[Senate Hearing 110-240]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-240

        DHS'S ACQUISITION ORGANIZATION: WHO IS REALLY IN CHARGE?

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

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                     THE FEDERAL WORKFORCE, AND THE
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 7, 2007

                               __________

        Available via http://www.access.gpo.gov/congress/senate

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs











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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


  OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                   DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan                 GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware           TED STEVENS, Alaska
MARK L. PRYOR, Arkansas              TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana          JOHN WARNER, Virginia

                   Richard J. Kessler, Staff Director
             Jennifer A. Hemingway, Minority Staff Director
                      Emily Marthaler, Chief Clerk





















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1
    Senator Voinovich............................................     3

                               WITNESSES
                         Thursday, June 7, 2007

Hon. Paul A. Schneider, Under Secretary for Management, U.S. 
  Department of Homeland Security................................     5
Admiral John P. Currier, Assistant Commandant for Acquisition, 
  U.S. Coast Guard...............................................     7
John P. Hutton, Director of Acquisition and Sourcing Management, 
  U.S. Government Accountability Office..........................     9

                     Alphabetical List of Witnesses

Currier, Admiral John P.:
    Testimony....................................................     7
    Prepared statement...........................................    36
Hutton, John P.:
    Testimony....................................................     9
    Prepared statement...........................................    41
Schneider, Hon. Paul A.:
    Testimony....................................................     5
    Prepared statement...........................................    27

                                APPENDIX

Background.......................................................    53
Response from Mr. Schneider to specific questions regarding the 
  number of new acquisition staff the Department has hired.......    59
``Defense Acquisition University Quick Look Study,'' United 
  States Coast Guard Deepwater Program, February 2007............    61



















 
        DHS'S ACQUISITION ORGANIZATION: WHO IS REALLY IN CHARGE?

                              ----------                              


                         THURSDAY, JUNE 7, 2007

                                 U.S. Senate,      
              Subcommittee on Oversight of Government      
                     Management, the Federal Workforce,    
                            and the District of Columbia,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:33 p.m., in 
Room 342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 
Chairman of the Subcommittee, presiding.
    Present: Senators Akaka and Voinovich.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Good afternoon. This hearing of the Homeland 
Security and Governmental Affairs Subcommittee on Oversight of 
Government Management, the Federal Workforce, and the District 
of Columbia is called to order.
    I want to welcome our witnesses and offer my special thanks 
to Under Secretary Schneider for taking time out of his busy 
schedule once again for this Subcommittee. Last month, this 
Subcommittee held its first hearing to examine the Department's 
management challenges, where we touched on several issues vital 
to integrating DHS successfully. In today's hearing, we hope to 
explore one of the most critical issues facing DHS, and that is 
acquisition management.
    Four years ago, the Federal Government started a monumental 
task bringing together 22 agencies and offices from across the 
Federal Government to form the new Department of Homeland 
Security. This reorganization combined 180,000 employees as 
well as a massive procurement portfolio. DHS has become the 
third-largest spender on contracts behind the Departments of 
Defense and Energy, spending more than $15 billion in fiscal 
year 2006.
    While DHS is still a young agency, it has experienced its 
share of contracting woes. Since its creation in 2003, DHS has 
found itself on the Government Accountability Office's high-
risk list. This has been due in large part to the challenges 
that existed in many of DHS's component agencies before the 
reorganization as well as the complexity and critical 
importance of a successful reorganization.
    In particular contract management has posed a difficult 
problem throughout DHS's short history. The Department is 
already engaged in several large-scale procurement projects. 
Some were poorly executed and managed. Poor contract management 
leaves DHS vulnerable to waste, fraud, and abuse. Most 
importantly, it exposes the Nation to unacceptable security 
risks.
    When the Department was created, a total of seven component 
agencies brought their own contracting shops to DHS. Those who 
did not have their own existing organization before coming to 
DHS now utilize the Office of Procurement Operations under the 
Chief Procurement Officer. While DHS does have a Chief 
Procurement Officer, the acquisition organizational structure 
at DHS gives the position little formal authority outside of 
the Office of Procurement Operations. A 2004 Management 
Directive at DHS gave the CPO oversight and auditing roles 
agency-wide, but limited its authority over the Secret Service 
and the Coast Guard. The CPO and DHS's other contracting shops 
share dual authority over contracting matters. This 
decentralized acquisition organization has proven problematic 
for the agency, according to GAO.
    In addition to the acquisition structure at DHS, the 
Department has an inadequate contracting workforce. The 
shortage of qualified procurement professionals seriously 
hinders the Department's ability to oversee contracts 
effectively after they have been awarded. DHS has made some 
progress in improving recruitment, training, and retention of 
qualified acquisition professionals, notably with its new 
internship program.
    However, more needs to be done. Without the experienced 
workforce the Department requires, I fear it will have to rely 
increasingly on large single-source contracts that it cannot 
effectively manage, leading to increased waste and fraud.
    Last year, problems with the Coast Guard's Deepwater 
contract came to a head when costs soared and deliverables did 
not meet specifications required under the contract. I 
understand that over the last several months, the Coast Guard 
has reevaluated its Deepwater contract and implemented reforms, 
which I hope Admiral Currier will detail in his testimony, but 
it is most important to hear what lessons have been learned 
both by the Coast Guard and the Department that can be applied 
to future acquisition programs.
    The Department is now in the process of implementing the 
Customs and Border Protection contract to secure our borders, 
known as the Secure Border Initiative, or SBInet. This will be 
a multi-year, multi-faceted project of a tremendous scale that 
would present a great procurement management challenge to even 
the most experienced, highest-functioning organization. 
However, as the DHS Inspector General pointed out in a November 
2006 report, there are already early warning signs that the 
Department may not have the resources available to manage 
SBInet properly. According to that report, DHS lacks the 
appropriate workforce, business processes, and management 
controls to plan and execute it. I am greatly concerned by 
this. I hope that Under Secretary Schneider will lay out how 
DHS intends to mitigate the problems highlighted in the 
Inspector General's report.
    DHS needs a comprehensive acquisition structure in which 
all components with procurement authority work together, do not 
duplicate efforts, and do not unnecessarily compete for 
resources. This is essential for the Department to perform its 
mission.
    As Benjamin Franklin once famously said, ``For want of a 
nail, the shoe was lost. For want of a shoe, the horse was 
lost. And for want of a horse, the rider was lost.'' 
Acquisition management is a fancy term for making certain that 
our first responders and homeland security professionals have 
the tools they need to accomplish their mission. I intend to 
keep a close watch on how well DHS is managing acquisition and 
look forward to supporting Mr. Schneider's efforts at reform.
    Now, I would like to call on Senator Voinovich for his 
statement.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Senator Akaka. I want to 
thank all of you for being here today. This is the second 
hearing we have had on management issues facing the Department 
of Homeland Security. I am very worried about the current state 
of the Department and where it is going. I don't think the 
public understands what a gigantic task it is to take 22 
agencies, 200,000 people, and bring them together and come up 
with an organization that really gets the job done.
    Senator Akaka and I are going to stay committed to the 
Department's management issues. We want to make sure that this 
gets off the GAO high-risk list, but more important than that, 
that it does the job that the people of this country expect it 
to do, which is to protect the homeland.
    I think too often Congress fails to recognize the link 
between agency management and operational success. With a 
finite amount of resources and an ever-growing demand for 
homeland security services, it is imperative that the 
Department employ an effective acquisition management strategy 
to ensure taxpayer dollars are spent in a cost-effective 
manner.
    In 2005, the GAO began reporting on the challenges inherent 
in the Department's acquisition process. The 2007 GAO high-risk 
report found the Department lacks a unified acquisition 
organization and faces a shortage of experienced acquisition 
personnel to manage its $15.7 billion procurement budget.
    Senator Akaka and I have spent a considerable amount of 
time in the Senate focusing on human capital management and 
improving the effectiveness of agency programs deemed to be 
high risk. We understand how critical it is for DHS to have a 
highly-trained, appropriately staffed acquisition workforce to 
properly manage its acquisition process. We expect that 
individuals supporting the acquisition structure will know who 
is in charge. Mr. Schneider, I am pleased that you recognize 
these core needs and look forward to learning more about your 
plan to ensure that they are met.
    One deficiency that continues to plague the Department's 
ability to accomplish its mission is the lack of a Chief 
Management Officer. The CMO position will become even more 
important if the immigration bill currently being debated in 
the Senate becomes law. The Department's plan to achieve the 
benchmarks in the immigration bill currently being debated by 
the Senate will require the dedication of top-level leadership 
and considerable resources. I think that our colleagues have no 
idea of what a gigantic task it is going to be to implement 
this legislation, assuming it gets passed. That is why I am 
working on an amendment to ensure the Department consults with 
this Committee if the immigration bill becomes law. This will 
provide for greater oversight and more acountability.
    Mr. Schneider, I remain convinced that elevating your 
current position to Deputy Secretary for Management and 
requiring a term appointment will provide the top-level 
leadership and continuity necessary to meet the current and 
future management challenges facing the Department. I recently 
read a National Journal article. You have 360 political 
appointees in the Department of Homeland Security, as 
contrasted to the Veterans Administration, which has 235,000 
employees and only 64 appointees. The Defense Department has 
283 political appointees, but they have 2.1 million employees.
    I was talking to Senator Collins today and we agreed that 
we need to look at the number of political appointees and 
evaluate which can be eliminated and those positions that can 
be put into the civil service. We are going to see lots of 
people leave that are in strategic positions in the Department 
and then the issue is who is going to run the Department? It 
seems to me that we need a CMO. Senator Akaka, we have to 
really push to see if we can't get this legislation passed so 
we have some kind of decent transition over there, or God only 
knows what will happen in the interim period.
    As the Department moves forward with major acquisition 
projects such as SBInet, a key component of our efforts to 
secure the border, I want to be assured DHS has a clear 
governance structure in place. This structure must clearly 
define how and when decisions will be made, who will make them, 
require performance metrics to measure success. Are we doing 
any good? And while these characteristics might seem basic to 
some, a cursory view of the Federal Government's acquisition 
initiative shows they are too often forgotten.
    I am pleased to see that SBInet is serving as a pilot for 
Acquisition Innovation Project, an effort launched by the 
Partnership for Public Service's Private Sector Council to 
improve post-award contract management. I encourage the 
Department to continue to participate in this pilot to aid in 
the success of SBInet and future DHS acquisition projects.
    As governor, I know firsthand how important public-private 
partnerships can be in improving the functioning of our 
government. This Subcommittee has responsibility to ensure the 
Department has the ability to carry out its mission. Rest 
assured that we will continue to monitor the acquisition 
management at the Department.
    I look forward to your testimony, and thank you, Senator.
    Senator Akaka. Thank you very much, Senator Voinovich.
    It is my pleasure to welcome back Paul Schneider, who is 
now Under Secretary for Management, Department of Homeland 
Security; also Rear Admiral John Currier, Assistant Commandant 
for Acquisition, U.S. Coast Guard; and John Hutton, Director of 
Acquisition and Sourcing Management, Government Accountability 
Office.
    As you know, it is the custom of the Subcommittee to swear 
in all witnesses, so will you please stand and raise your right 
hand.
    Do you swear that the testimony you are about to give the 
Subcommittee is the truth, the whole truth, and nothing but the 
truth, so help you, God?
    Mr. Schneider. I do.
    Admiral Currier. I do.
    Mr. Hutton. I do.
    Senator Akaka. Thank you. Let the record note that the 
witnesses responded in the affirmative.
    I want to thank you again for being here. Although your 
statements are limited to 5 minutes, I want all of our 
witnesses to know that their entire statement will be included 
in the record.
    So Mr. Schneider, will you please proceed with your 
statement.

  TESTIMONY OF HON. PAUL A. SCHNEIDER,\1\ UNDER SECRETARY FOR 
        MANAGEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Schneider. Thank you, Mr. Chairman, Senator Voinovich, 
and Members of the Subcommittee. It is a pleasure to appear 
before you again. I am here today to discuss acquisition and 
procurement issues and authorities.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Schneider appears in the Appendix 
on page 27.
---------------------------------------------------------------------------
    The Department of Homeland Security is in the midst of many 
crucial acquisitions that are vital to the success of DHS. 
Acquisition is the process that starts with identifying a 
mission need, developing the requirements and budget to meet 
that need, developing sound business strategies, contracting 
with industry to deliver the products and the services to 
fulfill that need, assessing trade-offs, managing program 
risks, and sustaining the delivered system through its life. 
Procurement is the actual transaction for goods or services and 
plays only a part in the overall acquisition process.
    The Coast Guard Deepwater program and SBInet are perhaps 
the two largest acquisition programs in the Department. The 
Deepwater program has been restructured with the role of the 
Coast Guard in managing this large-scale effort to be one of 
more hands-on control. The Coast Guard is also implementing a 
major organization restructuring to strengthen acquisition, 
which Admiral Currier will discuss in more detail. The major 
challenge the Coast Guard now faces in executing the 
Commandant's Blueprint for Acquisition is hiring the 
experienced talent that it needs to manage complex acquisitions 
and to establish acquisition as a valued career field with 
appropriate career plans for both military and civilians. This 
will require several years to fully mature.
    I am frequently asked if SBInet will turn into a Deepwater 
problem. The answer is unequivocally no. SBInet is the 
Department's multi-year plan to secure our borders and reduce 
illegal immigration. It is managed by one of the most 
experienced program managers in government, Kirk Evans. The 
program's approach is comprehensive and includes risk 
mitigation factors. Project 28 will demonstrate SBInet's system 
capabilities by deploying sensor towers, unattended ground 
systems, and upgrades to existing Border Patrol vehicles and 
communication systems. Upon completion of Project 28, which is 
set for this month, the Army will conduct an independent test 
and evaluation and provide an assessment of SBInet's interim 
operating capabilities.
    Because this is a modular and scalable architecture, we 
will be in a position to make important trade-offs on 
performance, risk, and total system cost very early, all this 
in less than 1 year after this contract was awarded. In my 
personal opinion, this is a model for how spiral acquisition 
and risk reduction ought to be accomplished.
    People are the key for us to achieving acquisition 
excellence. We currently have a serious shortage of people who 
are experienced in program management and the related career 
fields. We have the funding to pursue aggressive hiring and are 
doing so.
    Regarding our acquisition structure, given how the 
Department was formed and its current maturity, it is not 
surprising to me that we do not have a consistent organization 
structure throughout the Department. My written testimony 
covers this in some detail. While this may not be ideal for the 
long term, I think it is more important to focus on people, 
acquisition processes, and the individual program efforts 
rather than trying to develop the more perfect organization 
structure at this point in time.
    The two key positions in the Department with authorities 
related to procurement and acquisition are the Chief 
Procurement Officer and the Under Secretary for Management. In 
accordance with the Service Acquisition Reform Act, which was 
enacted as part of Title XIV of the National Defense 
Authorization Act for fiscal year 2004, I am the Chief 
Acquisition Officer, or CAO, of DHS, as that law requires, the 
CAO require to be a non-career employee.
    The Chief Procurement Officer, Ms. Elaine Duke, who is here 
with me today, is a career civil servant with nearly 25 years 
of government service. She serves as the Chief Procurement 
Officer and the Senior Procurement Executive of the Department. 
The Chief Procurement Officer has authority to exercise 
whatever oversight she determines to be proper over the 
execution of the procurement and contracting functions across 
the Department.
    As the Chief Acquisition Officer, my authorities include, 
and I will just summarize the big ones, monitoring the 
performance of acquisition activities and acquisition programs 
of the Department, evaluating the performance of these programs 
on the basis of applicable performance measurements, and 
advising the Secretary regarding the appropriate business 
strategy to achieve the mission of the Department, making 
acquisitions consistent with applicable laws and establishing 
clear lines of authority, accountability, and responsibility 
for acquisition decisionmaking in the Department.
    The major differences between the responsibilities of the 
Department of Homeland Security Chief Acquisition Officer, me, 
and the Under Secretary of Defense for Acquisition Technology 
and Logistics is that the Under Secretary of Defense for 
Acquisition Technology and Logistics has very specific 
authority granted by Title X to direct the service secretaries 
in acquisition matters. I think, however, it is important to 
recognize that this major change took place as a result of the 
Goldwater-Nichols legislation and a major restructuring of the 
entire Defense Department and that occurred roughly in 1986 
with Goldwater-Nichols and the Defense Management Review, I 
think it was of 1989.
    DHS is still in the developing stages, and I strongly agree 
with the Secretary's decision that as a result of his second-
stage review, there would be no more major reorganizations 
during his administration.
    I would like to thank you for this opportunity to be here 
today and I would be pleased to respond to any questions you 
may have.
    Senator Akaka. Thank you very much, Mr. Secretary.
    Now, Admiral, will you please proceed with your statement.

 TESTIMONY OF ADMIRAL JOHN P. CURRIER,\1\ ASSISTANT COMMANDANT 
               FOR ACQUISITION, U.S. COAST GUARD

    Admiral Currier. Good afternoon, Chairman Akaka, Ranking 
Member Voinovich. Thank you for allowing my written testimony 
to be entered into the record, sir. I am grateful for this 
opportunity to come here today and discuss with you the 
acquisition policies, processes, and practices of the U.S. 
Coast Guard and also describe our relationship with the 
Department.
---------------------------------------------------------------------------
    \1\ The prepared statement of Admiral Currier appears in the 
Appendix on page 36.
---------------------------------------------------------------------------
    Our acquisition portfolio now totals approximately $25.8 
billion of critical investment, and that is about a $1.4 
billion annual obligation across 16 major programs. When 
Admiral Thad Allen became Commandant in May 2006, his first 
order directed the consolidation of our previously disjointed 
acquisition activities into a single, comprehensive directorate 
with a goal of better supporting and enhancing mission 
execution by creating a responsive, competent, and efficient 
acquisition organization.
    Standing up on July 13 of this year, the Acquisition 
Directorate will include the Deepwater Program Executive Office 
and 15 other acquisition programs, the Office of Procurement 
Policy, the Research and Development Program, and the Head of 
Contracting Activity. The consolidated Acquisition Directorate 
will more effectively deliver the material solutions to 
maintain mission readiness for the operating forces of the 
Coast Guard.
    Also in support of the Commandant's intent, we developed a 
blueprint for acquisition reform as a capstone strategy 
document defining our future state. We desire to become a model 
mid-sized Federal agency for acquisition and procurement. The 
blueprint shows the way through a number of improvements in 
organizational alignment and leadership, policies and 
processes, human capital, which we consider to be the most 
important, and knowledge and information management and the 
development of decisionmaking tools for program managers. We 
have selected or chosen to use the Government Accountability 
Office framework for evaluation of Federal acquisition as a 
framework for our strategy for restructuring.
    Additionally, Vice Admiral Vivien Crea, who is the Agency 
Acquisition Executive, is fully engaged with the Department in 
two particular activities to ensure that through the Joint 
Requirements Council that whatever procurements we are doing 
are surveyed across the Department for applicability to other 
component agencies, as well as her involvement in the 
Investment Review Board on a cyclical basis to review our 
financial and program status.
    We have established several collaborative teams to 
facilitate communications and best practices amongst our 
stakeholders within the Coast Guard and within the Department. 
For example, the Capstone Integrated Project Team, under the 
direction of the Under Secretary for Science and Technology, 
was convened for the first time this year to identify 
technology gaps and to assess whether projects are capable of 
meeting those gaps and meeting the stated objectives of the 
procurements.
    Under our blueprint strategy, an area of particular focus 
will be the New Start Management. We and virtually all other 
Federal agencies have been weak in managing the front end of 
major systems acquisitions. Adequate cost estimation and 
programmatic risk assessment are critical to the success of 
program execution. We need to become better at the formulation 
of systems acquisition strategies early on in the project 
identification phase. This includes not only requirements 
generation, but resources and contract vehicle planning. We 
also need to become more effective at oversight in two critical 
areas, at the program level and at the executive level.
    Our blueprint effort to date has already resulted in some 
progress. For example, using the Defense Acquisition University 
as a third party, we accomplished a nose-to-tail review of our 
Rescue 21 program to determine problems, adequacy of our 
acquisition strategy, and most importantly, a way ahead in 
close collaboration with the prime contractor, General 
Dynamics. The contract has been restructured to improve our 
business relationship with the prime and also contain costs.
    We have aggressively restructured the Deepwater program to 
position the Coast Guard to assume a greater systems integrator 
responsibility. We want to enhance competition, pursue service-
wide logistics and network architecture solutions, and create 
necessary bench strength within our workforce to be able to see 
this execution through, we need to see through this vital 
recapitalization.
    Our executive oversight has been materially enhanced by our 
Commandant, Admiral Allen, who periodically meets with the 
chief executive officers of the major companies with which we 
are contractually engaged. The purpose for those meetings are 
to review the programs and to align expectations.
    At my level, Admiral Blore, the PEO Deepwater, and myself 
regularly meet with our vice president counterparts with the 
major companies with which we have contracts and program 
reviews on a regular cycle.
    Our reformation in acquisition is the result of robust 
analysis process, tapping the expertise of several third 
parties, notably DOD, the Office of Naval Research, the Center 
for Naval Analysis, Naval Sea Systems Command, and the Defense 
Acquisition University. We are closely working with the 
Department's Chief Procurement Officer, Chief Information 
Officer, and Chief Financial Officer to ensure a meaningful 
relationship for oversight, guidance, and investment review.
    In the end, the Coast Guard must be able to do three 
things: Contract for sustainment; procure assets and acquire 
major systems on a single asset basis--an example would be 
patrol boats; and also employ a government or non-government 
commercial systems integrator for networked complex 
acquisitions. We are currently reorganizing the Coast Guard 
acquisition and, in fact, the overarching mission support 
architecture to effectively meet our mission requirements, not 
only now but in the future as we grow with our security focus 
in the post-September 11 world.
    Thank you, Senators, for this opportunity to describe our 
program and I look forward to answering your questions.
    Senator Akaka. Thank you very much, Admiral.
    Mr. Hutton, will you please proceed with your statement.

  TESTIMONY OF JOHN P. HUTTON,\1\ DIRECTOR OF ACQUISITION AND 
   SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Hutton. Thank you. Mr. Chairman, Senator Voinovich, and 
Members of the Subcommittee, thank you for inviting GAO to this 
hearing to discuss the Department of Homeland Security's 
acquisition organization.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Hutton appears in the Appendix on 
page 41.
---------------------------------------------------------------------------
    As you know, DHS is the result of one of the biggest 
mergers to take place in U.S. Government, integrating 22 
separate Federal agencies and organizations with multiple 
missions, values, and cultures into one department. Now, such a 
merger involves a variety of transformational efforts, one of 
which is to design and implement the necessary management 
structure and processes for acquiring goods and services. In 
fact, DHS has some of the most extensive acquisition needs in 
the Federal Government. In fiscal year 2006, the Department 
reported that it obligated over $15 billion for goods and 
services to support its broad and complex acquisition 
portfolio.
    Now, my testimony today focuses on accountability and 
management of DHS acquisitions and it is based primarily on 
GAO's reports and testimonies. I will discuss three issues: 
First, the Department's challenges in creating an integrated 
acquisition function; second, the investment review process; 
and third, the Department's reliance on contractors for 
critical services.
    Having an acquisition function that efficiently, 
effectively, and appropriately acquires goods and services is 
critical for agencies that rely heavily on the private sector 
to support its mission. We have reported, however, that the 
structure of DHS's acquisition function creates some ambiguity 
about who is actually accountable for acquisition decisions. 
Specifically, the structure depends on a system of dual 
accountability and cooperation and collaboration between the 
Chief Procurement Officer and the component heads.
    An October 2004 Management Directive, the Department's 
principal guidance for governing and integrating and managing 
the acquisition function, highlights the Chief Procurement 
Officer's broad authority, including the management, 
administration, and oversight of department-wide acquisition. 
In our report, we noted that the directive may not achieve its 
goal of establishing an integrated acquisition organization 
because it creates unclear working relationships between the 
CPO and the component heads. For example, some of the duties 
delegated to the CPO are shared with the component heads, such 
as recruiting, selecting key acquisition officials at the 
components, etc.
    Another potential integration issue concerns managing and 
providing appropriate resources across DHS's acquisition 
organization. Indeed, a common theme in our work has been DHS's 
struggle to provide adequate support for its mission components 
and resources for department-wide oversight. For example, in 
our 2005 report, we noted disparities in the staffing levels 
and workload among the component procurement offices and we 
recommended that DHS conduct a department-wide assessment, and 
it is my understanding they plan to do so. While DHS reported 
progress in providing staff for the component contracting 
offices in 2006, much work, as we have been noting, remains to 
fill the positions with qualified, trained acquisition 
professionals.
    The CPO recently established a department-wide acquisition 
oversight program, and this is a promising initiative. It is 
designed to provide insight into components' acquisition 
programs as well as facilitate lessons learned across the 
components. Now, while implementation is ongoing, we reported 
in 2006 that the CPO lacks the authority needed to ensure that 
the Department's components comply with its procurement 
policies and procedures, such as the acquisition oversight 
program.
    Now, turning to DHS's major investments, DHS put in place a 
review process intended to reduce risk and increase the chances 
for successful outcomes in terms of cost, schedule, and 
performance. In 2005, we reported that this process adopted 
many acquisition best practices that, if applied consistently, 
could increase the chances for success. We also noted how 
additional management reviews and other steps could better 
position DHS to make well-informed decisions. Concerns have 
been raised about how the investment review process has been 
used to oversee its largest acquisitions and we understand DHS 
expects to make some changes to the process.
    Finally, to quickly get the Department up and running and 
to obtain necessary expertise, DHS has relied extensively on 
contracts with the private sector for a broad range of mission-
related services and complex acquisitions. In particular, our 
work has found at DHS, and it is similar to other government 
agencies, they face challenges, particularly when they are 
managing the use of another agency's contracting service or 
existing contracts to acquire services. Although use of such 
interagency contracts can provide advantages in terms of 
timeliness and efficiency, they may not necessarily provide the 
best outcome for the agency.
    Further, the government agencies, including DHS components, 
have also turned to a systems integrator in situations such as 
when they believe they do not have the in-house capability to 
design, develop, and manage a complex acquisition. This 
arrangement creates an inherent risk as a contractor is given 
more discretion to make certain program decisions. With the 
increased reliance on contractors comes a need for an 
appropriate level of oversight and management attention to its 
contracting for services and major systems.
    In closing, since DHS was established in 2003, it has been 
challenged to integrate 22 separate Federal agencies and 
organizations. Such a merger involves a variety of 
transformational efforts, one of which is to design and 
implement and the necessary management structure and processes 
for acquiring goods and services, and given the size of DHS and 
the scope of its acquisitions, we are continuing to assess the 
Department's acquisition efforts in ongoing work and planned 
work.
    Mr. Chairman, this concludes my statement. I will be happy 
to answer any questions.
    Senator Akaka. Thank you very much.
    Mr. Hutton, GAO has recommended for years that the Chief 
Procurement Officer be given authority over the Coast Guard and 
the Secret Service. You also recommend that the CPO be given 
more authority over other DHS component procurement operations. 
Exactly what new authorities is GAO recommending for the CPO 
and how do you think this would improve acquisition management 
at DHS?
    Mr. Hutton. Senator, if we take it back to the original 
Management Directive where we noted that a goal was to 
integrate an acquisition function over at DHS, in reading that 
and in our past work, we noted, too, though, that it was 
assigning dual accountability and collaboration between CPO and 
the component heads. So we had recommendations, as you pointed 
out, that we felt that the CPO needed some additional resources 
and enforcement authority to make sure that the procurement 
policy and procedures are followed through.
    Now, we are not talking about a direct report or 
centralized procurement, and quite frankly, there is really no 
single optimal way to organize an acquisition function. But I 
think in our work, what we are trying to point out is that are 
we aligned in such a way that we can have an effective 
acquisition organization?
    And just to use one example, in our work in 2005, we noted 
that the Coast Guard and Secret Service were explicitly 
exempted from the Management Directive. So you had a situation 
where you had a couple components over at DHS and you had the 
CPO with their operations and you had several others, but the 
way the directive was written, it basically made it sound like 
the CPO had no authority over the Secret Service and the Coast 
Guard.
    So when we raised that issue in that work, initially, we 
were informed that it was for statutory reasons, but in that 
work, in discussions with DHS General Counsel, we found that it 
really was more of a policy decision. And it is my 
understanding that DHS is considering having the Secret Service 
and Coast Guard under that umbrella of the Management 
Directive. So that would be a good thing.
    Senator Akaka. Let me try to clarify your last remarks 
here. Do you think that DHS can strengthen the CPO using their 
own current authority? You used the word ``statutory.'' Is some 
kind of Congressional action needed?
    Mr. Hutton. Well, sir, I think that GAO wouldn't want to be 
prescriptive as to how DHS should go about doing it. I think 
what we tried to do was apply some best practices and 
principles, and the Admiral went through some of them, what 
drove his blueprint, and one of the issues has to do with 
organizational alignment and leadership.
    What we were just pointing out is that, for example, if you 
had a situation, like in our 2005 report where we noted that 
the components had varying numbers of contract specialists and 
you looked at what their workload is, and just doing simple 
math, and that may not be the best analysis, but it is just 
showing that, well, maybe the staff isn't perfectly aligned. As 
we all note, DHS brought in all these different components and 
basically had to start and get up and running.
    What we said there was that we felt that we ought to have 
an analysis across the components. What are the needs on a 
component basis? What are the needs of the DHS? If there are 
opportunities that, because of urgent needs and other reasons, 
you need to move some people, how easy would that be? What kind 
of authorities would be required to be able to do something 
like that? And that was where we were coming from when we were 
making that particular point about what authorities does the 
CPO have to effectively carry out what we are reading in the 
Management Directive as the responsibilities.
    Senator Akaka. Mr. Schneider, in your testimony, you 
explained that you are the Chief Acquisition Officer at DHS 
while Ms. Duke is the Chief Procurement Officer. I understand 
that Ms. Duke also sits on the Chief Acquisition Officer 
Council at the Office of Management and Budget. Do you and the 
Chief Procurement Officer have authority over particular 
acquisition functions or are you essentially letting the CPO 
exercise your authority as the Chief Acquisition Officer under 
your supervision?
    Mr. Schneider. Senator, first, regarding the Chief 
Procurement Officer being on the Acquisition Council, in the 
absence of--in the gap between when my predecessor left the 
position of Under Secretary until I was appointed, Ms. Duke, in 
fact, assumed the responsibility of not just being the Chief 
Procurement Officer, but the Chief Acquisition Officer. So as 
such, she participated in the Chief Acquisition Officer 
Councils.
    I believe that the responsibilities of the Chief 
Procurement Officer are very clear and so let us kind of take 
this a piece at a time. This is where I think, with all due 
respect to the GAO reports and considerations, I think there 
has been a continuing confusion of this issue of procurement 
versus what I will call the big concept of acquisition.
    I believe that the responsibilities and authorities of the 
Chief Procurement Officer are very clear and I believe the 
responsibilities from a procurement standpoint within the 
organizational operating components of the Department are very 
clear. I also believe that the Chief Procurement Officer has 
the authority, if you will, to review--for example, if Ms. Duke 
decides that she wants to review every procurement and concur 
with every procurement, whether it is CBP or you name the 
agency, above $1,000, above $1 million, whatever the threshold 
she establishes, that is her authority. She has the authority 
to go in and conduct procurement oversight reviews. She has the 
authority, I believe, to basically request the removal of a 
contracting officer's warrant if she determines, in fact, that 
contracting officer is not following the rules and regulations 
as dictated by applicable law.
    And regarding the issue of resources throughout the 
Department, the Chief Procurement Officer at headquarters works 
very closely with the Chief Procurement Officers in each of the 
operating components. They address resource issues. Ms. Duke 
acts as, for all practical purposes, the Chief Recruiting 
Officer for contracting officers among the Department. So from 
my standpoint, I observe, having been in this job now 5 months, 
an unprecedented degree of cooperation, if you will, among the 
Chief Procurement Officers at headquarters and within the 
Department.
    Let us talk the second point about the Coast Guard. From a 
practical standpoint, on a day-to-day operational basis, I 
couldn't ask, and I know if you asked her she would say the 
same thing, for a better, closer working relationship with the 
Coast Guard than what we have today. And so regardless of what 
the directives say or the like, the fact of the matter is the 
Coast Guard is an inherent part of the Department. We operate 
as one. I spend a tremendous amount of time with Admiral 
Currier, Admiral Blore, the Commandant, Admiral Crea, and their 
Chief Procurement Officer when we work together on major 
procurement and acquisition issues.
    Now, let us talk about acquisition authority. And that is 
one of the reasons why I tried to emphasize that in my 
testimony--here is where--let us talk about dual 
accountability. I do not believe in the case of acquisition 
there is a dual accountability. I think it is very clear. I 
think it is the Secretary who has responsibility and the head 
of the operating component. There is absolutely no doubt in my 
mind that the head of Customs and Border Protection is the 
official that the Secretary holds responsible and accountable 
for the execution of SBInet. There is absolutely no doubt that 
the Secretary holds the Commandant responsible for the 
execution of Rescue 21 and Deepwater. And so in terms of dual 
accountability, I am sorry, but I do not agree with that 
statement.
    In the course of exercising the Secretary's oversight, 
however, there are processes that are put in place at the 
Department level to conduct reviews of the program. That is 
where we, the Department, exercise oversight. I think the 
perfect example of this is the Deepwater program. The Deepwater 
program will be coming up for a major acquisition milestone 
decision in terms of proceeding to award of National Security 
Cutter 3. There was an Investment Review Board review of the 
Deepwater program, an acquisition decision memorandum that was 
signed by me on behalf of the Deputy Secretary who chairs the 
IRB, that basically says prior to coming and getting a 
milestone approval, you must do A, B, C, D, and E. It was done 
in a cooperative manner with participation on the Coast Guard, 
the CPO, the CIO, etc., and so I think that is a process that 
is in place by which the Secretary exercises oversight.
    That does not dilute, in my mind, or that does not change 
what I consider to be the clear line of responsibility and 
accountability between the Secretary and the head of the 
operating component.
    Senator Akaka. Thank you. We will have another round of 
questions. Senator Voinovich.
    Senator Voinovich. Thank you, Senator Akaka.
    You made mention of the issue of recruiting people with the 
experience that you need in acquisition. I would like you to 
share with me if you have the budget to hire the people that 
you need to get the job done? Second, do you have the 
flexibilities to bring them on board?
    Mr. Schneider. Thank you, Senator, for the question. This 
is really the key issue and I would say people is our No. 1 
priority. I think, first of all, the most critical career field 
in my view is the contracting officer career field, and in that 
particular career field, we have direct hiring authority across 
the Department, which means we interview somebody, we like 
them, we can hire him or her immediately.
    And so the challenge then is to find qualified contracting 
officers, and to be very frank, we are aggressively trying to 
recruit at the mid-level and the higher level. Our intern 
program is structured to prime the pipeline, so to speak, at 
the intern level, and we have funds in the fiscal year 2008 
budget to begin that program. So I am pretty comfortable with 
1102s, or the contracting officers.
    The other career fields, we do not have direct hire 
authority. I will be signing a letter to OPM requesting the 
direct hire authority for these other career fields, and this 
ends up being logisticians, cost estimators, people that have 
managed programs, program management experience, test and 
evaluation-type experience, and the reason being is we are in a 
very competitive market, not just with private industry but 
government, and if we cannot--we think we have a mission that 
sells relative to attracting people, but we need to be able to 
act and act fast.
    So I think, frankly, I am hopeful that we will get the 
direct hire authority from OPM without too much difficulty. So 
I think that is No. 1.
    No. 2 is the ability to hire re-employed annuitants. Let me 
give you an example. It is a well known fact, we do not have 
the range and depth of experienced acquisition personnel. Key 
to the success of our intern program is to have the right types 
of mentors to mentor these people. The other thing we are 
looking at is getting senior acquisition experienced people 
that can mentor ongoing programs, and especially new starts. 
And so what we want is the ability, if we can find people and 
get them interested in the mission, frankly, like the 
Administration did with me, to come back in and go work some of 
these programs. We believe that would be helpful. So I am about 
to request from OPM the authority to do that.
    With respect to money, funding, we have the funding this 
year to and are aggressively hiring, so I am not worried about 
that. I am worried, however, about what I just learned relative 
to the House Appropriations Committee action on our budget for 
2008 that basically removed a considerable amount of money that 
we had put in for hiring initiatives and training and 
development initiatives, especially in the acquisition career 
field. So that just happened apparently from what I understand 
yesterday, so what I plan to do is to get the facts and figures 
and hopefully when the appropriations bill gets considered by 
the Senate, we can get some help, if you will, to get that back 
in. That hurts us significantly.
    So relative to authorities, yes, I have got what I need on 
contracting. I am going to OPM for expanding the direct hiring 
and to be able to employ re-employed annuitants. And money is 
okay this year, but I am worried about next year.
    Senator Voinovich. Please let us know about the House 
action. We will look into it and see if we can make sure that 
it is in the Senate bill. If you don't have the money, you 
can't get the job done.
    Mr. Schneider. Thank you.
    Senator Voinovich. One thing that we have noticed is that 
DHS has doubled spending on contracts from 2004 to 2006. 
However, over the last 5 years, the number of dollars devoted 
to training employees in contract management across the 
government has remained basically the same. Once you bring new 
people on, how long does it take them to get to the point where 
they are fully trained. What is your training budget and why 
hasn't that budget increased to respond to the new hires so you 
can continue to upgrade their skills?
    Mr. Schneider. I think that is a question, frankly, I have 
asked myself. I think one of the problems is when, prior to the 
forming of the agency or of the Department or shortly 
thereafter, the concept of major acquisition, that wasn't the 
nature of the business. It was relatively simple procurement. 
And so the Department relied most heavily on contracting 
officers who typically would be the procurement experts to 
basically perform what would be considered to be a simple or 
not as complex acquisition. I think it is only in the past 2 
years when this concept of what is acquisition and the 
complexity of large systems came to the Department. The 
Department's budget, and I may not have the numbers totally 
right, but it has gone up like about 50 percent over the past 3 
or 4 years. A lot of this stuff has gone into the development 
and the procurement of major systems.
    So if we did not shape or modify the workforce, frankly, 
over the past 2 or 3 years, the response to the roughly 50 
percent increase in budget authority, and so our training 
budget, and I would suspect most organizations, is fairly well 
baseline. So organizations like CBP or TSA, whose mission--
well, CBP, for example, in the case of some of their major 
initiatives, they didn't have a SBInet, and I think that is one 
of the reasons--and the reason they didn't, because their 
previous attempts at it in different initiatives were not 
successful. Part of the reason it was not successful was 
because they didn't have trained people. And so I don't think 
there was an ability to, in real time, fundamentally give like 
an adrenaline shot of training to people that were trying to 
execute.
    So what we have been doing with the Chief Human Capital 
Officer is work across the Department. What are our training 
and development needs? We have a Chief Learning Officer who is 
working very closely with all of the operating components 
across the Department to leverage those training and 
development opportunities that is best of breed and then use, 
whether it is CBP or if it is the Coast Guard, use that as the 
foundation to provide that training and development capability 
for the entire Department.
    So we are in many cases relying on Coast Guard for a lot of 
their training and development. There are a couple of nuggets 
that CBP had in terms of, I believe it is leadership training. 
And so that is one of the reasons why we have been trying to 
justify, if you will, an increased budget, and it is one of the 
reasons why I am shocked, actually, at the budget action on the 
House, because for 2008, that is where we wanted to basically 
make a significant increase. And so I think we are trying, but 
we have been having some difficulty.
    And if I might add, I think part of the difficulty is we 
get a bad rap, frankly, on this HR Max effort that was 
initiated. And so I think there is a tendency, quite frankly, 
to paint everything that we are doing in the personnel training 
and development area, etc., even though Max HR had six or seven 
components, the fact of the matter is it all gets lumped into--
that is one of these personnel things where--and so it is a 
target.
    And so one of the reasons, frankly, why we have moved away 
from Max HR to Human Capital Operating, emphasizing training 
and development, is to get away from the stigma of something 
that is, frankly, from the public perspective, is out to do 
harm to employees, which is not the case.
    Senator Voinovich. Thank you. Senator Akaka.
    Senator Akaka. Thank you. Admiral Currier, under a 2004 DHS 
Management Directive, the Coast Guard is not under the 
authority of the Chief Procurement Officer. Can you tell me to 
what extent the Coast Guard still works with the CPO?
    Admiral Currier. Yes, sir, Senator. I think that Under 
Secretary Schneider accurately described our relationship with 
the Department. We are very closely tied to the Chief 
Procurement Officer, the Chief Information Officer, the Chief 
Financial Officer, and all of our processes in acquisition. I 
mean, basically, the Department controls our budget, so there 
are mechanisms for control of component agencies.
    We don't look at it that way. We look at it as a mutually 
supportive organization where DHS has brought their 
organization and their engagement with the components. They 
have matured that as they have formed up the CPO Office. We 
helped them do that. We offered policy advice. We offered 
people. We have worked collaboratively with DHS to see them 
through this, and I think that they have matured to the point 
where we are quite comfortable with the relationship of a 
subordinate component agency working in close collaboration 
with DHS across the board.
    I have seen, in my 2 years as Assistant Commandant for 
Acquisition, no problems, no issues where they have asked for a 
policy implementation and we have not complied, or when we 
raise an objection because we feel it is an onerous oversight 
or something that doesn't sink up, they are not very 
responsive. We have absolutely no complaints from an 
organizational level that our relationship with the Department 
is anything but proper and mutually supportive.
    Senator Akaka. Let me follow up to ask you whether or not 
the Coast Guard is under the authority of the Chief Procurement 
Officer.
    Admiral Currier. I would say, sir, that if you read the 
letter, were I an attorney, I would tell you if I read the 
Management Directive, I would probably say that could be the 
case, but I can tell you functionally that is not the case.
    Senator Akaka. Let me ask, would there be a downside to 
having the CPO exert more authority over the Coast Guard?
    Admiral Currier. I don't see it as being that way, sir. I 
really have--I feel that is the functional relationship that 
exists. If the statute or the code followed that, currently, we 
have certainly no objection to that.
    Senator Akaka. Mr. Schneider, last year, DHS appropriations 
contained funding for 400 additional acquisition employees at 
DHS. How many new acquisition staff have you hired to date?
    Mr. Schneider. The key number I track is the contracting 
officers. I know we were trying to hire somewhere around three 
to--I think we have hired about 50 percent of the number.
    Senator Akaka. Well, Mr. Schneider----
    Mr. Schneider. It is about 150, so--I can provide that 
information.\1\
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    \1\ The information provided by Mr. Schneider appears in the 
Appendix on page 59.
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    Senator Akaka. If you can provide that----
    Mr. Schneider. Sure.
    Senator Akaka [continuing]. That would be fine. And also, I 
would like to know how these staff are being divided between 
CPO's office and the component offices, as well.
    Mr. Schneider. Well, it is really a joint recruiting 
effort, so what Ms. Duke does is if we get a pretty good 
athlete and she decides that TSA or CBP needs him, she ships 
him in that direction. They work together, the heads of 
contracts of all the operating components and the Chief 
Procurement Officer, on who is in the most serious shape and 
who desperately needs help. And so what they do is working 
together among themselves figure out how best to utilize the 
talent that comes in.
    For example, we had a big exposition, job exposition one 
day downtown at the Reagan Building. We had, I think it was 
1,200, 1,300 people showed up. And so what we do is we tag them 
and classify them. They go talk to people from the CPO's 
office. They talk to people from across the Department. Then we 
basically evaluate them and we decide who really needs to be 
looking at them depending on what the career fields are. We 
also advertised in the local papers a couple of months ago, and 
in response to two ads we have gotten, I believe it is 400, 500 
applicants, and so doing the same thing with them. We are also 
targeting, quite frankly, where we think organizations are 
leaving town that perhaps we have some experienced people that 
may want to do that.
    But basically, it is being run like a joint recruiting 
effort and, frankly, because they work so well together, this 
particular group of Chief Procurement Officers, they recognize 
who is in the most serious condition and they try and fulfill 
those needs first.
    Senator Akaka. Before I call on Senator Voinovich, 
Secretary Schneider, the Homeland Security Appropriations Act 
contained a provision I authored creating a rotation program at 
DHS to let staff gain expertise throughout the Department. With 
all of the component agencies of DHS still having their own 
individual acquisition shops, I believe this kind of program 
could be especially useful for procurement professionals. Is 
the Department doing anything to encourage procurement staff to 
rotate between procurement offices?
    Mr. Schneider. Yes, sir. Let me just give you a couple of 
examples. We have two what I call premier leadership programs. 
We have an OPM-approved SES candidate program, and so our first 
class of SES candidates were selected, I think it might have 
been about 4 or 5 months ago. As part of that candidate 
development program, these folks are required to go do 
rotational assignments.
    We also have, and it was actually initiated by the 
Commandant of the Marine Corps, Admiral Allen, who had a 
personal interest in it, is a DHS Fellows Program. Part of that 
DHS Fellows Program, and this is where the best and the 
brightest at different grade levels, civilian and in the case 
of the Coast Guard military, were picked for this very special 
effort. What we have decided to do is at the tail end of that 
program, and I forget how long it is, is to require a 
mandatory, I think it is 4- or 5-month rotational assignment, 
and this is where we use, and this is probably along the lines 
of the best practice that many of the Fortune 500 companies 
use, we have these folks working critical corporate-type 
projects. They work--it is about, I think, roughly 34 of them--
and then at the end of this development effort, they get 
assigned at one of--a different operating component from where 
they come from, and I think it is 4 to 6 months.
    The other thing we do is this. Our Chief Financial Officer, 
the counterpart of the Chief Procurement Officer, he has been 
very key in hiring. We get a lot of Presidential Management 
Interns. He is a former Presidential Management Intern and 
apparently that program draws people to where successful folks 
that have been in the program are. And what he does is takes 
these people, rotates them throughout the Department, and 
ultimately we are building a financial officer type of 
infrastructure that has had experience across the Department.
    I also think it is important to note that I think at least 
one and maybe two of the Chief Procurement Officers that are in 
the Department used to work at headquarters.
    So I think there is no massive initiative that says we are 
going to take 25 percent of the workload and start rotating 
them around, but I think we started on the right path within 
the past 6 months on these key initiatives to making rotation a 
key element and almost to be considered as a future 
prerequisite to promotion.
    Senator Akaka. Senator Voinovich.
    Senator Voinovich. Admiral, in your testimony you said that 
the end result of the Coast Guard's Blueprint for Acquisitions 
Reform will be an Acquisition Directorate capable of 
efficiently and effectively meeting mission requirements. Do 
you have metrics to measure if the blueprint is successful, and 
was Mr. Schneider or anybody from DHS involved with developing 
the blueprint? Did you consult with GAO in developing the 
blueprint?
    Admiral Currier. Thank you, Senator. The blueprint was put 
together because we looked at Rescue 21 and the nose-to-tail 
survey that I described earlier, and we also did that with 
Deepwater over the last 18 months. We looked at a compilation, 
a library of IG reports and GAO reports and different programs 
and projects that the Coast Guard had done. Initially when I 
took over as Assistant Commandant for Acquisition, I looked at 
these individually, viewed them, quite frankly, as history and 
put them aside.
    But it became evident there were emergent themes throughout 
these reports, so we cataloged those themes and we put together 
about 12 efficiencies in acquisition across the board. When I 
showed them to Defense Acquisition University (DAU), it became 
evident that those were common acquisition shortcomings across 
the Federal Government. So we tried to decipher a way, how 
could we devise a strategy that would give us meaningful 
solution to some of these things.
    The other theme that emerged is the GAO framework for 
Federal agency acquisition assessment. We decided to use that 
for two reasons. One is it made sense, and secondarily, often 
you are what you measure. So we did do that.
    As far as metrics, when we produced our first edition of 
the blueprint, we had a catalog of activities as an appendix. I 
got my senior staff together. We collaborated with the 
Department and we cataloged activities that we had to do. 
Initially, our metrics were the accomplishment of those 
activities on time and basically if there were cost elements, 
on cost.
    The second edition that will come out when we stand up the 
consolidated Acquisition Directorate on July 13 will have a 
more robust set of metrics that also measure projects, program 
outcomes as far as cost control and schedule execution. So 
there will be two tiers of metrics within the blueprint. One is 
for activities that are specifically called out, and the second 
is the aggregate effect on program execution.
    We did closely collaborate with the Department, the Defense 
Acquisition University, Admiral Massenburg at NAVAIR, actually 
Retired General Kadish, who at one time was in charge of DOD 
acquisition reform. They were very generous with their time 
sitting down with me, and I will tell you in all honesty, I am 
an operator by trade. I am level three certified as a program 
manager, but my main experience is certainly not on a par with 
theirs. Very generous with their time. The Under Secretary was 
generous with his time. Ms. Duke was very--contributed to this. 
And I think that the Under Secretary would tell you that 
certain elements within this are going to be used as a model 
for other agencies within the Department.
    Sir, I hope that answers your question.
    Senator Voinovich. Mr. Hutton, you have been listening to 
the testimony. I would like your comments about what the 
Admiral has made reference to and how you feel about it and how 
do you think they are coming along.
    Mr. Hutton. Sure, Senator. First, I want to say at the 
outset that obviously we are very pleased that the Admiral 
found that the framework for assessing the acquisition function 
was very useful, because that was based on a lot of work that 
we have done over the years, best practices, literature 
searches, panels that we held and things like that. And it is a 
holistic approach to look at the whole function and it breaks 
down into very key areas that one wants to look at how they are 
doing. It is general guidance. It is not a cookbook, but it is 
really used more for self-reflection and assessment of where 
you are.
    So I was very pleased to hear that. I have reviewed the 
Coast Guard's blueprint at a very high level several months 
back. I can't right now give you an assessment of the merits 
and of all the details and the specifics, and as the Admiral 
mentioned, there is apparently going to be a revision coming 
very shortly. But I was very pleased to hear that the GAO 
framework is one of the instruments that they used to assess 
their acquisition function.
    Senator Voinovich. Mr. Schneider, it looks like the Coast 
Guard is really getting it. It looks like their system is in 
decent shape. Mr. Schneider, do you agree with the Admiral?
    Mr. Schneider. Let me, Senator----
    Senator Voinovich. They have their own acquisition, but Ms. 
Duke is in charge of acquisition everywhere else?
    Mr. Schneider. Let me try it this way. I guess within the 
spirit of full disclosure, the in-depth reviews of the Coast 
Guard programs that the Admiral referred to, Rescue 21 and 
Deepwater, it really is a coincidence because all this happened 
before I was even considered by the Administration for this 
job. But I am the guy that led those reviews for the Defense 
Acquisition University. It just kind of turns out that way.
    It really is a fluke that all these improvements and 
recommendations that we developed, especially in the case of 
Rescue 21, the Admiral aggressively instituted them, and then 
with Deepwater, I think led to a more systematic overview, just 
like he said. So we have--which is why--the Admiral and I first 
met last March, and so they were kind enough that, just as he 
indicated, to work very closely with DAU and I was the lead for 
DAU, and so this whole Blueprint for Acquisition, I believe 
truly reflects the best practices and lessons learned from a 
lot of major programs that have had difficulties.
    There is no daylight between us, quite frankly, at the 
Department level and at the Coast Guard level in terms of 
structure and process. There is no daylight between us in terms 
of the individual efforts, whether it be the National Security 
Cutter, the Offshore Patrol Cutter, the Aviation Initiatives, 
logistics, CFR, ISR, etc. So we are in full concurrence and 
working very closely on everything.
    And so I think, just as the Admiral said and as I 
indicated, this Chief Procurement Officer contracting function 
and how I exercise acquisition oversight for the Secretary, I 
think it works very well, and quite frankly, it is a model for 
how it ought to work across the Department.
    Senator Voinovich. Good. Is it coordinated?
    Mr. Schneider. Yes, sir.
    Senator Voinovich. If GAO reviewed this, they would say 
that you are communicating?
    Mr. Schneider. Yes, sir.
    Senator Voinovich. And are sharing and learning from each 
other.
    Since the Deepwater problem, you have analyzed the issues. 
Is there a piece of paper someplace that talks about lessons 
learned and how the new system is going to make sure that those 
things don't occur again?
    Mr. Schneider. I think, if I recall, the DAU Deepwater 
report lists the lessons learned and a series of 
recommendations which you or your staff may find informative as 
a starting point. I also think, I am not sure if we sent you 
several months ago, and maybe not, but we can check that, we 
can send you a document that indicates the status of the 
Deepwater program which goes asset by asset through what is the 
status and what is being done in terms of the restructuring. I 
think you would find that informative.
    Senator Voinovich. In other words, the recommendations that 
came out of that GAO report are being folded into the new 
system to make sure that the problems that----
    Mr. Schneider. Their blueprint----
    Senator Voinovich [continuing]. Occurred there are not 
going to occur with other procurement----
    Mr. Schneider. Their blueprint for acquisition and 
reemergence of a technical authority within the Coast Guard and 
migrating to a single logistics concept, C4I that is directed 
and more hands-on direction and breaking up some of these 
procurements like the Admiral referred to relative to 
procurement of patrol boats, which is their specialty and the 
like, that is exactly what they are doing.
    Senator Voinovich. Thank you. Senator Akaka.
    Senator Akaka. We will have another round here.
    Mr. Schneider, as you know, and I want to in a sense follow 
up on what Senator Voinovich was indicating. As you know, the 
Coast Guard recently dropped their lead systems integrator, 
choosing instead to fulfill the role itself. In light of 
Deepwater, should the Department continue to rely so heavily on 
LSIs for large projects?
    Mr. Schneider. I have given this a lot of thought, Senator, 
and I think in many ways the concept--that the originators of 
the Deepwater concept with the integration concept--there are 
some days I think it was not a good idea, but frankly, in many 
ways, it might have been a brilliant idea. I think the serious 
problem that--I think it is almost like a confluence of factors 
that contributed to the problem.
    First off, clearly, I don't think the Coast Guard had the 
range and depth of talent to manage that type of contract. And 
so an integrator means different things to different people. In 
this particular type of contract, we were talking about a 
concept whereby the Coast Guard said, here are my requirements. 
I want to totally recapitalize my entire Deepwater fleet of 
planes, ships, boats, land-based infrastructure, and logistics, 
so you figure out how best to do it.
    And so the concept, depending--it might have been brilliant 
in concept, but it was seriously flawed in practically being 
able to be executed by a Department who is so hands-on 
operationally. And I think to think that the operational forces 
would allow just an industry team to decide what was best in 
terms of operational spaces and how things were going to 
operate, what the mix would be, was probably not the right 
decision. I also think that trying to start so many individual 
asset developments, like the Offshore Patrol Cutter, the Fast 
Response Cutter, and National Security Cutter, at the same 
time, given the lack of depth and experience they had, was one 
of the major contributions to its not being successful.
    On the other hand, I think on major system integration-type 
contracts where you have, for example--and that is why SBInet, 
and I differentiate between it--it may, in fact, be the 
appropriate type of concept and contract vehicle, especially in 
the fact that I think the SBInet is manned with many more 
resources and in many cases they have the range and depth of 
talent that are needed to manage a very complex technical 
integration effort.
    So I would not, to use the expression, throw the baby out 
with the bathwater. I think it has a place. I think it needs to 
be based on the circumstances and the nature of the contract 
and how it is structured and how you incentivize the 
contractor. But I think there were really some very strong 
reasons why people thought at the start it was a good idea.
    Senator Akaka. Admiral, as I understand it, between June 
2003 and December 2006, Lockheed and Northrup Grumman, the 
former Deepwater lead system integrator, received $18 million 
in contract award fees from the Coast Guard. This is about 88 
percent of the available award fees, which would seem to 
indicate that the job was done 88 percent well. To give it a 
grade, you might think of it as being a B-plus in most grading 
systems. I don't think, from what we have heard about the 
problems with Deepwater, that it deserves a B-plus. My question 
to you is, how would you grade Deepwater?
    Admiral Currier. Well, Senator, I will be honest with you. 
This puts me in a little bit of a difficult situation because I 
have been in charge of the Acquisition Directorate, which is 
contracting and programs that are non-Deepwater, so I can give 
you an observation, but I want to be clear that I am not the 
program executive officer for Deepwater.
    I can give you my opinion on this, there was a set of 
criteria used for award term evaluation that are currently 
being reviewed, such that they are more applied to actual 
performance than some of the general criteria that were used in 
the first evaluation of the award term. I think that is being 
relooked at by Admiral Blore, who is the PEO for Deepwater, and 
I think that there is going to be some overhaul in that area, 
sir. But I cannot give you--I will have to get back to you with 
specifics on that information.
    Senator Akaka. Would you consider the contract award fees 
in this case, fair?
    Admiral Currier. Sir, I am not trying to be evasive, but I 
don't have enough information. I really don't. I can get back 
to you with that, with a statement from Admiral Blore, who is 
the PEO. But I, quite frankly, would be uncomfortable rendering 
an opinion on that.
    Senator Akaka. Let me ask Mr. Hutton, can you give me your 
thoughts on these contract award fees? How is it that a program 
with so many issues could get 80-plus percent of available 
award fees?
    Mr. Hutton. Senator, GAO issued a report, I believe a year 
ago, where they looked more broadly across several contracts 
over at DOD and I think there was a finding that was similar, 
that there were fees around that range. But yet when you look 
at the systems, they were having problems and it just raised 
the issue of are you sufficiently motivating the contractor for 
positive performance.
    I share the Admiral's point that the award fee determining 
official basically makes that determination based on what was 
established as the criteria that they were going to use to 
judge the contractor's performance. So if that process was 
followed as appropriate and the determinations were considered 
appropriately and that is the score, then I think that is what 
they get. But I do think if there are major problems with 
systems, maybe one place you might look at first, though, is 
just what was the criteria we were evaluating, if it seemed out 
of sync.
    Senator Akaka. Senator Voinovich.
    Senator Voinovich. Mr. Schneider, a number of corrective 
actions to improve acquisition management for the SBInet 
program were to have been completed by this January. In the CBP 
response to the DHS Inspector General report, made with the 
concurrence of the Chief Procurement Officer, the Department 
said it would address concerns about the lack of defined 
project activities, measures for operational requirements and 
performance management objectives, time lines, anticipated 
costs, staffing levels, and expected outcomes. GAO testified in 
February that many of these issues remained.
    I would like you to respond directly to the concern raised 
by the GAO and the DHS OIG and to tell us what, in your view, 
has been done, what needs to be done, and then Mr. Hutton, if 
you are at all familiar with what has transpired since 
February, what are your observations.
    [The information requested for the Record follows:]

                  INFORMATION SUBMITTED FOR THE RECORD

    DHS's Secure Border Initiative Network (SBInet) is a multi-
year, multi-billion dollar program that will develop a 
comprehensive border protection system through a mix of 
technology, infrastructure, and personnel. In fiscal year 2007, 
the Congress appropriated $1.2 billion for the program and 
asked GAO to review the SBInet expenditure plan. In February 
2007, we recommended that DHS (1) ensure that future 
expenditure plans include explicit and measurable commitments 
relative to the capabilities, schedule, costs, and benefits 
associated with individual SBInet program activities; (2) 
modify the SBInet contract to include a maximum quantity or 
dollar value; and (3) re-examine the level of concurrency and 
appropriately adjust the acquisition strategy. To address our 
recommendation on the level of concurrency, in March 2007, DHS 
submitted a revised SBInet expenditure plan for fiscal year 
2007 to Congress. The new plan delayed some technology 
deployment and, in its place, accelerated tactical 
infrastructure construction.
    As of July 2007, SBInet is behind schedule because the 
pilot deployment project, Project 28, did not meet its June 
2007 deadline. We continue to monitor the implementation of the 
SBInet program as part of our on-going work.

    Mr. Schneider. Well, Senator, first off, as of right now, 
we are on track in terms of completing Project 28, and Project 
28 is absolutely key. This is a 28-mile stretch of the border 
south of Tucson. So this is where we are basically--I call it 
the initial deployment of SBInet, where we are using cameras, 
we are using radar, we are using wireless communications. We 
have these roughly, I think it is 98-foot towers. We are 
basically exercising command and control, a common operating 
picture that goes back to Tucson headquarters as well as mobile 
command units, and we are actually--this is where the Army is 
going to be doing this test and evaluation.
    So there is a modeling and simulation that has been done to 
predict, if you will, how well this system will perform in 
terms of tracking, cueing, and then determining the optimum 
method of intercept prior to the point of where the illegal 
aliens can basically not be apprehended.
    So our plan is to--we have a pretty good idea of how well 
this system will perform. This equipment, for the most part, is 
off-the-shelf type of equipment and the communications gear is 
pretty straightforward. So our plan is--and we know how much 
this cost. This is a fixed price. I think it is roughly a $20 
million effort. And so our plan is, as a result of this initial 
deployment and this independent test evaluation of the Army, is 
to figure out what the cost-benefit, if you will, is, how 
scalable it is as we march across the border.
    So while sometimes we are criticized, and I have personally 
had this discussion with both the Inspector General and with 
the Comptroller General, David Walker, so while we are 
criticized sometimes for not having very clear performance 
requirements, etc., this is an example where we are trying to 
use available technology to minimize the risk and get an 
assessment for how well this system will perform, how we can 
augment it, if we need to put more cameras, if we need to put 
more radar, if we need to put more unattended ground sensors, 
etc., to enhance the performance if it is not adequate, and 
then make these trade-offs about is that performance 
acceptable, what is the manpower that it takes to go execute 
this, what is the cost----
    Senator Voinovich. What I am trying to get at is that it is 
my understanding that they came back and they had some 
criticisms of the way this was being undertaken. What have you 
done to respond to those criticisms in terms of a system? Mr. 
Hutton, are you familiar at all with what has been happening 
since February? You folks came in and said they hadn't done 
these things. They were supposed to have them done by the end 
of January and the fact was they haven't been done. Have they 
been done to your knowledge or haven't you reviewed it lately?
    Mr. Hutton. Senator, I am not personally involved in that 
review. Colleagues at GAO are looking at that system. I believe 
there is some ongoing work right now, but I really do not know 
the status of those issues.
    Senator Voinovich. I would like to know what were the 
issues and what have you done to respond to the issues.
    I would also like to ask about your work with the 
Partnership for Public Service Private Sector Council. Max 
Stier and his group are a good resource that can be helpful. 
Have they been helpful in improving your post-award contract 
management? A lot of times the problem is that once they are 
awarded, nobody really stays on top of the contractor to make 
sure you get what has been promised. I would like you, Mr. 
Schneider, to comment on the partnerships pilot project.
    Mr. Schneider. Well, I know that they are looking at best 
practices for contract administration, and that is the sum of 
it. I would have to get back to you and give you an assessment 
of--and I will--about exactly what they have done and what have 
we learned from them.
    Senator Voinovich. Senator Akaka, I have no more questions.
    Senator Akaka. Thank you very much. I want to thank Senator 
Voinovich. As you know, I regard him as a champion of human 
capital management. He has been going after the high risks 
within our government system with me for years, and I want to 
emphasize that we are working together on these issues and 
trying to improve program outcomes.
    So I want to thank you witnesses for being here today and 
contributing with your testimony and your responses. Getting 
DHS's acquisition management on track is vitally important to 
us and it is an important issue because if it is not done 
properly, then there is the risk of waste, fraud, and abuse in 
contracting, and in this particular case in DHS contracting. It 
also puts not only our tax dollars at risk, but more 
importantly, our national security. I look forward to 
continuing to work with you, with the Department of Homeland 
Security, in monitoring this issue.
    Senator Voinovich. Senator Akaka, could I make one more 
comment after you have finished?
    Senator Akaka. Yes. Let me call on Senator Voinovich for 
his closing remarks and then I will close it.
    Senator Voinovich. I don't know whether this immigration 
bill is going to pass or not. Even if it doesn't pass, there is 
a lot in there that is already in the law. SBInet is going to 
be part of that.
    I would like to say to you that there is a feeling out 
there that things aren't right at the Department of Homeland 
Security and that it has been an embarrassment to the Bush 
Administration. There is a feeling on the street that for some 
reason we just can't get things done around here. It is not 
helpful politically, and it is not helpful from a substantive 
point of view because people have to believe that those of us 
in government know what we are doing, especially when dealing 
with issues of national security.
    I would suggest to you that if the immigration bill passes, 
the microscope is going to be focused on the Department. I 
would suggest that everybody be aware of that fact. Mr. 
Schneider, you and I have been talking about, are we winding up 
or are we winding down? One of the best things that could 
happen is that if it does pass, that you would really get 
together and make it happen.
    And I am sure, following up on your suggestion about their 
budget, I know Senator Akaka and I will do everything within 
our power to make sure that money is put back in your budget so 
you have the money to do what you have to do.
    Mr. Schneider. I would like the opportunity just to make a 
comment, if I may, Senator.
    Senator Akaka. Go ahead.
    Mr. Schneider. I believe that if that bill passes, then the 
implementation and execution of that is probably the single 
most important thing that I have to worry about. If it helps, 
frankly, I would like you to know that going back about 4 or 5 
weeks ago is when the Secretary asked me to make sure that we 
are positioned to successfully execute that. And I can tell you 
that we have put together a team from across the Department in 
a manner that is probably unprecedented since the Department 
was formed. This team works for me, and our job is the detailed 
execution of how this bill will be executed on the assumption 
that it passes.
    We have the entire leadership of this Department that is 
mobilized in terms of focusing on what we have to do to 
execute, and I realize, and I know the Secretary and the Deputy 
Secretary and the heads of all the operating components realize 
what the importance of this bill is to the Nation, and the fact 
is we are very well aware that there will be a tremendous 
amount of visibility given to how well we perform. That is why 
I am personally satisfied that we have some of the best and 
brightest people from across the Department that are looking at 
how we are going to execute this thing.
    Senator Voinovich. Thank you. Thank you, Senator.
    Senator Akaka. Thank you very much for your closing 
remarks, Mr. Schneider and Senator Voinovich.
    Again, I want to thank you for your testimony and your 
responses. The hearing record will be open for 1 week for 
additional statements or questions other Members may have 
pertaining to this hearing.
    The hearing is now adjourned.
    [Whereupon, at 4:14 p.m., the Subcommittee was adjourned.]


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