[Senate Hearing 110-500]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-500
 
   IMPROVING FINANCIAL AND BUSINESS MANAGEMENT AT THE DEPARTMENT OF 
                                DEFENSE

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

                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                   INFORMATION, FEDERAL SERVICES, AND
                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 16, 2007

                               __________

       Available via http://www.gpoaccess.gov/congress/index.html

       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


FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, 
                AND INTERNATIONAL SECURITY SUBCOMMITTEE

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
BARACK OBAMA, Illinois               GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           PETE V. DOMENICI, New Mexico
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                    John Kilvington, Staff Director
                  Katy French, Minority Staff Director
                      Claudette David, Chief Clerk

                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Coburn...............................................     3
    Senator McCaskill............................................    21
Prepared statement:
    Senator Voinovich............................................    37

                               WITNESSES
                       Tuesday, October 16, 2007

Hon. David M. Walker, Comptroller General of the United States, 
  U.S. Government Accountability Office..........................     6
J. David Patterson, Principal Under Secretary of Defense 
  (Comptroller), U.S. Department of Defense......................     7
Paul A. Brinkley, Deputy Under Secretary of Defense for Business 
  Transformation, U.S. Department of Defense.....................     9
Dov S. Zakheim, Former Under Secretary of Defense (Comptroller), 
  U.S. Department of Defense.....................................    12

                     Alphabetical List of Witnesses

Brinkley, Paul A.:
    Testimony....................................................     9
    Prepared statement...........................................    86
Patterson, J. David:
    Testimony....................................................     7
    Prepared statement...........................................    81
Walker, Hon. David M.:
    Testimony....................................................     6
    Prepared statement...........................................    38
Zakheim, Dov S.:
    Testimony....................................................    12
    Prepared statement...........................................    97


                    IMPROVING FINANCIAL AND BUSINESS



                      MANAGEMENT AT THE DEPARTMENT



                               OF DEFENSE

                              ----------                              


                       TUESDAY, OCTOBER 16, 2007

                                   U.S. Senate,    
          Subcommittee on Federal Financial Management,    
                Government Information, Federal Services,  
                                and International Security,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:19 p.m., in 
Room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper, McCaskill, and Coburn.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Welcome, one and all. The Subcommittee will 
come to order. Dr. Coburn and I were talking and it looks like 
we are going to start voting. We are working on one of our 13 
appropriations bills, the Commerce-Justice appropriations bill, 
and they have an amendment at 3:30. We are probably doing 
amendments about every 15 minutes after that. It will make this 
a long hearing. No, hopefully it won't be that often, but it 
will seem that way, I am sure.
    I am grateful my colleague here is with us, Dr. Coburn. We 
are going to be joined by some others on our Subcommittee 
later. Senator McCaskill is presiding right now. As soon as she 
can get someone to relieve her, she will be over to join us and 
some others will, too.
    I think it was the day before September 11, 2001, former 
Secretary of Defense Donald Rumsfeld, with whom and for whom 
some of you have worked, gave a blunt and accurate assessment 
of one of our greatest adversaries while speaking to Pentagon 
employees and this is what he said, ``The topic today is an 
adversary that poses a serious threat to the security of the 
United States,'' and he went on to say, ``the adversary is 
closer to home. It is the Pentagon bureaucracy, not the people, 
but the processes; not the civilians, but the systems; not the 
men and women in uniform, but the uniformity of thought and 
action that we too often impose upon them.''
    Unfortunately, some 6 years later, those words are as true 
today as they were back then and our hearing today will focus 
on this adversary. Specifically, we will discuss how to 
continue to improve financial and business management at the 
Department of Defense, focusing on both the progress made by 
the Department in the area of business transformation as well 
as on the monumental challenges that the Department continues 
to face.
    I am told that the Department of Defense is one of the 
largest, most complex entities in the world. It employs nearly 
1.4 million people on active duty, roughly 825,000 in the 
Reserve and National Guard, and nearly 720,000 civilians. Its 
fiscal year 2006 financial statements included $1.4 trillion in 
assets and nearly $2 trillion in liabilities.
    To support DOD's operations, the Department performs an 
assortment of interrelated and interdependent business 
functions using almost 3,000 business systems. For fiscal year 
2007, the Department of Defense spent approximately $4.5 
billion to operate, maintain, and modernize these business 
systems, including their infrastructure. The ability of these 
systems to operate as intended affects the lives of our war 
fighters both on and off the field.
    While the Department of Defense has long been acknowledged 
for its premier war fighting capabilities, the dismal state of 
its financial and business management practices leave the 
Department vulnerable to waste, fraud, and abuse.
    We all share the same objective, and that is to try to 
figure out how the Department of Defense can successfully 
transform its financial management and business systems. The 
questions I hope will be addressed today are the following 
ones.
    The Department recently assigned Chief Management Officer 
duties to the current Deputy Secretary of Defense. One of the 
questions that I have is, is this action sufficient?
    Since 1999, the GAO has urged the Department to develop a 
strategic enterprise-wide business transformation plan. Why has 
this plan not yet been developed?
    Given the personnel turnover that will happen between now 
and January 2009, how will the Department ensure that progress 
is sustained?
    And finally, how can Congress play a constructive role in 
charting the best path forward for the Department?
    The Department of Defense has needed a Chief Management 
Officer who puts taxpayers first and is committed to sound 
financial and business management and transparency. Some of us, 
including the Comptroller General, have been pushing for this 
change literally for years. In fact, along with Senators 
Ensign, Voinovich, and Akaka, I joined them in cosponsoring 
legislation to establish in the Department of Defense, a Deputy 
Secretary of Defense for Management, who would serve as a Chief 
Management Officer.
    Now, certainly, Deputy Secretary of Defense Gordon England, 
for whom I have enormous respect, has ably served in this 
capacity unofficially even while tackling the challenges of 
being at the Department itself. Furthermore, Secretary Gates 
took a step in the right direction when in a September 18, 
2007, DOD Directive he expanded Secretary England's official 
role to include serving as Chief Management Officer, as we 
know.
    But a number of others, and certainly myself, and that 
includes GAO, the Institute for Defense Analysis, and the 
Defense Business Board, do not believe this action is 
sufficient. I believe this additional title will not 
necessarily result in the kind of meaningful reform that we are 
looking for. Only a full-time, term-based senior management 
official will be able to provide focus and sustained leadership 
over DOD's business transformation.
    Sound financial and business management is critical to the 
success of the Department. It is the foundation of any 
organization, any program, or any activity. The Department of 
Defense has one of, if not the most, important missions of any 
U.S. Government agency, and that is to protect and secure our 
homeland. Waste and mismanagement undermine that very important 
mission. Anything that weakens the Department weakens its 
ability to respond quickly and effectively to meet the real 
threats that our country continues to face.
    As elected Members of Congress, we have an obligation to 
the United States of America and to our people to ensure that 
their dollars are being used as effectively and as efficiently 
as possible. To date, the war in Iraq has cost us just over a 
half-trillion dollars and the meter is still running. Since 
2003, we have passed eight supplemental bills for Iraq and 
Afghanistan. We will soon consider another $150 to $190 
billion. The deficit this year is forecasted at roughly $160 
billion, and although that is a little better than last year, 
it is not great.
    At home, we are faced with huge growing fiscal imbalances 
due at least in part to our aging population and skyrocketing 
health care costs. This is not the time to be frivolous with 
our hard-earned money. But we know that there is never a time 
to be frivolous with the hard-earned money of the people of our 
country.
    Congressional oversight is imperative to make sure that 
Federal agencies like the Department of Defense step up to the 
plate, confront the waste of precious taxpayers' dollars, and 
take immediate corrective action so that more of our dollars 
support the real mission of the Department of Defense, and that 
is protecting Americans and our national interest both here and 
abroad.
    Dr. Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Senator Carper, thank you for having this 
hearing. It is our biggest expenditure, the Department of 
Defense. That is where we have the most money.
    I was glad you alluded to former Secretary Rumsfeld's 
statements. I am anxious to hear how things have changed since 
then. As I have studied and prepared for this hearing, I am not 
sure large quantities of measurable change have, in fact, 
happened.
    My primary concern pertaining to DOD's financial management 
is the goal for DOD to become audit-capable. Whether they pass 
or fail the audit, you have to become audit-capable first, and 
the fact that we are not anywhere closer to that now than we 
were when I came to the Senate is simply unacceptable.
    DOD continues to play the key role, with 15 programs or 
activities on GAO's 2007 high-risk list. Six of them have been 
on the list for at least 10 years, some dating as far back as 
1990. The DOD contracting continues to be unaccountable. I want 
to restate that word, unaccountable, unmeasurable, not 
manageable. It still is unaccountable. It is plagued with 
longstanding problems and it has been on the high-risk list for 
15 years, almost three Administrations.
    There have been numerous initiatives and strategies that 
have been implemented, but there still hasn't been any 
demonstrable progress in the key areas, or there hasn't been 
any significant metrics that I am aware of or benchmarks to 
gauge the progress of new standards and guidelines.
    I am almost to the point where I agree with David Walker 
that there ought to be a permanent position at DOD called the 
Chief Management Officer. I know that is not in the framework. 
I know it is not there. But I am wondering how long--6 years 
from now, we will continue to sit at a hearing like this and 
still have 15 to 20 programs on the high-risk list, still not 
have metrics, and still not measure things?
    And this is not meant to reflect on any of you gentlemen. I 
am not talking about you personally. I am talking about the 
leadership above you that has to be there to make this happen. 
The efforts have to be held accountable, and that is part of 
the reason that we are having this hearing. I hope that there 
are clear milestones and firm commitments in both planning, 
financial planning as well as purchasing planning, that I 
haven't seen.
    What I am hoping that will come out of this hearing is a 
commitment from the Defense Department to sit down with this 
Subcommittee and the GAO on a regular basis to try to hash some 
of this out. To me, I think we are kind of like we are on a 
paddleboat and we are going against the current. We haven't 
lost any, but I am not sure we have made any headway. As we 
continue to change things and change techniques and change 
strategies, I am not sure we are any closer to the goal. So I 
look forward to hearing that.
    I want to thank Comptroller Walker for his work and 
analysis and I thank each of you all for the input and the 
effort that you are--this is a daunting task. If it was easy, 
you would have already fixed it, I am sure. But the fact is, 
the frustration level and the financial consequences to not 
having an audited financial statement, to not having 
procurement under control, is, in fact, costing lives. And more 
importantly, it is costing the future of the next two 
generations of Americans because this is the largest 
expenditure that we have and if we can't get this right, we 
can't get any of it right.
    So I look forward to your testimony and I am hopeful that 
we can start a dialogue with both Chairman Carper and myself 
and really get some benchmarks for you all in terms of the 
implementation of this.
    The other thing that I worry about, as your staff and you 
have so ably pointed out and I know you are going to bring up, 
is there going to be an Administration change coming up in 
2009? Are we going to see another great big setback? Are we 
going to start all over again? I want some assurance today that 
the things that are in place are going to continue to move 
forward rather than we are going to change it again and change 
the goal. What are we, at 2016 now, I believe, is when we said 
we can have an auditable financial statement? That is not 
acceptable anywhere else in this country and it shouldn't be 
acceptable here. Thank you.
    Senator Carper. Let me go ahead and take a minute or two 
and introduce our witnesses. Again, welcome to each of you.
    We are going to lead off today with our Comptroller 
General, General David Walker. I said to General Walker before 
we started that I am glad we don't have to pay him on a 
piecemeal basis for every time that he testifies. Otherwise, 
you would run this deficit up even more than it has. He said he 
would like to go to work on a commission basis, I think is what 
he said. But it is not going to happen anytime soon.
    He is currently serving his ninth year of a 15-year term. 
Part of me says it would be nice to have a 15-year term, but I 
am not sure sometimes. But General Walker has been a vocal 
advocate of ensuring fiscal stewardship in the Federal 
Government. We are grateful for your service and for that of 
the team that you lead.
    J. David Patterson is the Principal Deputy Under Secretary 
of Defense, the Comptroller. As the Principal Deputy, he is 
directly responsible for advising and assisting the Under 
Secretary of Defense as Comptroller for oversight of DOD's 
financial management activities. His responsibilities also 
include developing and implementing DOD financial policy, 
financial management systems, and business modernization 
programs.
    Mr. Patterson served in the Air Force, I am told, from 1970 
to 1973 and retired at the rank of Colonel. During that time, 
he held responsible leadership and management positions with 
assignment at the Air Wing level as--are you ready for this, 
Dr. Coburn--a C-5A aircraft commander. Were you the wing 
commander for a wing that included C-5s?
    Mr. Patterson. I was the deputy forward air controller at 
Dover.
    Senator Carper. At Dover? Good for you. Welcome, a special 
welcome.
    Next, we have Paul Brinkley--welcome, Mr. Brinkley--Deputy 
Under Secretary of Defense for Business Transformation at the 
Department of Defense. Mr. Brinkley leads business management 
modernization for the Department of Defense. Prior to assuming 
his current role, Mr. Brinkley served as Senior Vice President 
of Customer Advocacy and Chief Information Officer for the JDS 
Uniphase Corporation. I hear from my staff that you have been 
doing great economic development work over there in Iraq and we 
commend you for that and say welcome.
    Last, we are glad to have Dr. Dov Zakheim with us today, 
currently a Vice President at Booz Allen Hamilton. Dov was 
appointed to be the Under Secretary of Defense and Comptroller 
from 2001 to 2004. I think his tenure there began as my tenure 
here in the U.S. Senate started. I remember fondly the 
opportunities we had to work together and we are delighted that 
you could be with us today. Dr. Zakheim is a member of the 
Defense Business Board and the Council on Foreign Relations. He 
has taught at the National War College, at Yeshiva University 
and Columbia University to name but a few. We are delighted to 
see you and thank you for coming today.
    I don't know if we started a vote or not. Could somebody--
--
    Senator Coburn. Yes, we have.
    Senator Carper. Have we? OK.
    Senator Coburn. Let me just add something. It takes a lot 
of courage for Booz Allen Hamilton to allow you to come and 
testify here. They are a contractor at the Defense Department 
and I want to thank them for their courage. Input into our 
government is the thing that we need and we value, and when 
people are intimidated to not do that because of the fear that 
they might not have the next contract, we all lose. So I want 
to thank your employer for that, Dov.
    Mr. Zakheim. Thank you. I am speaking in my own personal 
capacity, but I am glad to be here.
    Senator Carper. Dr. Coburn, do you want to just----
    Senator Coburn. Do you want me to go vote? We have got 
three.
    Senator Carper. In a row? Let us just get started and then 
we will take a break.
    General Walker, you are on. Welcome.

 TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF 
    THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Chairman Carper, Dr. Coburn, it is a pleasure 
to be back before the Subcommittee again to talk about this 
time the Department of Defense's efforts to transform its 
business operations and what further action is needed to 
maintain continuity of effort, to change the status quo, and to 
achieve sustainable success.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 38.
---------------------------------------------------------------------------
    As has already been mentioned, DOD represents 15 of 27 
high-risk areas on our latest list. Eight are DOD-specific. 
Seven are government-wide challenges.
    As you all know, in addition to representing the largest 
single domestic agency as far as spending--discretionary 
agency, I should say, for spending, our Nation is already 
running deficits and they are going to get a lot worse in the 
future because of the retirement of the baby boomers of the 
generation, absent reforms.
    Every dollar of waste is a dollar we don't have to meet a 
need, and every dollar of waste is an additional dollar of debt 
with compound interest that our kids and grandkids are going to 
have to pay off. We should have zero tolerance for waste at any 
time, but especially at a time of deficits and facing a period 
of sustained deficits and debt burdens that lie before us 
absent meaningful reforms.
    Transformation takes a long time to make happen, even in 
the private sector. And clearly, the senior leadership at DOD 
is committed to transformation and there are a lot of good 
people working very hard in order to try to achieve success. 
Progress has been made at differing rates in these 15 different 
areas, but candidly, there are a number of critical things that 
have to be done that have not been done, and I am here to tell 
you unless and until they are done, we will never be 
successful.
    We have to have a single integrated, comprehensive, 
strategic business transformation plan that goes beyond 
systems, that deals with all 15 high-risk areas, a 
comprehensive strategic and integrated plan with key metrics 
and milestones and with assigned accountability and 
responsibility for achieving results. We don't have it.
    Second, we need a Chief Management Official, a full-time 
job, not a part-time job, with a term appointment, with 
responsibility and authority to develop, implement, and oversee 
that plan, to work in partnership with others who would provide 
continuity both within and between Administrations. GAO, the 
Defense Business Board, and IDA have all recommended a new 
full-time position with a term appointment.
    The recent action to appoint Deputy Secretary Gordon 
England as the CMO, in my view, is form, not substance, and let 
me be clear here. I have tremendous respect for Secretary 
England. He is an extremely capable individual, and this has 
nothing to do with him as an individual. In fact, what we need 
to start doing is look beyond individuals and recognize that we 
have got an institutional problem that cries out for 
institutional and sustainable solutions, and that is not what 
is being done.
    The only outlier in this debate is the Department of 
Defense. That is the only outlier in the debate about what we 
need to do to move this thing forward, and frankly, I am 
growing more frustrated as time goes on, not because of these 
good people here. These are very capable, dedicated people who 
are making a difference because the status quo is not going to 
achieve sustainable success, and the sooner the Congress 
recognizes that and the sooner that the Executive Branch acts, 
the better off we will all be.
    I will be happy to answer any questions you may have after 
hearing from my co-panelists.
    Senator Carper. Thank you, General Walker.
    From a General to a Colonel. David Patterson, please 
proceed. You are recognized for 6 minutes. If you want to 
summarize your testimony, that would be fine. Your entire 
statement will be entered into the record. Please proceed.

 TESTIMONY OF J. DAVID PATTERSON,\1\ PRINCIPAL UNDER SECRETARY 
      OF DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE

    Mr. Patterson. Thank you very much, Mr. Chairman, Dr. 
Coburn. Again, it is a great privilege to be here to talk to 
this Subcommittee and discuss the progress that I believe we 
have made in the Department in improving our business and 
financial management and preparing the Department for an 
independent audit.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Patterson appears in the Appendix 
on page 81.
---------------------------------------------------------------------------
    We are always happy to bring the Subcommittee up to date 
and to clarify any questions you may have about the 
Department's modernization efforts. Indeed, before I finish 
today, I would hope that I would leave you with a better 
understanding of what I consider to be the three most important 
considerations on this topic.
    First, to your point, Chairman Carper, the size and the 
scope of the Department of Defense is indeed a great challenge. 
But to address that challenge, we are making progress in the 
Department along a sound plan for success. And the DOD's strong 
commitment to wise stewardship with our resources, sustained 
business and financial modernization, and a solid leadership 
support.
    To the first point, the size and scope of our challenge, we 
often hear it asked with some astonishment, how can it possibly 
be that the Department of Defense has never been independently 
audited? Well, on its face, it seems like a simple question and 
a relatively straightforward task. In an organization as large 
as the Department of Defense, the task is anything but simple.
    To put it in perspective, the Department of Defense is not 
only the largest department in the Federal Government, but the 
largest and most complex organization in the entire world. With 
an annual budget nearly twice the annual revenues of Wal-Mart 
and assets three times the size of Wal-Mart, IBM, and 
ExxonMobil combined, it is also the largest entity in the world 
ever to consider being audited end to end.
    And again to your point, Chairman Carper, we are also a 
global enterprise with 600,000 facilities in 163 countries 
around the globe, over five million inventory items, and $3.4 
trillion in assets and liabilities.
    Now, before the Chief Financial Officers Act of 1990, the 
Department of Defense operated under a very simple system. We 
received appropriations from Congress and tracked expenditures 
to ensure their proper execution. Business processes were slow, 
business operations inefficient, and because systems that had 
evolved over decades were incompatible across a spectrum of the 
agencies and components, information was inaccurate and 
incomplete. The result: Inaccurate inventories, material 
weaknesses, and an inability to obtain a clean audit.
    So that is the first point. The Department of Defense is a 
huge organization, a huge enterprise that for decades has 
utilized an outmoded collection of disparate systems 
incompatible with each other in a modern systems world.
    The second I would like to bring to your attention is the 
progress in light of that challenge that we have made toward a 
sound path for success. In 2005, a detailed plan was launched 
to modernize DOD financial management and prepare the 
Department for audit. Today, that plan is producing measurable 
results, transforming the way we do business, improving 
process, and reducing costs and making the Department more 
accountable.
    In 2001, only two Department of Defense entities were 
auditable, the Defense Finance and Accounting Service and the 
Military Retirement Fund. Today, seven Defense enterprises are 
auditable, whose combined assets and liabilities comprise 15 
percent of the Department's total assets and 49 percent of its 
total liabilities, and they all have clean audit opinions. By 
the end of fiscal year 2009, we expect to have nearly 40 
percent of DOD assets and 90 percent of the liabilities, or 
nine of our financial enterprises, with clean audit opinions.
    So we have the largest enterprise in the world, but thanks 
to a solid plan that is working, we will have gone from two 
auditable entities in 2001 to nine Department entities, or 90 
percent of our liabilities and nearly 40 percent of our assets 
being auditable by the end of next fiscal year. And I might add 
just in passing that those seven auditable agencies that we 
have today have a combined value of assets and liabilities 
twice the next largest government agency, Health and Human 
Services.
    So that brings me to my third point, and I would like to 
leave with you a very strong understanding that the Department 
of Defense, the heads of our agencies, and military leaders are 
absolutely committed to wise stewardship of resources and 
sustained modernization that supports not a bureaucracy, but 
the mission and the brave fighting men and women who put their 
lives on the line every day to accomplish that mission.
    So we have the largest and most complex organization. We 
have a plan to achieve success. And we have an organization, 
and more importantly a senior leadership that is absolutely 
committed to achieving that success.
    So, Mr. Chairman, thank you again for allowing us to come 
and talk to you. I look forward to your questions.
    Senator Carper. Thank you, Colonel Patterson.
    We are going to take a little break here. We have a series 
of three votes. We are going to get there for the end of the 
first one, vote two more times, and be back probably in about 
20 minutes. We will get back as quickly as we can.
    The hearing will stand in recess and we will return 
shortly. Thank you.
    [Recess.]
    Senator Carper. The hearing will come to order. I am 
delighted that you are all still here. Thank you. I apologize 
for the interruption.
    Mr. Brinkley, you are next in line, so please feel free to 
proceed. I am going to ask you to summarize in about 6 minutes 
and we will enter your full statement into the record. You are 
recognized. Thank you.

   TESTIMONY OF PAUL BRINKLEY,\1\ DEPUTY UNDER SECRETARY OF 
DEFENSE FOR BUSINESS TRANSFORMATION, U.S. DEPARTMENT OF DEFENSE

    Mr. Brinkley. Thank you, sir. Chairman Carper, Senator 
Coburn, Members of the Subcommittee, it is my honor to appear 
here today to discuss Defense business transformation and its 
associated governance.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Brinkley appears in the Appendix 
on page 86.
---------------------------------------------------------------------------
    As the largest industrial organization in the world, the 
size and complexity of the Department of Defense combined with 
its singular mission present unique challenges not faced by 
other entities undergoing transformational change. The 
Department's mission requires that its business operations 
adapt to meet new challenges not faced by other organizations 
undergoing transformation. The Department must be able to react 
with precision and speed to support our Armed Forces. Despite 
these challenges, I believe the progress the Department has 
made at all levels under the leadership of Deputy Secretary of 
Defense Gordon England over the past 3 years has been 
remarkable.
    Fundamentally, business transformation requires a number of 
things, including a sound enterprise-level strategy for 
transforming business processes and the culture that our people 
work within, leadership commitment, and a strong investment, 
management, and governance structure to ensure alignment to 
that strategy.
    Over the last 3 years, the Deputy Secretary of Defense has 
led our transformation efforts, devoting extensive time and 
energy to the effort to improve the Department's business 
operations. In many ways, Secretary England has been acting in 
the capacity of Chief Management Officer throughout his tenure, 
most notably in his role as the Chairman of the Deputy's 
Advisory Working Group and the Defense Business Systems 
Management Committee (DBSMC), the overarching governance board 
for the Department's business activities.
    Since its inception in 2005, the DBSMC, in concert with 
functionally aligned investment review boards, has served as 
the governance structure that guides transformation activities 
of the business areas of the Department, such as finance, 
acquisition, personnel management, and logistics. Authorized by 
the fiscal year 2005 National Defense Authorization Act and 
reiterated in the DBSMC charter, the DBSMC has responsibility 
for approving business systems modernizations over $1 million, 
the Business Enterprise Architecture for the Department of 
Defense, and the Enterprise Transition Plan, a comprehensive, 
milestone-based plan that lays out, in 6-month increments, 
measurable progress that the entire Department has opened up to 
scrutiny and measures itself on 6-month increments in published 
reports to the Congress. This gives the DBSMC statutory 
oversight and control of spending to ensure alignment to 
Department-wide objectives, the key to our success to date.
    The DBSMC charter extends the authority of the DBSMC beyond 
statutory requirements to include responsibility for ensuring 
the strategic direction of the Department's business operations 
are aligned with the rest of the DOD and for measuring and 
reporting the progress of our business transformation efforts. 
With this expanded focus, the DBSMC has become an integral 
driving force behind the Department's adoption of continuous 
process improvement and Lean Six Sigma methodologies. The 
Department's shared focus on enterprise resource planning 
system and process deployments, and the requirement to change 
longstanding business practices necessary for these ERP 
projects to succeed. In each of these areas, the DBSMC has 
provided invaluable top-level direction for the business 
transformation efforts of the Department.
    As you mentioned, the Deputy Secretary's role in business 
transformation was recently codified in a September 18, 2007 
directive issued by the Secretary of Defense designating the 
Deputy Secretary of Defense as the Chief Management Officer 
(CMO) of the Department. This ensures that the Department's top 
leadership will continue to make business transformation a top 
priority.
    The directive formally institutes into departmental policy 
the Deputy Secretary's responsibilities as the CMO. As CMO, the 
Deputy Secretary shall ensure Department-wide capability to 
carry out the strategic plan of the DOD in support of national 
security objectives; ensure that the core business missions of 
the Department are optimally aligned to support the 
Department's war fighting mission; establish performance goals 
and measures for improving and evaluating overall economy, 
efficiency, and effectiveness, and to monitor and measure the 
progress of the Department; and finally, to develop and 
maintain the Department's Department-wide strategic plan for 
business reform.
    The official designation of the Deputy Secretary of Defense 
as the CMO affords the President and the Secretary of Defense 
necessary flexibility to implement an integrated management 
team that can quickly meet the changing requirements of 
business transformation and positively affect outcomes while 
formally instituting accountability at the top levels of the 
Department for the future of our transformation activities.
    Finally, I want to highlight a few points. The Department 
under Secretary England's leadership, we have successfully 
established the Business Transformation Agency in 2005. This 
organization provides an accountable entity for all DOD-wide 
business and system improvement efforts, staffed by the best 
and brightest career civil servants along with highly-qualified 
experts hired from private industry, bringing best practices to 
the business of government.
    We have developed and continue to evolve the Business 
Enterprise Architecture and its associated federation strategy. 
Biannually, we do publish the Enterprise Transition Plan, which 
serves as our business transformation strategic road map.
    We are implementing the Department-wide adoption of 
continuous process improvement principles and implementing Lean 
Six Sigma, as I mentioned, and we are improving the acquisition 
and fielding process for information systems, the development 
of what we call the Business Capability Lifecycle (BCL). This 
BCL process will help resolve longstanding challenges that have 
impacted the delivery of business capabilities in a timely 
manner. Under process rules, initial operating capability of an 
IT program must be reached within 12 to 18 months of the 
contract award or else the business case will not be approved 
for funding. This shifts the entire mentality of how we invest 
in business systems within the Department of Defense.
    There are over 20 DOD-wide systems programs that are 
critical to the DOD and its interoperability that have directly 
benefitted from this transformation approach. Using a similar 
approach, programs like the Defense Travel System (DTS) and 
Defense Integrated Military Human Resources System (DIMHRS) 
have been restructured and are on a path to deliver 
longstanding value to the Department of Defense.
    Finally, I have two last points I want to make that I think 
we lose sight of. Some of the most effective and rewarding work 
the business transformation effort is involved in is in the 
midst of our fighting forces in Iraq, working to ensure 
business processes that directly support military operations in 
the field are agile and that they are aligned to war fighting 
needs.
    Three years ago, the business mission of the Department and 
the war fighting mission were viewed as very separate 
activities. In three short years, that mentality has changed. 
The effect of our business operations on stability operations 
in the war fighting arena are now widely understood and 
seamlessly linked. In considering any changes to organizational 
structure, it is critical that we not structurally recreate a 
boundary between these two mission areas.
    Finally, regarding sustaining our effort, we have taken 
several steps to ensure our progress is sustained. 
Transformation of an entity this size cannot be achieved in a 
single Presidential term. It took Lou Gerstner 10 years to 
transform IBM into the global competitor it is today, as an 
example. By establishing a culture of measured 6-month 
incremental improvements, published and clearly articulated in 
our transition plan, by establishing the new entity within 
government, the BTA, staffed with career and business 
professionals, and creating a sense of direct customer focus by 
engaging with our war fighters, we believe the Department now 
has the tools needed to help ensure continued progress and to 
avoid lost momentum in a change of Administration.
    Thank you, and I look forward to your questions.
    Senator Carper. Mr. Brinkley, you are recognized. Please 
proceed. Thank you.

   TESTIMONY OF DOV S. ZAKHEIM,\1\ FORMER UNDER SECRETARY OF 
       DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE

    Mr. Zakheim. Thank you, Mr. Chairman and Senator Coburn. It 
is a privilege to be here before you today to discuss ways to 
improve financial management in the Department of Defense, and 
as I said to Senator Coburn earlier, I am speaking in a 
personal capacity.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Zakheim appears in the Appendix 
on page 97.
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    When I appeared in 2001 before the Senate Armed Services 
Committee at the hearing for my confirmation as Under Secretary 
of Defense, I told the Members of the Committee that I 
considered being CFO as important as being Comptroller. The 
fact is that financial management traditionally has been a 
backwater at DOD and that is for two reasons. The first is 
because the Department's primary task is to support the 
military's mission, to fight and win the Nation's wars. So 
everything else, and particularly everything that can be 
categorized as back office, tends to be subordinated to this 
essential task.
    The second reason is that while the Under Secretary of 
Defense (Comptroller) is also the Chief Financial Officer, the 
CFO role has traditionally been subordinated to that of 
Comptroller, because as Comptroller, it is the Under Secretary 
of Defense's responsibility to formulate the budget and secure 
its passage through the Congress. This activity is naturally 
critical to the ongoing functioning of the Department while 
financial management is seen as an ancillary exercise. As one 
of my predecessors put it to me just as I was taking on the 
job, ``as long as you can get your budget submitted on time, 
you have done your job.'' He never mentioned CFO at all.
    This situation, by the way, is exactly the reverse of what 
goes on in the private sector. In most corporations, it is the 
Comptroller who is subordinated to the CFO. Budget preparation 
is just one financial task and hardly the most important at 
most private firms. It is a lot more important to know how the 
money actually is spent and managed throughout the year, what 
DOD terms ``budget execution.'' But it is noteworthy that only 
in 2002-2003 did the Department of Defense formally include 
execution as part of what is now called the planning, 
programming, budgeting, and execution process.
    This focus on the budget is a natural outgrowth of the 
Department's relationship with the Congress. It is by means of 
the budget that the Congress exercises its control over the DOD 
program. In the private sector, shifting funds from one 
division to another is a routine matter. For DOD, those actions 
are strictly regulated by the Armed Services and Appropriations 
Committees as well as, in some cases, the Intelligence 
Committee. There are severe, and in my view excessively low, 
limits on reprogramming funds. Reprogrammings of any 
significance require prior Congressional approval, normally 
from the four defense-related committees. The combination of 
Congressional practice and rules with the culture of a 
Department whose top priority is war fighting poses a 
fundamental challenge to any effort to improve the Department's 
ability to improve upon the management of its business finances 
and all of its business management operations.
    Nevertheless, the last 7 years have witnessed considerable 
progress in the financial management arena and that of business 
management. DOD is realizing the objectives that result from 
sound financial and business management. You have heard details 
from my former colleagues who are sitting alongside me. But as 
in other aspects of DOD activity, business transformation 
remains and must remain an ongoing effort.
    In addition, the Department continues to face major hurdles 
well beyond those created by Congressional limitations and 
execution management. That is understood. So improving 
financial management is going to be a painstaking process. 
There is no quick fix or panacea that is going to change the 
situation overnight.
    Beyond those actions already taken to improve the situation 
over that which prevailed in the 1990s, I would suggest the 
following. None of these are particularly original ideas.
    First, Congress should reconsider its reprogramming 
ceilings. These should be raised to 5 percent of the baseline 
budget so as to give the Department's financial managers the 
ability to execute budgets more efficiently. Congress would 
still retain prior approval to satisfy its oversight role.
    Second, I believe the Department should ensure that the 
Business Transformation Agency be led by a three-star general 
or flag officer or the civilian equivalent, and that the agency 
report directly to the Department's Chief Management Officer, 
currently the Deputy Secretary of Defense. While I currently 
see no need for legislation to codify such a relationship, that 
may have to be considered in the future.
    Finally, since I am running out of time, I would like to 
address this question of a Chief Management Officer. In my 
view, the Department should have one with the rank of a 
principal under secretary who would hold office for a fixed 
term. I stated this view during my final appearance before the 
Congress when I was still Comptroller, when I sat alongside 
Comptroller General David Walker, with whom I agreed then and 
with whom I still agree.
    I recognize, and you have heard this before and I am in 
complete agreement, that the Department currently has a strong 
CMO. In my opinion, Deputy Secretary Gordon England is the most 
capable senior manager the Department has had in decades. But 
Secretary England's term expires with that of the 
Administration. He hasn't indicated that he wants to serve 
another 20 years. There is no guarantee that his successor will 
bring the same managerial background to the job as, by the way, 
did Secretary Rumsfeld, who in many ways was his own CMO. 
Moreover, the post of CMO should be one that is for a fixed 
term, perhaps 5 years. Nevertheless, a way needs to be found 
that the CMO should serve at the pleasure of the Secretary and 
Deputy to whom he or she would report.
    Some say it is going to be exceedingly difficult to find a 
top manager willing to take the job. They point to the fact 
that Congress has imposed increasingly onerous financial and 
reporting burdens on those who otherwise would be willing to 
serve the Nation in a senior capacity. Clearly, the Congress is 
going to have to do its part. It is going to have to ease 
restrictions to the point where senior people would be prepared 
to leave industry and finance to serve as CMO without, for 
example, putting their pensions at risk. Otherwise, the right 
people will never be available and the CMO concept for DOD will 
remain just that, just a concept.
    Again, I appreciate the opportunity to testify before this 
Subcommittee and I am prepared to respond to questions the 
Members might put to me. Thank you.
    Senator Carper. Dr. Zakheim, thanks very much for your 
testimony.
    We have been joined by Senator McCaskill. I understand you 
choose not to offer an opening statement, is that correct?
    Senator McCaskill. No. I just have questions.
    Senator Carper. OK. Well, you will have them. Thank you for 
joining us today.
    Dr. Zakheim, very briefly restate your four points right at 
the end.
    Mr. Zakheim. The four points about CMO or generally?
    Senator Carper. The last four points that you made.
    Mr. Zakheim. What I said, first of all, is the----
    Senator Carper. Starting with reprogramming ceilings----
    Mr. Zakheim. Yes. Reprogramming ceilings are just far too 
low.
    The second point that I made was that the Business 
Transformation Agency needs to be permanently linked at a high 
level to the Deputy Secretary and the Secretary and to the CMO 
if there is one. In this case, it is still the Deputy 
Secretary.
    And then I made several other points in my written 
statement, but finally I did address the question of the CMO. I 
believe it should be someone with a fixed term, preferably 5 
years, a principal under secretary, that is to say outranking 
the other under secretaries, reporting to the Secretary and the 
Deputy, obviously having to work with them, but if this person 
is a technocrat, it shouldn't be that much of a problem.
    Finally, that Congress needs to take action to ensure that 
the reporting requirements that make it so difficult for people 
to get through the confirmation process are made a little 
easier. You are just not going to get Wall Street bankers and 
industrial tycoons who really know this domain well to come in, 
go out or come back into government. It is not so much the 
salaries. They don't care about the salaries. They are serving 
their country. It is the agony of the process. Why should they 
want to do that? Congress just has to ease up, I think.
    Senator Carper. I remember being nominated by former 
President Clinton when I was Governor of Delaware to serve on 
the Amtrak Board of Directors and going through the process 
itself, just the paperwork alone was enough to, as much as I 
wanted to do it, I almost said a couple of times, that is it. I 
am not going to do this.
    Let us just go with the last point that Dr. Zakheim 
mentioned and that is the issue of whether we ought to have 
basically a Chief Management Officer. Is this somebody who 
should serve a set number of terms, somebody who would not be 
part of the team, if you will, appointed by a President? I know 
Messrs. Patterson and Brinkley have different perspectives, but 
let us just go back to you on that point.
    One of the things that the Secretary has done, I think, is 
by executive order or by direction he has said that Gordon 
England, Deputy Secretary, who is, I think we all acknowledge, 
very talented and valuable leader, he ought to be the CMO. Is 
that action sufficient? That is one question. The second is how 
is this designation any different from some of the previous 
arrangements that we have had?
    Mr. Walker. First, the action is not sufficient. It is 
largely a status-quo scenario. I have great respect and 
admiration for Gordon England. He is an extremely capable 
professional. But the simple fact of the matter is, Secretary 
England is G-O-N-E on January 20, 2009, gone, and we don't know 
who the next Deputy Secretary is going to be. We have no idea 
what their background is going to be. We have no idea what 
their interest is going to be. There is no statutory 
requirement for the Deputy Secretary to have the kind of 
qualifications that would lead to sustainable success with 
regard to business transformations. If you look at recent 
deputy secretaries, some have had backgrounds that would lend 
them towards being successful and some have had backgrounds 
that would not lead them to be successful in that role.
    And so as I have said before, I think there is agreement 
between the Defense Business Board, IDA, and GAO that there is 
a need for a new position as a full-time job with a term 
appointment and certain other elements. There is agreement on 
that, and I think it is essential.
    Senator Carper. One of the statements, it maybe came from 
Secretary England, but someone, I think, has indicated that CMO 
position that meets GAO's recommendations and the 
recommendations of Dr. Zakheim will interfere with future 
Presidents' and Secretaries of Defense's ability to create 
their own management team. Would you just respond to that?
    Mr. Walker. Clearly, there has to be a basis that if there 
are irreconcilable differences between the CMO and the 
Secretary or potentially the Deputy Secretary, depending on the 
reporting relationships, then there has got to be a mechanism 
in place to be able to deal with that, and one way you could 
deal with that is to have some type of a reporting requirement 
to the Congress where they could end up proposing to take an 
action to end somebody's term before the end of that term for 
specified reasons and just advise the Congress.
    But I think one of the things we have to keep in mind is 
that by getting somebody to agree on the front end to serve a 
specified period of time, with the right type of qualification 
requirements and with the potential to be reappointed if they 
do a good job, that sends a powerful signal within the 
organization, as well, that you can't underestimate because I 
have been a Presidential appointee of Ronald Reagan, George 
Herbert Walker Bush, and William Jefferson Clinton, and my 
prior positions have been at the pleasure of the President 
until this current one.
    The fact is that PAS-es, by definition, are temporary help. 
I mean, they are only going to be there for a temporary period 
of time if you serve at the pleasure of the President, and the 
kind of things that we are talking about needing to get done 
here--that these gentlemen are making a very meaningful 
contribution towards, I might add--they are going to take a 
long time.
    Senator Carper. I just want to turn to Mr. Brinkley, if we 
could, to follow up on this question. I know you and, I think, 
Mr. Patterson have a different take on this, but there is 
concern about if we don't allow the President to appoint the 
CMO as part of his or her team, that it is going to interfere 
with their ability to create a management team to their liking. 
I just wonder, why does the Department hold this position if 
the CMO is supposed to be nonpartisan and focused solely on 
business transformation.
    Mr. Brinkley. I can only offer observations. The sense the 
Department has is that a new Secretary coming into the 
Department with a management agenda aligned to the 
Administration's managerial priorities should have as much 
freedom as possible to take the people that he has available 
and build the team that he believes best aligns to his 
management style and his management discipline, and the more 
statutory structure you build in place--a private sector 
analogy would be you hire a new CEO into a major corporation. 
He needs to be able to build his team. He needs to be able to 
organize.
    So anywhere that you have a statutorily-defined structure, 
you reduce the flexibility of the CEO of the organization to 
organize effectively, and so I believe there is a natural 
resistance within the Executive Branch of government to efforts 
to legislate and put in statute things that hinder the ability 
of the accountable individual because it will be the Secretary 
of Defense held accountable for execution within the Executive 
Branch, there is a resistance to having statutory structures 
imposed. And so I believe that is the source of the concern 
that the Department has about having a position this senior 
defined in a way that is not--having this statutorily put into 
place.
    Senator Carper. Dr. Zakheim, would you just comment on 
that, please?
    Mr. Zakheim. It seems to me that, first of all, as you 
said, Senator, we are talking about a technocrat here. We have 
lots of people who have served as technocrats inside the 
Department of Defense under a variety of Secretaries. Let me 
give you two.
    The late Doc Cook, David O. Cook, who was called the 
``Mayor of the Pentagon.'' He had lots of power. Some people 
said he had more power than the Secretary. When he swore me in, 
he told me the Bible that he used was the same one he had sworn 
in Don Rumsfeld 25 years earlier in the same job. He always was 
the Secretary's purse man, whoever the Secretary was.
    Another example, and he should be alive and well, is Andy 
Marshall, who has been serving as the head of Net Assessment in 
the Department of Defense since he was appointed by Secretay 
Jim Schlessinger, Mr. Rumsfeld's predecessor the first time Mr. 
Rumsfeld was Secretary, which was a couple of years ago.
    So it is quite possible for somebody who is technically 
brilliant at what they do to serve as the Secretary and the 
Deputy Secretary, and obviously, as David Walker said, there 
has to be some leeway that they have to serve at the pleasure 
of the top two people. In other words, if there is a 
fundamental personality disagreement that is paralyzing the 
Department, you can't turn around to the Secretary and the 
Deputy and say, well, you are stuck with this individual. That 
wouldn't work, either.
    Senator Carper. General Walker.
    Mr. Walker. Very quickly, Mr. Chairman. First, look, there 
is a balancing of interest here that we have to keep in mind. 
On one hand, any President or any Secretary would like to have 
total discretion to pick whoever they want and remove whomever 
they want. That is understandable. That is human nature.
    On the other side of the coin, we have an institutional 
need. You have to balance the two. What is more important, to 
meet the institutional need irrespective of who the President 
and the Secretary is, or to meet the individual want based upon 
who that is.
    The other thing is, is this is not a new issue. The 
Commissioner of Social Security and the Commissioner of the 
Internal Revenue Service are Presidential appointments with 
Senate confirmation with significant responsibilities and they 
have term appointments.
    Senator Carper. Have they always been that way?
    Mr. Walker. They have been that way for a number of years. 
I mean, we are not crossing the rubicon here, and those jobs 
are at least equivalent in level of responsibility as this one.
    Senator Carper. All right. Good. Thanks. Dr. Coburn.
    Senator Coburn. Thank you. Let me just go back for a 
minute. General Walker, last year's appropriation had $9 
billion in earmarks in the Defense Department, something like 
12,000 earmarks, which we are trying to get a handle on now 
with the Defense Department on how the money was spent. You are 
talking about progress being made. I just want to make it 
clear. Is there any interference in the progress of managing 
the Defense Department when we have 12,000 earmarks out there 
laid out for things that they have to do that are non-
competitively bid that have to happen?
    Mr. Walker. I think earmarks are a problem. I think not all 
earmarks are equal. Some earmarks, frankly, represent waste. I 
recently was asked by the House to come up with a definition of 
waste and some examples, and my definition was basically on the 
following lines. When the taxpayers as a whole do not receive 
reasonable value for money because of an inappropriate act or 
omission by a party that has discretion over government 
resources, that is waste. That can happen by Executive Branch 
officials, by Legislative Branch officials, by contractors or 
grantees. One example I gave was inappropriate earmarks that 
are not based upon value and risk, where we would not be doing 
it but for the earmark.
    But as you know, Dr. Coburn, an earmark by itself doesn't 
increase government spending, but if you have got constrained 
resources, the fact that you are telling somebody how to spend 
the money when you are going to have tighter and tighter 
budgets causes other problems and it serves to undercut the 
integrity of the process and the credibility of the Congress in 
the eyes of the American people.
    Senator Coburn. General Patterson, you went from two to 
seven. You expect to be nine entities in 2009. How many total 
entities are there in the Defense Department?
    Mr. Patterson. There are roughly 15.
    Senator Coburn. Fifteen?
    Mr. Patterson. Fifteen, yes.
    Senator Coburn. In your report, this report, you list the 
DOD reporting entities. It is 15 percent of assets, 49 percent 
of liabilities. What percentage of net operating expenditures 
is that?
    Mr. Patterson. We don't audit net operating expenditures. 
That is an appropriation and we don't audit--and as I 
understand it, we don't intend to audit net operating 
expenditures.
    Senator Coburn. What percentage of the Defense Department 
is it?
    Mr. Patterson. Well, it is about $152 billion in O&M, which 
is operations and maintenance, of a roughly $460 billion----
    Senator Coburn. So it is about 30 percent?
    Mr. Patterson. Yes, sir, that is about right.
    Senator Coburn. OK. So we have 30 percent of the Pentagon 
or the DOD now auditable, correct?
    Mr. Patterson. That is correct. But sir, if I could 
explain----
    Senator Coburn. OK.
    Mr. Patterson [continuing]. I don't want to leave the wrong 
impression. Within the O&M account, you have a number of other 
things--civilian personnel, you have the contractors, you have 
services, you have maintenance, and depot maintenance. You have 
a variety of things within it, all of which are accountable 
line items in a budget. Those are the things within the 
services and the various agencies that we would look at for 
auditing.
    Senator Coburn. OK. But as a percentage of the DOD, that is 
what my point is, we are up to about 30 percent where we were 
at 5 percent before.
    Mr. Patterson. I couldn't attest to that sir, I mean----
    Senator Coburn. Well, it is about 30 percent of the DOD 
budget?
    Mr. Patterson. Yes, sir.
    Senator Coburn. That is my point. But none of the Army 
isn't in there, right?
    Mr. Patterson. Yes, sir, it is. The Army is in operating 
and maintenance accounts, of course.
    Senator Coburn. I am talking about auditing.
    Mr. Patterson. Oh, I am sorry.
    Senator Coburn. The Army isn't in there. The Air Force 
isn't in there. The Marines and Navy are not in there.
    Mr. Patterson. That is correct.
    Senator Coburn. So this 70 percent would include the 
services.
    Mr. Patterson. The 90 percent on liabilities and 40 percent 
in assets would include, when we get to that point, the Marine 
Corps, it would include the Corps of Engineers and the Army, it 
would include the Defense Information Systems Agency, and it 
would include the Medicare fund that we have.
    Senator Coburn. When you get there.
    Mr. Patterson. When we get there in--correct.
    Mr. Walker. Dr. Coburn, the answer to your question, I 
think, is yes. The 70 percent of net operating costs that have 
not been audited yet include the services.
    Senator Coburn. OK. Paul, you are in a appointed position, 
correct? So unless you are reappointed, everything you are 
doing now at the Business Transformation Agency is going to 
have a jump start with the next Administration?
    Mr. Brinkley. We have staffed an SES-level director of the 
BTA that reports to my office. My office is a political 
appointment, a non-Senate-confirmed political appointment that 
supports that Deputy Secretary of Defense's business 
transformation objectives. My role will be replaced no later--
no earlier--maybe no later--than January 20, 2009.
    Senator Coburn. OK. And so understanding the political 
nature of this, if you were asked to serve no matter what the 
next Administration, would you give that a consideration? We 
are not going to hold you to it---- [Laughter.]
    Mr. Brinkley. I don't want to be on the spot here----
    Senator Coburn. This is a great point. Look at our problem. 
We have somebody fairly effective, or highly effective at what 
they are doing now, and because we are going to have an 
election, we are going to gut that. That is the whole point. 
The point is, we don't have the ability to put great managers 
in and keep them there. Go to the point of David Walker or Dov 
Zakheim.
    Give me, Mr. Zakheim, if you will, give me some examples of 
where the military or DOD could have used a higher 
reprogramming, or some examples where we were wasting or not 
being able to effectively do things because we have so much--
such a limitation on reprogramming.
    Mr. Zakheim. You are asking me to think back 3 or 4 years. 
We have had cases, as I recall, where we needed to move money 
into faster spending accounts. I will give you an example of 
where it would have been nice to be able to reprogram a lot of 
money quickly.
    Up-armored Humvees, we moved the money eventually. We had 
to move mountains on the Hill to make that happen. There 
shouldn't have been anything requiring that kind of work. There 
were kids out there getting killed. It is that sort of thing, 
or the body armor, where it needs to be left to the discretion 
of the managers.
    Again, as you heard from Dave Patterson and Paul Brinkley, 
we know generally where the money is, and nobody is running off 
to the Swiss banks with the DOD budget. The real question is, 
do the managers of that budget today, who are executing the 
budget, have the ability to move money around to where it needs 
to be spent urgently. The answer is ``no'', 99 percent of the 
time, and that just makes no sense in any context, including 
the government.
    Senator Coburn. So your position is if you had a 5 percent 
limit, still reportable----
    Mr. Zakheim. Yes.
    Senator Coburn [continuing]. You still had to come and get 
clearance----
    Mr. Zakheim. Absolutely.
    Senator Coburn [continuing]. That would give the 
flexibility?
    Mr. Zakheim. Sure, because then you----
    Senator Coburn. What kind of resistance, when you talk to 
appropriators, do you get on that?
    Mr. Zakheim. Well, it is not just the appropriators. I 
mean, we have to get the authorizers to agree and you have to 
get the Intelligence Committees, when it is their budgets, as 
well. The staffers feel that this is the way they control, and 
I can understand that. I agree that Congress needs to maintain 
oversight. But it seems to me that as long as you still have 
the prior approval requirement, you are maintaining that 
control.
    Senator Coburn. Do you think there is adequate oversight in 
Congress of the Department of Defense?
    Mr. Zakheim. Very often, the Congress seems to be looking 
for the key under the lamp post, because you get oversight that 
verges on or actually is like micromanagement. In other cases 
you don't get it at all, and it seems to me that what you 
really need is a dialogue between responsible leaders on both 
sides of the river, where both sides have the country's 
interest at heart. There just hasn't been that kind of a 
dialogue to say, ``Look, how do we straighten this out?'' In 
fact, we are still functioning in the realm of financial 
management and budgeting as if we were living in the 1960s.
    If you permit me to relate an anecdote about this. Around 
the time I took over as Comptroller, I bumped into Robert 
McNamara and we got to talking about the planning, programming, 
and budgeting process because there wasn't execution even as 
part of that process. And McNamara said to me, ``You have got 
to be kidding. This is what I was dealing with 40 years ago.''
    Now, think about that. We are still functioning in many 
ways, because of the interplay between Congress and the 
Pentagon, the same way we were at the height of the Cold War. 
Something has got to give here.
    Senator Coburn. Earlier, you alluded to the fact that you, 
or maybe Mr. Brinkley, I don't know which, that you have a 
management structure and that in the private sector, we have a 
business plan, we have auditing, we have financial controls, we 
have benchmarks, we have metrics, and we have reassessment all 
the time of what we are doing. The point was made is that their 
primary thing is to defend the country, and so therefore this 
is second. I will put forward to you is you can't defend the 
country unless you have the other first.
    Mr. Zakheim. I don't disagree. I am just saying that there 
is a culture here that exists, and when you think about it, 
these are folks who are laying their lives on the line every 
day. Many of them are coming home pretty badly beaten up, if 
they come home alive, and so naturally when the requirement 
comes, when I want to pull some people off to do some of this 
anolytical management activity, the military is going to say, 
``Well, wait a minute. We are short of people out in the 
field.''
    Senator Coburn. Yes.
    Mr. Zakheim. You have this tremendous tension there. It is 
not just money resources, it is human resources, maybe even 
more so human resources. It is very understandable, and that is 
why I think you can't really start pointing fingers at anybody 
and blame anyone. We have a system that just needs to be 
revisited.
    Senator Coburn. All right. Thank you, Mr. Chairman.
    Senator Carper. I think we are about to start another vote. 
If we do, I am going to ask Dr. Coburn if he would be willing 
to go over and vote and then just come back and, while I vote, 
chair the hearing.
    Senator McCaskill, welcome. We are glad you are here.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Thank you. I have, as usual, like 14 
different things I would like to pursue with this particular 
group, but let me for a minute focus on contracting.
    Clearly, we are going to be contracting in the future 
forever, and clearly, DOD and the various branches have done a 
miserable job of contracting in this conflict. Whether it is 
LOG CAP, whether it is reconstruction funds, there has been a 
lack of definitization. There has been a lack of oversight. 
There has been a lack of monitoring. There has been a lack of 
competitive bidding. And we have example after example after 
example.
    We have had several references to the private sector. I 
have got to tell you, and I think, Mr. Brinkley, you mentioned 
a CEO and having the ability to organize. Somebody would have 
been fired in a private business over the way these contracts 
have been overseen. Someone would have been held accountable, 
not necessarily maybe the CEO, but I guarantee you the Board of 
Directors, if all the information had come forward about 
literally--I had actually the contracting people at LOG CAP in 
Iraq, when they put up the bar graph of LOG CAP going from $20 
billion to $15 billion to $12 billion. When I asked them what 
caused the difference, I actually had this woman say to me in 
Baghdad it was a fluke, a $5 billion fluke that the contract 
went down that much.
    Now, what I would ask of you, Mr. Brinkley, any of you, and 
Mr. Walker and all of you, is don't we need to either have a 
Reserve component for conflicts that are contracting 
specialists, or more importantly, don't we need to engrain 
contract oversight in military training? I had a general say to 
me over there, I don't care if it costs $10 billion or $15 
billion. I wanted it yesterday and I wanted to make sure there 
was ice cream in the mess hall. It didn't make any difference 
to me. And he was kind of offended that I was trying to drill 
down on this.
    And ultimately, this comes back to a level of trust. 
Congress is going to continue to overreact and over-regulate 
because they don't trust that the military is going to be 
responsible, and the military is going to run around and do 
whatever they can to go around the regulations because they 
need what they need when they need it. And it doesn't appear to 
me that this dog is going to ever catch his tail, because it 
hasn't for 40 or 50 years.
    What do we do about the contracting piece to provide some 
measure of accountability? Can we demote someone? Can we 
promote someone? More importantly, can we fire someone?
    Mr. Brinkley. I will answer the first two questions and 
comment on the rest. Your points, and it was good to hear the 
focus on the root cause of what exactly has transpired, the 
idea of a Reserve component for contracting, I have seen 
firsthand, and I will give you an anecdote from the private 
sector.
    The company I worked for before I came to DOD bought about 
a billion dollars worth of materiel all over the world, just $1 
billion, right. It seemed like big money at the time. We had a 
large staff of engineers and contracting, procurement experts, 
we called them, contracting experts who managed those supply 
relationships, ensured that product was delivered on time. It 
was key to our ability to ship a product to our customer.
    Now, compare and contrast within government. The scale of 
the spending to support our mission in Iraq and the number of 
people we have doing a phenomenally good job--I am in awe of 
how our contracting officers are able to manage the scale of 
the spending they oversee.
    We do need to look at, in my opinion, and I know that this 
has been acknowledged and people are looking at how to do this, 
Joint Forces Command is looking at a contracting, a scalable 
Reserve component for contracting, but we do need, if we 
anticipate future conflict that requires us to contract at this 
level, and also to ensure that the economic effect of our 
contracting is being applied to support the economic 
stabilization missions that we have in places like Iraq, that 
we ensure that we create a contracting corps that has the 
expertise not just in contracting in peacetime, but also 
contracting in times of conflict when a general is going to 
pound the table and he is going to want his forces to have the 
very best they can get and you get overwhelmed with the natural 
desire to support immediately the needs of the force and to 
balance that trade against your ability to adhere to contract 
regulations and rules and have systems and processes that 
support that mission.
    That is a very important area that we must focus on going 
forward, and there are some bright folks who are looking at how 
we structure the contracting community to do that in the 
future.
    Senator McCaskill. Yes, Me. Walker.
    Mr. Walker. Senator, on pages 40 and 41 of my testimony, 
which is Appendix 1,\1\ there are 15 longstanding systemic 
structural problems within the Defense Department with regard 
to acquisition and contracting that need to be addressed. 
You're tough on another issue, and that is when you have a 
conflict or another type of contingency, for example, Hurricane 
Katrina. To the extent that you have systemic weaknesses that 
have not been addressed, they are exacerbated and multiplied 
when you have a contingency operation, whether that be in Iraq, 
which is a military operation, or whether that be Hurricane 
Katrina, which is a natural disaster.
---------------------------------------------------------------------------
    \1\ Appendix 1 appears in the Appendix on page 81.
---------------------------------------------------------------------------
    And yes, one of the challenges on the 15 is the capacity 
and the capability, both in numbers as well as skills and 
knowledge, to get the job done, and I think we do need to 
consider having some type of Reserve for contingency 
operations, but we also need to make sure we have enough for 
just day-to-day ongoing operations and I question whether we 
do.
    Senator McCaskill. Mr. Patterson, I have a letter from a 
constituent who used to work at KBR. He is retired Navy and he 
left in November 2006. His job at KBR was a subcontract close-
out specialist. His job was basically an auditing function to 
look at the contracts and find if there had been errors, 
omissions, and money that was paid inappropriately.
    He found a number of problems, and when he left in November 
2006, he not only talked to KBR about it, he also talked to 
DCAA about it, the Defense Contract Audit Agency. It is $50 
million. He hasn't heard a word. So he sent me all the 
documentation and it is pretty obvious, and this is the other 
issue. At some point in time, it is like Monopoly money. Who 
cares about $50 million? I mean, we have got billions that are 
out there.
    Who is responsible within the Comptroller's Office to take 
obviously very credible--this is the work we paid for, by the 
way. This is somebody who we paid for, found this money that we 
are owed, and nothing has happened and it has been almost a 
year. I mean, not a word. So he recently forwarded it to me 
because he figured out that I am talking about this stuff a lot 
out here and figured I was interested, and I am.
    I would certainly appreciate, first of all, your response 
about how successful have we been at getting money back that 
was paid that shouldn't have been paid? I know that lack of 
definitization of the contracts is a big problem, but this is 
definitely definitized, and this was not a cost-plus. This is a 
firm fixed price subcontract.
    And so this is a situation where there is $50 million here 
ripe for the picking and nobody seems interested in picking it. 
Multiply that times thousands of contracts. We are talking real 
money.
    Mr. Brinkley. Well, I certainly appreciate that, and I will 
be more than happy--if you ask, who is responsible, it is the 
Comptroller and myself. I will ensure that you get an answer 
back on that particular incident.
    Senator McCaskill. And I would like to know how many of 
these there are. How many auditors have we paid to find money 
that we are owed and how successful have we been at getting 
that money back?
    Mr. Brinkley. Well, to that particular point, we have done 
33,800 audits through the Defense Contract Audit Agency (DCAA) 
throughout the entire Department of Defense. We have recovered 
$1.2 billion from vendors that were overpaid incorrectly. We 
have a very high incidence of--the percentage of improper 
payments is extremely low in a very large organization.
    But to your point, we take it very seriously, particularly 
with regard to what is going on in the theater. We have Defense 
Finance and Accounting Service (DFAS) representatives who are 
in theater. We have DCAA, as you point out, in theater and 
looking at all of the contracts. The KBR has been a 
particularly important company for us to look at because it has 
had such high visibility.
    So I can assure you that the Department of Defense takes 
its contracting responsibilities extremely seriously, and when 
we find that there are areas where we find discrepancies, we 
send teams to immediately work through those things. We have 
sent people to jail, as you well know, because they have 
defrauded the government.
    Senator McCaskill. And there are going to be, 
unfortunately, in a heartbreaking way, there are going to be a 
lot more that go to jail----
    Mr. Brinkley. Absolutely.
    Senator McCaskill [continuing]. Because we are a long way 
from done, and I think the American people, when they realize 
that for the first time, really, we have had men and women who, 
unlike the 99.9 percent of the men and women who step forward 
and across the line for us, have stolen millions and millions 
and millions of dollars, and it is a dramatic failure of the 
Department of Defense. I appreciate you take it seriously that 
this has been a complete breakdown of appropriate financial 
accountability.
    Mr. Walker. Senator McCaskill, we have a report coming out 
on improper payments dealing with the Defense Department within 
2 weeks that I would commend to you.
    Senator McCaskill. OK, and I will read it in depth and 
hopefully I can get back and ask some more questions after I go 
vote.
    Senator Carper. We are going to take a quick recess. Dr. 
Coburn will be back momentarily and resume the hearing. But 
until he returns, we will just be in recess for a few minutes.
    [Recess.]
    Senator Coburn [presiding]. Well, we will start again, if 
we may.
    General Patterson, in 2006, the DOD spent $300 billion on 
contracts, 71 percent of the entire Federal Government's 
contract work. Many of these contracts were time and materials, 
one of the riskiest contract types for the government because 
they could be awarded quickly and labor hours or categories can 
be adjusted if the requirements are unclear or the funding is 
uncertain. DOD's management of contracts have been on the GAO's 
high-risk list since 1992, 15 years. Why in contracting has 
this not been resolved in 15 years?
    Mr. Patterson. Well, I can't account for the years prior to 
my coming to the Department of Defense, but I can----
    Senator Coburn. Well, what are your thoughts about it?
    Mr. Patterson. I think that we use too many time and 
materials contracts. Within 2 weeks of my taking the job, I 
came in and found out that the logistics management program had 
a $1.3 billion time and materials contract that looked as 
though it had no end and we simply refused to fund it because 
that is ridiculous.
    I have a very negative reaction to people who use time and 
materials contracts because they can't figure out how to 
justify the individual elements of what they want to do and we 
have to get to a point where we apply structure and discipline 
to the way in which we use the taxpayers' dollars. To simply go 
in and say, well, I don't know exactly what I want to do, so I 
guess a time and materials, or an Indefinite Delivery/
Indefinite Quantity (IDIQ) contract, is the way I should go.
    Particularly odious to us has been the interagency 
contracting, and we have gone a long way to eliminate the 
abuses that have taken place----
    Senator Coburn. Explain what that is, interagency.
    Mr. Patterson. As you know, you have GSA and NASA, the 
Treasury, they all have open contracts, IDIQ contracts. They 
all have them. Well, when something is very urgent and there is 
an open contract that is open in that category, it is perfectly 
reasonable to sign a MPR over to another agency because you 
need to get something very quickly.
    Well, what we found was that wasn't the case at all. People 
were having Multi Interagency Procurement Requests (MIPR) 
signed over to the GSA or the Department of the Interior that 
said things like office equipment. I can't tell whether that is 
urgent or not. So consequently, we have taken very strong steps 
to eliminate that as a potential area for fraud, waste, and 
abuse. The Department of Defense IG has identified 640 
potential ADAs. Of those, we have done a cursory review and 
found that, effectively, it is people using the wrong 
appropriation or doing something else. It is simply an 
administrative error. But there are some that we are taking 
action on, and 90 of those are now for official review by the 
Department of Defense General Counsel.
    Senator Coburn. What percentage of contracts at DOD are 
fixed price?
    Mr. Patterson. I couldn't tell you right off the top of my 
head.
    Senator Coburn. Would that seem to be an important number 
for us as we look at this?
    Mr. Patterson. I am not sure that it is, because the 
exigencies of what you want to purchase drive you to make a 
determination as to whether or not you will use a fixed-price 
contract or a cost-plus contract. If you know very clearly what 
the bounds are of what you want to buy and how long you are 
going to purchase it for and the cost of that is very well 
known, then a fixed price is perfectly reasonable.
    Senator Coburn. Let me give you a little example. We had 
the Air Force and Lockheed here on the C-5 problems and the 
Nunn-McCurdy breach that was just filed about the time we were 
having that hearing.
    Mr. Patterson. Yes, sir.
    Senator Coburn. You can have all sorts of fixed-price 
contracts in the private sector where you say, if we buy this 
many, it is this price. If we buy this many over this time, it 
is this price. If we buy this many over an extended period of 
time, it is this price.
    I guess what I am going towards is it seems like we are not 
sharing some of the risk with the suppliers of the Defense 
Department. All the risk is being placed on the American public 
because we go cost-plus for a limited fixed-price contract. 
What is wrong with contracting the way the private sector does? 
How many contracts are you aware of that the private sector 
does that 70 percent are cost-plus? Mr. Brinkley, would you 
want to answer that?
    Mr. Brinkley. I think the motive in that, and I am not sure 
it is applicable anymore given all the consolidation that has 
taken place, but I think the desire for cost-plus and the 
motives that drove that and continue to drive that, in the 
private sector, you can always find another customer. In 
government, you win a big government contract, you do cost-
plus, and in the event that you lose that contract, you have 
the ability to ramp down your cost structure as opposed to just 
instantly facing a bankruptcy situation. So I think the 
structural definition or why we got into cost-plus was lent to 
that. Now whether in a globalized defense environment that is 
still a motive or not, I think may be worth looking at in terms 
of whether that structure and those motives that drove the 
creation of that still make sense.
    Mr. Zakheim. There is something else, too. If you look at 
shipbuilding, in the 1970s, there were huge cost overruns on 
fixed-price contracts, so the decision was made to go to cost-
plus because that way, you accounted for a lot of front-end 
research. You don't have formal R&D accounts as much in the 
shipbuilding account, but it is basically front-end R&D for the 
first ship. It is very difficult to predict a fixed price on 
research and development, and so they moved to cost-plus. Then 
there was a swing back to fixed price because then no one was 
happy with cost-plus. Then they realized why they had gone away 
from fixed price in the first place.
    So to some extent because--and this is what Mr. Brinkley 
was talking about--because of the peculiar nature of a lot of, 
of a monopsony environment, there is only one buyer here, it is 
much more difficult to say there is a cookie cutter answer, 
whether it is for cost-plus or fixed price, or for that matter, 
as Mr. Patterson said, in some cases, time and materials also 
is legitimate.
    I think maybe having a better sense of what is the most 
appropriate, we have some distance to go there, but I don't 
think you can just have a meat ax approach to a particular kind 
of contract.
    Senator Coburn. Mr. Patterson, I am going to go to you in 
just a second because I think a lot of our problems with these 
contracts is a lack of oversight in the contracts. In other 
words, the contract is out there and we don't have the 
oversight. That brings me up to another problem which I would 
like both Mr. Brinkley and Mr. Patterson to address. It is my 
understanding that we have a real shortage of contract purchase 
managers. What are we doing to address that? What are we doing 
to train for that? What are we doing to get those people in, 
get them the experience so that we have them on board?
    Mr. Patterson. I think there is something that we can do in 
the near term, and we are, and that is to train people within 
the individual units on very rudimentary statement of work, 
purchase order. A lot of the problems that we have are at the 
very lowest level and they don't amount to a great deal of 
money, but they continue to be problems. We have a dearth of 
qualified contracting officers, that is true, and I would 
attribute that to the zeal at which we reduced the number of 
professional government employees in the 1990s. We went from 
550,000 in the acquisition world, down to something less than 
300,000 in a matter of 7 years. We basically took the very guts 
out of the talented pool of professionals that did this kind of 
thing.
    Now, I am not saying that if we got them all back that 
everything would be wonderful again, but at least it is 
symptomatic, I think, of what you are getting at, and that is a 
lack of contracting officials to do the work.
    Senator Coburn. Are there certain regulations that should 
be waived in terms of hiring to help solve this problem?
    Mr. Patterson. I think there just needs to be a very 
strong, enthusiastic management emphasis on bringing back 
qualified and skilled government employees.
    Senator Coburn. Where do you get those?
    Mr. Patterson. You get them from the private sector. I 
would start out--the Congress gave us the authority to bring 
back IPAs and highly-qualified experts. We need to use that 
authority more liberally.
    Senator Coburn. General Walker.
    Mr. Walker. Well, first, I think training clearly is an 
issue, especially--including for our deployed forces. They need 
to have more training with regard to some of the basic issues 
of contracting that they are responsible for executing and they 
don't necessarily have that type of training.
    Second, cost-plus contracts are a problem to the extent 
that they are used in circumstances where they shouldn't be, 
but they are only one of many challenges that we have. And I 
come back to page 40 and 41 of my testimony where I lay out a 
number of them. I mean, part of the problem is that we know we 
have a want. The want may or may not be a need. We may or may 
not have defined it clearly enough. And then we ask a 
contractor to go out and try to work on a want, or even if it 
is a need that is not clearly defined, and we do it on a cost-
plus basis with inadequate training, with inadequate risk 
sharing between the taxpayer and the contractor, with 
inadequate oversight. You get a combination and a compounding 
of problems of which cost-plus is only one element.
    Mr. Patterson. And to follow up on what Dr. Zakheim said, I 
think that what we are missing here is we are missing a set of 
clear standards that drive you to make decisions on whether or 
not you are going to use a cost-plus incentive fee, a fixed 
price. We don't have those kinds of standards whereby we would 
be driven one place or the other. We also live in a world of 
extraordinary vagaries in terms of what the next year will 
bring in terms of budgetary authority.
    Senator Coburn. I am going to go back to the Lockheed----
    Mr. Patterson. OK.
    Senator Coburn. We have a contract that by the Air Force's 
assessment has a Nunn-McCurdy breach because it looks like the 
costs are going to be--why accept that contract in the first 
place? Why not say, Lockheed, if you want this business, you 
are going to have to share a good portion of the risk and here 
is what we will commit to, and you take, based on what an 
appropriations plan is and an authorization plan is, and the 
only out for Lockheed would be is that we are not going to ever 
fund this again. And ask Lockheed to quote on the basis of 
those parameters.
    We don't do that. We say, well, here is the way it works, 
and so therefore that is the only way we are going to contract. 
Well, the fact is, we could change to a different paradigm in 
defense contracting if we said, look, you get a bunch of gravy 
but you're going to take a bunch of risk. We have a defense 
contracting business, I believe, in this country that doesn't 
have much risk. We have conditioned them to low risk and they 
make billions of dollars off the Federal Government every year, 
and it is time that their contracting reflected them taking 
some of the risk.
    So I am asking, why can't you change the paradigm under 
which you buy, and maybe shipbuilding is an exception, but in 
Lockheed, we did all the steps. Now the question is, the real 
question is does the Air Force want the C-5 or not. That is the 
real question. It is not whether or not we are going to buy it 
or whether or not there is going to be a contract. It is 
whether or not the generals really want it.
    Mr. Patterson. Well, aside from your last question, the 
fact is, you are exactly right. We can modify contracts. We can 
write contracts to get the very best advantage for the 
government. But we are also responsible for getting cost 
schedule and performance, and what I believe and what I think 
we found when we did the Defense Acquisition Performance 
Assessment a couple or 3 years ago is that what we are missing 
here is stability in programs.
    The C-5 program, for example, starts in 2007 and doesn't 
finish until 2021 for 108 airplanes. In the 1950s, we bought 
535 Boeing 707s for air refueling. That price, I guarantee you, 
stayed fairly consistent over the 5 years in which those 
airplanes were purchased.
    What we need to understand, and to your point, we need to 
revamp the way in which we consider contracts. They can't be 
what I refer to, and it is unfair, I realize that, but it 
appears as though what we say is we need it faster, better, 
cheaper. The contractors say, outstanding. We can make it 
faster, better, cheaper, no matter how long it takes or how 
much it costs. And we say, where do we sign? We have to change 
that fundamental way of thinking in order to get a better deal 
for the American taxpayer, and I can guarantee you that we are 
committed to doing that.
    Senator Coburn. Well, I think General Walker's point is the 
reason we have trouble bidding contracts on research is because 
we oftentimes don't know what we want.
    Mr. Patterson. We have no idea.
    Senator Coburn. And so why are we letting contracts when we 
don't know what we want? That is management. That is the thing 
that Mr. Brinkley has brought to this, is this has to be 
clarified. What is your intent? What is your need? And is it a 
real need, and that is where upper management has to make those 
decisions. Where are the standards for cost-plus versus fixed-
price contracting in the Pentagon? Is there a set of standards 
that people have to follow?
    In other words, the Secretary says, here is when you will 
make a decision fixed price versus cost-plus. Are there 
standards within the Pentagon, or is there just freedom to do 
whatever you want?
    Mr. Patterson. Well, I think to your immediate question, 
and I am somewhat embarrassed, I have not seen those 
standards----
    Senator Coburn. So why not? Where are the standards that 
should drive the management of purchasing things that say, here 
are the circumstances in which it should be correct to use a 
cost-plus contract. Here are the circumstances when it is not. 
Where is the management tools? Mr. Walker.
    Mr. Walker. Well, first, there is something in the Federal 
Acquisition Regulations (FAR), that lays out guidance. To what 
extent has that been communicated and to what extent is that 
being followed?
    Senator Coburn. And where is the follow-up to see if it is 
correctly followed?
    Mr. Walker. Right.
    Mr. Patterson. But I think to General Walker's point that 
it is guidance, and there is nothing that tells us if these 
conditions, A, B, C, exist, then you have the conditions 
necessary for a fixed-price contract. If other conditions 
exist, then you will choose some other way of contracting. I 
think that very specificity needs to be part of the way we do 
our business in the Department of Defense.
    There may have been in the past people, as I mentioned, who 
knew this stuff intuitively and it wasn't necessary to come to 
this, what I refer to as the rules of acquisition. But in the 
absence of that skilled labor, I am coming to the point where I 
believe we need a strong set of rules.
    Senator Coburn. Is that in the planning?
    Mr. Patterson. The planning. I provided what I consider to 
be a reasonable set of rules to the acquisition community. But 
it is a process and we will talk about it and we will come to 
some accommodation because, quite frankly, I mean, as much as I 
would like to think so, I don't have the inside track on 
everything that takes place. But I do know from my experience 
both in government and in the corporate world that you need 
discipline and structure if you are ever going to achieve cost, 
schedule, and performance as you expect to have it.
    Senator Coburn. It is called line management. Here is your 
area of accountability. Step up to it. You step over, you are 
in trouble, but if you don't come up to it, you are in trouble, 
and that is the kind of management techniques that we need.
    Mr. Brinkley, do you have any comment on that?
    Mr. Brinkley. I just want to reinforce. I mean, Federal 
Acquisition Regulations and to be Defense Acquisition Workforce 
Improvement Act (DAWIA) certified as an acquisition 
professional requires you to learn those guidelines, and they 
are guidelines. I have witnessed myself courageous contracting 
and acquisition professionals put in place fixed firm price 
agreements for large programs that almost immediately then went 
off the rails, and the pressures then that they felt because 
now their whole program was at risk given all of the issues 
that General Walker pointed out in terms of the up-front 
requirements definition that was not well crafted. And so I 
know that the pressure on a contracting professional or an 
acquisition professional is to use the most flexible vehicle 
possible in the absence of that up-front requirements 
definition discipline that exists.
    Senator Coburn. That makes a lot of sense. When was the 
last time the Pentagon sued a contractor for non-performance 
based on a fixed-price contract?
    [No response.]
    Senator Coburn. There is the problem. The fact is, if we 
haven't, that means we have been contracting poorly. There 
should have been people taking enough risk that some didn't 
perform and we aren't holding them accountable. Most of these 
are very wealthy companies that do the big contracts for the 
Pentagon, and so with risk comes reward. I have no problem with 
them making a lot of money off of our purchasing, but they also 
ought to have to carry a lot of risk and I don't see that risk 
in our contracting and that is a big problem and one of the 
reasons the costs are so great. If it goes off the rails, why 
isn't the contractor on the hook? And that is my point. We are 
on the hook, you and I as taxpayers, not the contractor.
    Mr. Chairman.
    Senator Carper [presiding]. Mr. Brinkley, do you head the 
Business Transformation Agency?
    Mr. Brinkley. The Business Transformation Agency reports 
through my office within the Department, within the Office of 
the Secretary of Defense.
    Senator Carper. All right. That is the way it looks today. 
Help me figure out who is included under the Defense Business 
System Management Committee. Does that include the Deputy 
Secretary?
    Mr. Brinkley. That would be chaired by the Deputy 
Secretary. It includes all of the Service Secretaries, the 
heads of the Defense agencies, as well as the under secretaries 
in the business mission area of the Department, so the 
Comptroller, AT&L, personnel, and readiness.
    Senator Carper. All right. Fair enough. And then we have 
the Principal Staff Assistants. These would be the Comptroller, 
the Under Secretary of Defense for Acquisition Technology and 
Logistics, and then the Under Secretary for Personnel and 
Readiness, right?
    Mr. Brinkley. Correct.
    Senator Carper. OK. Let us move ahead to January 2009. I 
don't think any of us know who is going to be the next 
President, but there is strong suspicion that there will be 
some changes, as there normally is at the end of an 
Administration after 8 years. What our staff has done is they 
color-coded these different boxes with red, which suggests 
majority turnover, beige, which is sort of partial turnover, 
and yellow, which is relatively no turnover. I don't know if 
that is a vote of confidence in you, Mr. Brinkley, or not, but 
we don't have much turnover at all expected at the Business 
Transformation Agency.
    But up here, a lot of turnover from among the senior 
governing body. Among the Principal Staff Assistants, we have a 
fair amount of turnover. Here, we have some turnover at the 
Investment Review Board and relatively little down here below.
    Mr. Brinkley, with this much turnover at the Department, 
especially at some of the higher levels up here, how do you 
think the next Administration will continue the transformation 
efforts that have begun?
    Mr. Brinkley. So this is something we have thought about 
since the very beginning, and early on, we did some research on 
this problem, and I counted up nine times since 1960 that 
bright people came into the Department of Defense and launched 
efforts to modernize the Pentagon's business operations, and 
they all follow a trajectory: A head of steam, a vision, a 
strategy, some talented people come in, establish some 
momentum, a change of Administration, start over. That is a 
problem.
    Senator Carper. Have there been nine changes? How many 
changes in Administration since 1960?
    Mr. Brinkley. You would have to count. I guess I have to do 
the math.
    Senator Carper. You said nine times.
    Mr. Brinkley. I counted nine times since 1960 we have 
attempted to do a business modernization----
    Do some quick math. Anyway, so the question is whether it 
is turnover of individuals, turnover of Administrations, that 
is a concern. So we have taken tangible steps to address this. 
Some of this is codified into statute and none of that 
structure existed prior to the efforts we have had underway for 
the past 3 years, building on what Dr. Zakheim launched back in 
2001.
    We believe that establishing the civilian agency, Business 
Transformation Agency, we moved all of the people who were part 
of that political structure into a civilian organization. That 
organization in yellow there will not see turnover in the 
transition. It is a Defense agency. It is directed by David 
Fisher, a gentleman from the private sector who has come in at 
the SES level. He is the BTA's Director. I am a political 
appointee within the Office of the Under Secretary for AT&L in 
the middle there. I will turn over.
    But we also believe that there are a series of other steps 
we have taken to mitigate the risk of a loss of momentum. We 
publish, and sometimes I think we take this lightly, but it was 
a monumental achievement to publish for the entire Department 
of Defense our transition plan, and in some of the testimony 
earlier, people claim that such a plan doesn't exist or it is 
not complete enough and we will probably continue to debate 
that forever, whether it is comprehensive enough or not. But 
that plan lays out 6-month milestones, which was a change in 
thinking for the Department, that we publish and we measure 
ourselves to, and we make clear to you and we make clear to the 
public. And we hit about 70 to 80 percent of those milestones 
every 6 months. The ones we miss, we put in place recovery 
plans for.
    There are milestones in that plan that go out well past 
this Administration, 2012, 2013. Those are things that the 
Congress can hold the next Administration accountable to. And 
if the next Administration decides they think some of those are 
bad ideas, political--Democratic or Republican supply chain, 
right, or a Democratic or Republican accounting system, if they 
can identify things like that and they want to stop or 
redirect, well, then they can do that, but they do it in a way 
that is transparent and that you can hold them accountable to, 
and that is a very powerful tool that has been placed in your 
hands as an overseeing body to hold the Department of Defense 
accountable not to lose momentum, and I think that is 
important.
    So those are tangible steps. The structure that you have 
defined, that is in statute. The Congress put that structure 
into place, the DBSMC, these Investment Review Boards were put 
into place in the 2005 National Defense Authorization Act. The 
next Administration can't just wipe that structure out. It must 
place new leaders into those key roles and they must assume 
their responsibilities.
    So there are things that are continuity that have never 
existed before, that are necessary steps to create continuity 
beyond Administrations. What you have to decide is are they 
sufficient. I know Mr. Walker doesn't believe they are 
sufficient. There are people who argue passionately that this 
is good progress but not sufficient. That is above my pay 
grade. But I do think we have taken steps for the first time to 
see this work.
    My worst nightmare is to wake up back in California in 
March 2009 and read in the paper that all the work we have done 
has been washed away and that we are going to start over--
because I know what will happen. A few months later, we will 
start again, right, because the need for this isn't going to go 
away.
    Senator Carper. General Walker, you are raising your hand?
    Mr. Walker. First, there have been nine Administrations 
since 1960, all right.
    Senator Carper. All right.
    Mr. Walker. Second--and some were two-term Presidents. 
Second, there is a plan for systems. There is not a 
comprehensive integrated strategic business transformation plan 
that deals with all 15 high-risk areas with metrics and 
milestones. There has never been one.
    Senator Carper. Why do you suppose that is?
    Mr. Walker. Because there is nobody in charge. You can't 
run a country by committee. You can't run an agency by 
committee. Now, don't get me wrong. I think the DBSMC is a very 
positive thing, and let me reinforce, I think that Gordon 
England is one of the most talented executives that the Defense 
Department has ever seen, all right. But there is going to be 
massive turnover. It is a reality. It is not a theory, it is a 
reality.
    Now, one of the things, and I will just mention this 
briefly, that I think we need to think about as a country is 
how many political appointees should we have? How deep should 
they go? How many of them should be Presidential appointees 
with Senate confirmation? How many of them ought to be 
Presidential appointees?
    And of the ones that are Presidential appointees with 
Senate confirmation, I think we have to recognize the reality 
that there are three kinds of positions. There are policy 
positions, which clearly ought to serve at the pleasure of the 
President because they are executing the President's policy. 
There are operational and management positions which are 
different where you ought to have statutory qualification 
requirements and maybe a term appointment. And then there are 
independent adjudicatory and oversight positions, like 
Comptroller General, IGs, judges, where not only do you need 
the right kind of qualifications and potentially a term, but 
you also need independence. You need people who are 
independent.
    We have one-size-fits-all approaches in government and we 
need to kind of step back and fundamentally reassess that.
    Senator Carper. All right. Thank you. Mr. Zakheim.
    Mr. Zakheim. Obviously, you have pointed to a very serious 
problem. Let us play a mind game and say that the next Deputy 
Secretary of Defense, who still would be CMO, is someone who is 
not interested in management. We have had some of those. How 
effectively do you think that individual will run that 
committee that he or she will chair? The committee then will 
become useless.
    What does that do? It totally undermines the Business 
Transformation Agency because now the head of the agency, who 
by the way stays on, as I understand it, now doesn't really 
have any real reporting chain because the head of that agency 
has to deal with three quarrelling barons, the Comptroller--
again note Comptroller is in the title, it is not CFO in the 
title. It is very interesting. So the Comptroller--you may have 
a Comptroller that is only interested in the budget and not 
even interested in financial management. We have had some of 
those.
    And so it would be the Comptroller, the Acquisition Under 
Secretary, and the Personnel Readiness. How do you expect the 
business transformation person to deal with all three of those 
if there is a weak chairman of that business management 
committee at the top? It just doesn't work. It doesn't work in 
business and it won't work in government.
    So I feel that you have to have, in effect, a parallel to 
what we have already done. I mean, the fact is the Defense 
Department has a permanent managerial person, namely the head 
of the Business Transformation Agency. I believe that person 
has got a term, That person is seen as a technocrat, as an 
expert. Well, if that is the case, the same model ought to 
apply to a CMO, as I said in my testimony, and I would have the 
head of the Business Transformation Agency report directly to 
that CMO to get out from under competing baronies who are all 
legitimately claiming resources, but you just can't satisfy 
everybody.
    Senator Carper. All right. Thank you. Colonel Patterson, if 
you want to say anything on this one, feel free. Otherwise, I 
have another question for you. Do you want to opine on this 
briefly?
    Mr. Patterson. Well, obviously, I support the Deputy 
Secretary of Defense and the position that he has taken on 
this. I would also mention the fact that one of our 
responsibilities and that we take very carefully and very--it 
is an important responsibility, and that is we hire good 
managers. That is our responsibility. We vet them. Sometimes we 
are not perfect. But we are accountable for what happens to 
them and what happens on their watch. And so I would tell you 
that we take that very seriously and that is our 
responsibility, is to hire good managers. Good managers are 
people and sometimes we don't make the right choice.
    But to pick up on what Dr. Zakheim said, I think it is an 
extraordinarily important point, and it was the point that when 
you asked me the last time I was here, you said, what could we 
do for you, and I said you could help eliminate the byzantine 
labyrinthine process by which good people are systematically 
eliminated from being candidates for these important jobs, and 
I can't stress that enough.
    Senator Carper. I remember you saying that. It is good that 
you are staying on message.
    Mr. Patterson. Thank you, sir.
    Senator Carper. Let me move on to Mr. Walker for a quick 
question. We will come right back to you for my last question. 
General, how do challenges in DOD's business operations affect 
the war fighters?
    Mr. Walker. Well, first, I would say that there are three 
Ms in the Department. Mission is No. 1, and it should be, and 
it should be in every department and agency. Money is No. 2. 
Get the money, spend the money. And management is No. 3. Now, 
don't get me wrong. I am not trying to downplay what has been 
accomplished because a considerable amount has been 
accomplished. And I think to be fair, you have to analyze 
things based upon where do things stand now, what type of 
progress is being made, and then how do you benchmark it 
against a comparable organization. You need to look at all 
three to be fair and to provide contextual sophistication. 
Progress has been made.
    To the extent that we have inefficient and ineffective 
business processes, several things happen. One, we waste a lot 
of money. And if we waste a lot of money, when the crunch 
comes, and the crunch will come, including for the Department 
of Defense, we won't be able to acquire some things that we 
need.
    Second, we may not have good accounting over what we have 
in deciding what we are going to buy. We may not have an 
ability to deliver things that we do have, and we know where 
they are, as effectively as we should. And so I can give you 
more and more examples, but there are consequences to the war 
fighter and those consequences are anywhere from short-term 
tactical to longer-range strategic implications, not just for 
the war fighter, but quite frankly, for our national security.
    Senator Carper. Say those three Ms one more time.
    Mr. Walker. OK. Those three Ms are mission, money, and 
management.
    Senator Carper. All right. Thank you.
    Mr. Patterson, one more question for you and that is it for 
the questions I want to ask here today. But GAO has previously 
reported that it has found, I think, numerous problems with 
DOD's process for recording and reporting costs for ongoing 
operations related to the Global War on Terrorism, raising 
significant questions about the reliability of DOD's reported 
costs and its future requirements. Are the steps that DOD has 
previously taken regarding reliability having an impact in 
improving its reported Global War on Terrorism costs?
    Mr. Patterson. Yes, sir, I believe they have.
    Senator Carper. Would you talk about that a little bit?
    Mr. Patterson. Yes, sir. I would be happy to. Because it is 
so visible and we have a responsibility to be very accurate 
about the cost of this war, we have established a senior 
executive working group that I am a co-chair and the lead chair 
with the Director of the Defense Finance and Accounting System. 
And to this day, our processes and improvements have brought us 
to a point where we believe and we can show that 92 percent of 
all of the costs that we identify are costs that come from an 
accounting system, so that you can trace it back to an 
established accounting system.
    Only 8 percent of the costs of the Global War on Terror are 
attributed to modeling or estimating, and more modeling than 
estimating. We are attempting in every way possible to start to 
eliminate completely estimates and use actual costs in our 
Global War on Terror reporting and we are coming very close. I 
believe that the GAO in their latest accounting of the way in 
which we do things have given us credit for the fact that we 
are making progress in that area.
    Senator Carper. Is there anything to what he just said 
there, General Walker? Are you here to back him up?
    Mr. Walker. They are making progress and I have been asked 
to be briefed on this matter and I have yet to be briefed on 
it, but I am scheduled to be briefed on it in the near future 
and I will be happy to report back to this Subcommittee when I 
am.
    Senator Carper. Thank you. I said that would be my last 
question, but I want to go back to Mr. Brinkley, one thing we 
have not really gotten into. I understand one of the things 
that you focus on deals with how do we help foster economic 
development and job creation within Iraq. It is an important 
subject, real important, actually. I would be interested in 
your telling us how we are doing. Are we doing any better? What 
are some of our lessons learned?
    Mr. Brinkley. To synthesize quickly on this, Iraq has a $35 
to $40 billion gross domestic product (GDP), most of that 
generated with oil sales.
    Senator Carper. Is that both before and after the war?
    Mr. Brinkley. I think it has grown a bit in terms of the 
price of oil has gone up. Therefore, GDP has grown since 2003. 
Now, it was an industrial economy prior to 2003. Under U.N. 
sanctions, they were not allowed to import anything other than 
what they could smuggle in. They had a large industrial base. 
We are bringing DOD's industrial expertise to bear to get that 
industrial base up and running again. It provided employment 
for, the World Bank estimates, about half-a-million people in 
Iraq. That served as the core engine of the Iraqi economy, and 
so where we can bring business expertise from the Department of 
Defense to bear to restore industrial operations in Iraq, we 
are doing that.
    The way we are doing that is we are spending, as you know, 
well in excess of $10 billion a month in Iraq. Now, you are 
spending over $10 billion a month in Iraq to sustain our troop 
presence, acquiring a wide variety of goods and things that are 
necessary to sustain our presence there. That can be a huge 
economic stimulus to that country. So this area of contracting, 
not just how we do it transparently and more effectively so 
that the Congress and the American people have confidence in 
where their dollars are going, but also so that the war 
fighting community can wield our spending as a tool of economic 
policy in Iraq to help stabilize and restore employment and 
normalcy in areas.
    As General Petraeus establishes a security footprint, we 
follow with rapid economic reconstruction and development by 
restoring employment and the industrial base there. That is 
what we are working on today, and we have made significant 
progress and anticipate significant ongoing progress in that 
effort.
    Senator Carper. How do you measure your progress?
    Mr. Brinkley. Progress is measured in multiple levels. 
First and foremost is the efforts we have in partnership with 
Joint Contracting Command for Iraq-Afghanistan. Major General 
Darryl Scott under MNF-I Command has--we have registered over 
5,000 Iraqi companies, private companies, that are currently 
receiving almost $400 million a month in U.S. Government 
contracts for goods and services to sustain our forces. Four-
hundred-million dollars a month is a significant economic 
stimulus in the Iraqi economy, and these were goods that were 
not being imported from America but were being purchased in the 
region to support our mission. So this is not removing economic 
stimulus from home, but actually channeling regional economic 
stimulus into the place where we need it most, Iraq.
    The other measurement is in our restarting of factories. Up 
until September of this year, we brought back online 17 
industrial operations in Iraq that restored sustained 
employment to over 5,000 Iraqis. We will impact 30 more 
factories between now and January. Unlike construction or some 
of the other jobs, programs that we have underway in Iraq, a 
manufacturing job is a sustained employment that has a 
multiplier effect on the economy in Iraq, and so in partnership 
and in support of MNF-I Command objectives, we believe this is 
a key element to helping continue the stabilization we see 
starting to take hold in areas in Iraq today.
    Senator Carper. Dr. Zakheim.
    Mr. Zakheim. Yes. I was just going to say as the one non-
member of any part of the government, I am reasonably 
objective, I think. Paul Brinkley has done a remarkable job out 
there. He has paid a very high personal cost. He spends most of 
his time in what is now the garden spot of the world. He has 
been developing U.S. investments in Iraq, which is good for our 
businesses and good for the Iraqis, as well as what he has 
talked about. And fundamentally, if we are going to turn that 
place around, and now I am biased because I am an economist, it 
is only going to be done by turning the economy around. And so 
the gentleman to the right of me has done a remarkable job in 
that regard.
    Senator Carper. Mr. Brinkley, are you going to let him get 
away with saying that about you?
    Mr. Brinkley. Yes. [Laughter.]
    Senator Carper. All right. Dr. Coburn, any closing words?
    Senator Coburn. No, I am fine.
    Senator Carper. We appreciate each of you being here. We 
appreciate your current service to our country and your 
previous service. Dr. Zakheim, it is great to see you again.
    Your testimony has been valuable, but I think our questions 
have been of value to us and I hope to some of you.
    One request that I asked Mr. Patterson before was what can 
we do to be of help, and he has again reminded us of one of the 
things that we can do to be of help and we will try to be 
helpful there. Go ahead.
    Senator Coburn. I just wanted you to know that I elevated 
his rank while you were gone to General. [Laughter.]
    Mr. Patterson. And consequently, my answers to you were 
much better. [Laughter.]
    Senator Carper. That is not always the case. [Laughter.]
    We have field hearings. That would be a field promotion.
    This hearing record is going to be open for a couple of 
weeks for any additional statements that our colleagues might 
have and questions. To the extent that you receive those, we 
would appreciate your promptly responding to them.
    Thank you for bearing with us today through all these 
votes, and again, we appreciate very much your presence and 
testimony. Thank you so much.
    The hearing is adjourned.
    [Whereupon, at 5:58 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


                PREPARED STATEMENT OF SENATOR VOINOVICH
    Senator Carper and Senator Coburn, thank you for holding this 
important hearing to address the business management and financial 
challenges facing the Department of Defense. Improvements in these 
areas are essential to ensuring that the Department manages its people, 
systems, and programs in an efficient manner.
    Since 2005, as Chairman and now Ranking Member of the Subcommittee 
on Oversight of Government Management, the Federal Workforce, and the 
District of Columbia, I have held hearings on the Department's GAO 
high-risk areas; three on DOD supply chain management and one on the 
Department's transformation efforts.
    My interests in this area is three fold. First, the Government 
Accountability Office designated eight areas within the Department as 
high-risk for waste, fraud, abuse, and mismanagement. In addition, 
there are seven government-wide high-risk areas for which DOD shares 
responsibility. Many of these problem areas have been on GAO's list 
since 1990. These high-risk areas, and the resources and management 
efforts they consume, diminish the ability of the Department to perform 
its missions effectively.
    Second, the men and women serving abroad and fighting for our 
freedom deserve the best support possible from their government. 
Finally, the American taxpayer deserves a Department that is 
transparent and held accountable for every penny it spends. With a 
budget of well over $400 billion, the Department must be a good steward 
of the taxpayers' money.
    As I have noted in the past, former Secretary of Defense Donald 
Rumsfeld once estimated that the Department wastes 5 percent of its 
budget--more than $20 billion a year at current budget levels--on 
redundant or outdated business practices. Based on my experience, I 
believe the actual number is much higher.
    I have been extremely pleased with the work Mr. Brinkley and the 
Business Transformation Agency have been able to accomplish in such a 
short period of time. By developing and issuing the Enterprise 
Transition Plan every 6 months, BTA has been able to monitor the 
Department's transformation. Mr. Brinkley, I look forward to hearing 
how you plan to institutionalize BTA's transformation plan.
    Regardless of the progress, the Department will never see true 
transformation until they have a Chief Management Officer dedicated 
solely to management. While I applaud the decision of Secretary Gates 
to name a Chief Management Officer, the designation of the existing 
Deputy Secretary does not get the job done. After all, there are only 
24 hours in a day, and Gordon England is already responsible for a 
multitude of tasks. I think Comptroller General Walker will agree with 
me that we need a dedicated senior level official whose full-time job 
is focused on management.
    True transformation is driven by committed leadership and must 
stand the test of time. With the coming transition to a new 
Administration, we need to ensure that progress continues. I look 
forward to hearing from our witnesses today.
    Thank you, Senator Carper.
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