information that we 
talked about more conveniently available to a contracting 
officer. The Government already has the data, so we see no 
reason not to make that more readily available. The factual 
judgments or the complex legal judgments that some have 
proposed--again, it is not in 3033, but my caution here is that 
some are asking contracting officers, whose primary mission is 
to evaluate the opportunities for buying goods and services, to 
decide whether a company is in violation of the labor laws or 
the environmental laws or the tax laws. They are not trained to 
do that. They don't have sufficient information. Those are the 
complex legal questions that we are concerned about.
    Again, we are not concerned about having information. If 
there is a conviction by the Justice Department for tax 
evasion, that information ought to be available to the 
contracting officer.
    Mrs. Maloney. Are you saying that if a contractor doesn't 
pay their taxes that should not be part of the information? I 
mean, there have been reports on how many people are getting 
Government contracts that aren't paying their taxes.
    Mr. Chvotkin. There are a lot of reports of a lot of things 
going on. If there is a finding of tax liability and the 
contractor is not----
    Mrs. Maloney. Finding by whom? The IRS?
    Mr. Chvotkin. By the IRS. They are the agency that the 
Congress has charged with responsibility for implementing the 
tax laws. The IRS concludes that there is a tax liability that 
is not subject to an agreement or offset, absolutely, that 
information should be made available to the Government.
    Mrs. Maloney. Finally, are you aware that the disclosure 
standards in H.R. 3033 closely mirror the standards in the 
private sector for the construction industry? I have reviewed 
construction industry-wide forms. They are qualifications 
disclosure forms for construction general contractors and 
subcontractors, consensus forms, 221 and 721. These documents 
from the private sector ask for comprehensive contract 
compliance and legal compliance going back 5 years. Why 
wouldn't or shouldn't the Federal Government, Federal 
purchasing function, mirror the best practices of the private 
sector?
    Mr. Chvotkin. I am not familiar with those documents in the 
construction industry.
    Mrs. Maloney. OK. Can we get them to you and could you get 
back to us in writing?
    Mr. Chvotkin. Yes, ma'am. It would be my pleasure.
    Mrs. Maloney. We have to go vote, so I would like to 
reserve the opportunity to put other questions to you in 
writing. I know the chairman is telling me my time is up and 
has been up for a long time, so thank you, Mr. Chairman.
    Mr. Towns. And we will hold the record open to receive that 
information. Thank you very much.
    At this time the committee is adjourned.
    [Whereupon, at 12:27 p.m., the subcommittee was adjourned.]

                                 
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