[Senate Hearing 110-437]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-437
 
  MANAGEMENT AND OVERSIGHT OF CONTINGENCY CONTRACTING IN HOSTILE ZONES
=======================================================================


                             JOINT HEARING

                               before the

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

                                and the

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

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 24, 2008

                               __________

       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
                       Monisha Smith, Chief Clerk


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

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

                   Richard J. Kessler, Staff Director
             Jennifer A. Hemingway, Minority Staff Director
                     Jessica Nagasako, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Akaka................................................     3
    Senator Collins..............................................     5
    Senator McCaskill............................................     8
    Senator Levin................................................    48

                               WITNESSES
                       Thursday, January 24, 2008

Stuart W. Bowen, Jr., Special Inspector General for Iraq 
  Reconstruction.................................................     9
William M. Solis, Director, Defense Capabilities and Management, 
  U.S. Government Accountability Office, accompanied by Carole F. 
  Coffey, Assistant Director, Defense Capabilities and Management 
  Team, U.S. Government Accountability Office....................    11
Dina L. Rasor, Director, Follow the Money Project and co-author 
  of ``Betraying Our Troops: The Destructive Results of 
  Privatizing War''..............................................    13
Robert H. Bauman, Investigator, Follow the Money Project and co-
  author of ``Betraying Our Troops: The Destructive Results of 
  Privatizing War''..............................................    15
Perry Jefferies, First Sergeant, U.S. Army (Ret.), Iraq and 
  Afghanistan Veterans of America................................    17
Hon. P. Jackson Bell, Deputy Under Secretary of Defense for 
  Logistics and Materiel Readiness, U.S. Department of Defense...    35
General David M. Maddox, U.S. Army (Ret.), Former Commander in 
  Chief, U.S. Army Europe, Member of the Gansler Commission......    36
Hon. John Herbst, Ambassador of Ukraine (2003-2006) and 
  Uzbekistan (2000-2006), Coordinator for Reconstruction and 
  Stabilization, U.S. Department of State........................    40
William H. Moser, Deputy Assistant Secretary for Logistics 
  Management, U.S. Department of State...........................    42
James R. Kunder, Acting Deputy Assistant Administrator, U.S. 
  Agency for International Development...........................    44

                     Alphabetical List of Witnesses

Bauman, Robert H.:
    Testimony....................................................    15
    Prepared statement with Dina Rasor...........................   101
Bell, Hon. P. Jackson:
    Testimony....................................................    35
    Prepared statement...........................................   123
Bowen, Stuart W., Jr.:
    Testimony....................................................    90
    Prepared statement...........................................    57
Herbst, Hon. John:
    Testimony....................................................    40
    Prepared statement...........................................   155
Jefferies, Perry:
    Testimony....................................................    17
    Prepared statement...........................................   114
Kunder, James R.:
    Testimony....................................................    44
    Prepared statement...........................................   166
Maddox, General David M.:
    Testimony....................................................    36
    Prepared statement...........................................   131
Moser, William H.:
    Testimony....................................................    42
    Prepared statement...........................................   162
Rasor, Dina L.:
    Testimony....................................................    13
    Prepared statement with Robert Bauman........................   101
Solis, William M.:
    Testimony....................................................    11
    Prepared statement...........................................    73

                                APPENDIX

``Urgent Reform Required: Army Expeditionary Contracting,'' 
  Report of the ``Commission on Army Acquisition and Program 
  Management in Expeditionary Operations,'' submitted by General 
  Maddox.........................................................   142
Chart entitled ``Diminished Foreign Service Cadre Erodes 
  Technical Leadership, Oversight, Policy Impact on Foreign 
  Nations, and Innovation,'' submitted for the Record by Mr. 
  Kunder.........................................................   175
Report entitled ``Logistics Civil Augmentation Program (LOGCAP) 
  LOGCAP Support Unit (LSU) Det. Y8--Iraq, After Action Report & 
  Lessons Learned, Operation Iraqi Freedom,'' submitted by Mr. 
  Bauman.........................................................   176
Charts submitted for the Record by Senator Carper................   210
Questions and responses for the Record from:
    Mr. Bauman and Ms. Rasor.....................................   217
    Mr. Jefferies................................................   222
    Mr. Bell.....................................................   226
    Mr. Kunder...................................................   239


  MANAGEMENT AND OVERSIGHT OF CONTINGENCY CONTRACTING IN HOSTILE ZONES

                              ----------                              


                       THURSDAY, JANUARY 24, 2008

                             U.S. Senate,          
                Subcommittee on Federal Financial          
                Management, Government Information,        
          Federal Service,and International Security,      
                   and the Subcommittee on Oversight of    
            Government Management, the Federal Workforce,  
                              and the District of Columbia,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittees met, pursuant to notice, at 2:30 p.m., in 
Room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper, Akaka, Levin, McCaskill, and 
Collins.

              OPENING STATEMENT OF SENATOR CARPER

    Chairman Carper. The Subcommittee will come to order. I 
want to thank my colleague, my dear friend, Senator Akaka, for 
co-hosting and co-chairing this hearing with me today.
    We will be joined shortly by others of our colleagues. The 
Senate is working today on FISA legislation dealing with the 
surveillance court that was established, thirty-some years ago, 
I believe.
    And we are going to be voting on and off during the 
afternoon on amendments to that bill. We just finished the 
first, and I am sure more will follow. Hopefully, they will not 
be too disruptive.
    But I would like to say when I am Majority Leader, we won't 
have these votes interrupting my Subcommittee hearings, so that 
will probably be a while.
    Well, we are glad you are all here and we will be welcoming 
Senator Coburn shortly; Senator Collins, who is the Ranking 
Member of the full Committee; and others as they come and go in 
the afternoon.
    Nearly 5 years after going into Iraq, we still do not know 
how many contractors are there. We have estimates, but they 
differ.
    Last summer, the U.S. Central Command told us that there 
were about 130,000. Then later, they updated that number to 
approximately 180,000 contractors. The Gansler Commission 
Report, which came out in October, estimated that there may be 
160,000 contractors in Iraq.
    The Government Accountability Office (GAO) bases its cost 
estimate on what the Department of Defense said last year, 
which was that there are over 120,000 contractors in Iraq.
    But whatever estimate we ultimately accept, one thing seems 
for sure: We now have maybe as many, maybe even more, 
contractors in Iraq as we have U.S. troops.
    There is an old saying that you cannot manage what you 
cannot measure. And we in Congress are in a position to try to 
oversee contracting in Iraq among other places--without our 
government agencies knowing how many contractors there actually 
are in theater.
    Certainly, the continuing lack of management attention and 
proper oversight over the contractors in a war zone has 
resulted in runaway costs. Unfortunately, waste, fraud, and 
abuse are all too common in Iraq.
    Out of $57 billion worth of contracts for services and for 
reconstruction work in Iraq, the Defense Contract Audit Agency 
has reported that more than $10 billion, or roughly one-sixth 
of the total spent on contracts, is either questionable or 
cannot be supported because of lack of contractor information 
needed to assess costs.
    To date, there are more than 80 separate criminal 
investigations into contracts totaling more, I believe, than $5 
billion. And despite the dedicated, talented, and hard working 
contracting professionals we have, contract abuse appears to 
have become endemic.
    Late last year, we learned that the U.S. military paid a 
Florida company nearly $32 million to build barracks and 
offices for Iraqi army units, even though nothing was ever 
built.
    Earlier last year, the Special Inspector General of Iraq--
he is with us today--told us that Parsons Global, Inc., was 
charged with building 140 primary health care centers 
throughout Iraq, but only completed six after 2 years and $.5 
billion dollars had been spent.
    Parsons was also paid $62 million to build the Iraqi Police 
College, but the barracks failed to include proper plumbing, 
causing sewage to leak through the floors. The building, my 
staff has learned, has not yet been repaired. Construction of 
the $600 million U.S. Embassy in Baghdad continues to be 
plagued with safety and construction problems, and a 
contractor, First Kuwaiti, has been accused of labor abuses and 
human trafficking. And the list goes on.
    But let me be quick to add, though, that the story is not 
all gloom and doom. There are strides being made on all fronts, 
and they are worthy of recognition.
    In response to the 2007 Department of Defense Authorization 
Bill, the DOD has established a comprehensive policy and 
program framework for managing contractors and contractor 
personnel deployed with our forces on contingency operations.
    The Army, under the leadership of our former colleague, 
Secretary Pete Geren, commissioned the Gansler Report, and, 
with the blessing of Defense Secretary Gates, has begun 
implementing some of its recommendations.
    A Memorandum of Agreement has been recently reached between 
the Department of Defense and the Department of State defining 
the authorities and the responsibilities of private sector 
contractors in Iraq.
    With the leadership of Senators Lieberman and Collins, we 
were able to get more accountability in contracting. And, with 
the leadership of the freshman senators, we were able to pass 
into law the Wartime Contracting Commission. I, along with, I 
think, most of my colleagues here and on our full Committee 
were co-sponsors of both pieces of legislation.
    I called for this hearing for two reasons: First, how to 
figure out how to improve contracting practices in Iraq and 
Afghanistan; and second, how to prevent these contracting 
problems from happening again.
    As elected Members of Congress, we have an obligation to 
safeguard American taxpayer dollars, wherever they are being 
spent. The point of this hearing is to move forward and plan 
better for future contingencies, which the United States is 
certain to face.
    Today, I want to try to ensure the following--and we have a 
couple of charts set up here with the goals of today's 
hearing.\1\
---------------------------------------------------------------------------
    \1\ The charts referred to by Senator Carper appears in the 
Appendix on page 210.
---------------------------------------------------------------------------
    Goal one is that the workforce problems caused by 
inadequate staffing on the contracting and contract management 
sides are being addressed and solved; second is that the lack 
of training for military personnel and civilians on the 
battlefield is remedied before the next contingency operation. 
And third is that we capture the lessons learned and inculcate 
them into military leadership schools and civilian training for 
contracting officers.
    And if you will just look to the other side of the room, 
number four and five--number four that we are planning U.S. 
government-wide how to deal with reconstruction and 
stabilization crises in conflict and post-conflict areas, and 
who should be charged to implement those interagency 
activities; and finally that Congress plays an effective and 
active role in the path forward.
    To date, the United States has appropriated nearly $630 
billion for Iraq and Afghanistan, and has spent nearly $470 
billion in Iraq alone.
    A large part of that money is going to contractors, 
contractors involved in providing services to our troops and in 
reconstruction projects. Since 2003, we have passed nine 
supplemental bills for Iraq and Afghanistan. We will be asked 
to vote on another one later this year.
    At home, we are addressing huge, growing fiscal imbalances 
due to our aging population, skyrocketing healthcare costs, and 
a sharp decline in the housing sector. And now, we are facing a 
recession.
    We need to do everything we can to make sure the American 
taxpayer is getting what he or she paid for, and that is what 
we intend to do. Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Senator Carper. It is 
great to be with you and to work with you.
    I want to thank you personally for organizing this 
important hearing and for jointly conducting it with the 
Oversight of Government Management Subcommittee.
    I recently held a hearing in my capacity as Chairman of the 
Armed Services Readiness Subcommittee, which examined deeply 
rooted problems in Army contracting.
    At that hearing, we took testimony from Dr. Gansler, who 
spearheaded a very revealing and thorough report, which we will 
hear about from our second panel today.
    Contracting specialists are being asked to oversee an 
increasingly large number of contracts, as was mentioned by the 
Chairman. Since 1999, the number of contracting specialists has 
been frozen at about 30,000 at the Department of Defense, even 
as the number of contracts has ballooned.
    We have seen less oversight and less accountability at the 
Department of Defense and government-wide as well. It seems not 
a week goes by where I do not see yet another news story about 
waste, fraud, abuse, and even violence carried out by 
contractors in theater.
    Last year, the Armed Services Committee heard about 
appalling contractor waste and abuse committed by Halliburton 
under the LOGCAP contract. The Special Inspector General's 
reports likewise have painted a troubling picture of 
contracting failures in Iraq.
    It also came to light recently that contract security 
officers in Iraq working for the Department of State used 
unjustified lethal force against Iraqi civilians. Shockingly, 
it seems that these contractors are immune from prosecution 
under either Iraqi or U.S. law.
    Most recently, we learned of contractors in Iraq committing 
crimes against their fellow employees, including rape, with 
virtually no response from this Administration.
    Contracting can be a valuable tool to supplement government 
services and fulfill our responsibilities to our troops and to 
the American people. But at times, it seems that this 
Administration is turning contracts into corporate giveaways.
    We must restore accountability, without question. Congress, 
the military, and the State Department must redouble their 
efforts to reduce the financial costs to American taxpayers, as 
well as tragic human costs that can result from failures of a 
contractor oversight and accountability.
    These failures are the result of a crisis on multiple 
levels. First, there is a workforce crisis. As I noted a moment 
ago, the number of acquisition specialists has remained 
stagnant while contracting has expanded dramatically.
    The shortage of acquisition workers will continue to get 
worse if we do not address it. According to the Federal 
Acquisition Institute in their Fiscal Year 2006 annual report 
on the Federal acquisition workforce, over half of the Federal 
Government's acquisition workforce will be eligible to retire 
in the next 10 years. Many of these will be at the Department 
of Defense.
    Second, there is a management crisis. We simply do not have 
enough individuals to conduct adequate contract planning, 
execution, and oversight.
    Unfortunately, planning and oversight often go by the 
wayside so that contracting specialists can meet deadlines and 
get deliverables. This, again, is not acceptable.
    The acquisition workforce needs enough competent managers 
to oversee the billions of dollars of taxpayers' money spent on 
contracts.
    Finally, the most troubling: There is a crisis of 
accountability. Committees from both the House and the Senate 
have held countless hearings on contracting problems in Iraq 
and Afghanistan for the past 4 years. We created a Special 
Inspector General for Iraq.
    Still, no one in this Administration has been able and been 
held accountable for these failures. Problems are consistently 
overlooked or ignored.
    We need to shift course in the management of contracting. 
While it is imperative to look at the past to find what has 
gone wrong, it is more important to look to what can be done 
better.
    I fully support many of the recommendations made by the 
Gansler Commission and by the Government Accountability Office. 
I am committed to working with my colleagues to continue 
oversight in this critical area, and I am equally committed to 
taking any necessary steps to fix these problems.
    Agencies must invest more in recruiting top-quality 
contracting specialists to provide for oversight. Such an 
investment would be far less costly than paying for more 
flawed, wasteful, multi-million dollar contracts.
    I plan to work especially vigorously on the workforce 
aspect of this issue in my capacity as Chairman of both the 
Oversight of the Government Management Subcommittee and the 
Armed Services Readiness Subcommittee.
    I would like to invite my colleagues here to join me at a 
hearing on my OGM Subcommittee which we will hold soon on 
government-wide acquisition workforce challenges.
    This is a serious problem throughout the government and it 
needs our urgent attention.
    Again, thank you, Senator Carper, for agreeing to hold this 
joint hearing, and I thank our witnesses for coming here to 
provide their valuable insight. I hope our hearing today will 
lead to some real progress. Thank you very much.
    Senator Carper. You bet, Mr. Chairman. Thank you, and it is 
just an honor to sit here next to you and I think this makes a 
lot of sense for us to do this together. Senator Collins, 
welcome.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman. Mr. Chairmen, I 
guess I need to say today.
    I want to commend you both for holding this joint hearing, 
and for your diligent focus on a very serious problem, and that 
is ensuring that taxpayers' dollars are wisely spent no matter 
the circumstances.
    Our Committee, both at the full Committee level and at the 
Subcommittee level, has held countless hearings looking at 
contracting, highlighting examples of wasteful spending, even 
examples of outright fraud.
    We have found that natural disasters and military 
deployments since the year 2000 have helped to double the 
dollar volume of Federal contracting, which now exceeds an 
astonishing $400 billion a year. A vast amount of that 
contracting has gone to the Iraq reconstruction effort, but 
there were also billions of dollars that have been spent in 
reconstruction efforts for the Gulf Coast in the wake of 
Hurricane Katrina.
    But whether you are looking at the Iraqi reconstruction 
effort or the reconstruction of the Gulf Coast, unfortunately, 
you see common problems.
    You see an insufficient Federal workforce to oversee and 
write the requirements for those contracts. You see a lack of 
training. You see a lack of a contingency contracting corps 
that could be assembled to respond to a natural disaster. And 
not coincidentally, you see an over-reliance on non-
competitive, no-bid contracts, which do not ensure that the 
taxpayer is getting the best value and the highest quality 
goods.
    Meanwhile, and not coincidentally, the GAO, the Special 
Inspector General for Iraq Reconstruction, and agency 
inspectors general have identified waste, fraud and abuse, and 
fiscal mismanagement exceeding billions of dollars.
    These problems demand action. They waste taxpayers' dollars 
and impede the achievement of program objectives. Contracting 
problems in war zones carry additional risks of frustrating the 
military missions, jeopardizing relations with friendly 
governments, and diluting the effectiveness of America's 
financial commitments to promoting security, stability, and 
respect for human rights.
    Last fall's report by former Under Secretary of Defense Dr. 
Gansler paralleled what this Committee has found in its 
investigations, and, again, it is the same litany of problems--
an over-reliance on no-bid contracts, a vastly expanded 
workload, insufficient staffing, insufficient training, and 
deficient oversight.
    I believe the Senate took an important step toward 
contracting reform with its unanimous passage of S. 680, the 
Contracting and Accountability Act, which both Chairmen have 
co-sponsored.
    It is a bipartisan bill, and it would make a big 
difference. It not only addresses the over-reliance on sole 
source, no-bid contracts, but it really focuses on the 
acquisition workforce.
    That is far less glamorous, but arguably it is even more 
important than the new restrictions that we have imposed or 
will impose on no-bid contracts.
    The legislation would also establish a contingency 
contracting corps, to ensure that trained and experienced 
contracting officers can deploy to combat zones or to areas 
struck by natural disaster.
    The House has also passed a contracting reform bill, and I 
hope that this will be one of the accomplishments that we can 
get done this year.
    Again, I want to commend both Chairmen for their interest 
and commitment to this issue, and I am very pleased to join 
them this afternoon. Thank you.
    Senator Carper. Thank you very much, Senator Collins, and 
we are pleased to join you in support of that legislation.
    Senator Collins. Thank you.
    Senator Carper. Thank you for your leadership.
    I am going to go ahead and introduce our witnesses at this 
time, and we will start with Stuart Bowen. It is always a 
pleasure to have you with us, the Special Inspector General for 
Iraq Reconstruction, who I have learned just yesterday was 
married not long ago at Rehoboth Beach, Delaware.
    Mr. Bowen. That's right.
    Senator Carper. That's got to be the start to a good 
wedding, a good marriage.
    Mr. Bowen. Thank you.
    Senator Carper. Four years into his job, he's been to Iraq 
18 times. I think Senator Biden may have the high number here 
in the Senate. He has, I think, been eight or nine times, so 
you have doubled our list.
    When you go, how long do you stay?
    Mr. Bowen. Two to 3 weeks.
    Senator Carper. OK.
    Mr. Bowen. In the summer, sometimes 4 to 5 weeks.
    Senator Carper. OK. I think I would shorten those summer 
visits, if I were you. It is pretty hot over there in the 
summer.
    Well, 4 years into his job, Mr. Bowen has been to Iraq, as 
I said, for 18 times, more than twice the number of, as far as 
I know, any of us in the Senate.
    He has been a vocal advocate of ensuring fiscal stewardship 
over the $44 billion in U.S. appropriated reconstruction funds. 
Thank you, sir.
    Mr. Bowen. Thank you.
    Senator Carper. Thanks for joining us. Our next witness, 
Bill Solis, is Director of the Defense Capabilities and 
Management Team in the U.S. Government Accountability Office.
    His portfolio of work covers issues such as contractors on 
the battlefield, supply chain management, force protection for 
ground forces, and equipment reset. He is joined today by his 
colleague from GAO, Carol Coffey, and the two of you look a 
whole lot like the folks from the GAO who briefed Senator 
McCaskill and myself and our staffs before we went to Iraq back 
in June. So, it is good to see you both. Thank you for your 
help then and thank you for your help today; and frankly, your 
help in preparing for this hearing.
    Dina Rasor is a partner in the Bauman and Rasor Group. 
Currently, she serves as Director of the Follow the Money 
Project, which is dedicated to making sure U.S. soldiers have 
the equipment they need in Iraq and Afghanistan by following 
the money allocated for the war effort.
    She previously served the Project on Military Procurement 
for 10 years, which exposed event scandals in the 1980's, 
including over pricing and fraud in procurement systems, such 
as the infamous $7,600 coffee brewers--I remember those--and 
the $670 armrest in the C-5 cargo plane, which we have 
stationed at Dover Air Force Base. And did you ever work on P-
3s, anything on the P-3 aircraft, the Navy P-3 aircraft?
    Ms. Rasor. A little bit.
    Senator Carper. OK. Fair enough.
    Ms. Rasor. I've worked a lot on airlift, though.
    Senator Carper. OK. As I recall, the coffee brewer was one 
that would make coffee at sea level. It would make coffee at 
50,000 feet. It would make coffee a thousand feet below the 
water.
    Ms. Rasor. Well, the specs were just that it would still 
make coffee after an impact of 40 G's, which no C-5 would 
survive, but you would still have coffee.
    Senator Carper. Yes. I always wondered how good was that 
coffee. That is a lot of money for a cup of coffee.
    Ms. Rasor. Soldiers--troops told me not so good.
    Senator Carper. All right. Thank you, Ms. Rasor.
    Robert Bauman is an investigator with the Follow the Money 
Project and a partner in Bauman and Rasor Group. He has 24 
years of experience as a DOD Criminal Investigator, 
investigating many large defense contractors.
    He and Dina Rasor have recently co-authored a book entitled 
``Betraying Our Troops: The Destructive Results of Privatizing 
the War.'' Was that published last year?
    Ms. Rasor. Yes.
    Senator Carper. Good. And finally, I really want to extend 
a warm welcome to Perry Jefferies, First Sergeant, U.S. Army, 
Retired. We were talking earlier, and he tells me he had served 
25 years. Is that correct?
    Mr. Jefferies. Between the Texas National Guard and the 
U.S. Army, yes, sir.
    Senator Carper. All right. Well, thank you so much for a 
quarter of a century of service to our Nation.
    As a First Sergeant with the Army's Fourth Infantry 
Division in Iraq, Mr. Jefferies earned the Bronze Star. And 
while in the Army, he served in Korea and Germany in infantry, 
armor, and cavalry units, and as an instructor at the Armor 
School at Fort Knox. Upon retirement, he was awarded the Legion 
of Merit.
    He is a founding member of Iraq and Afghanistan Veterans of 
America, and again, our country owes you a huge debt of 
gratitude. Thank you for your service.
    Before I turn it over to Mr. Bowen to offer his statement, 
I am going to ask our witnesses to try to stick to around 5 
minutes. If you go a little bit over that, it is not the end of 
the world, but I try to ask you to adhere to that.
    We have been joined by Senator McCaskill, and I was just 
mentioning before we went on our CODEL to Iraq and Kuwait and 
other places how Mr. Solis and Ms. Coffey were good enough to 
brief us and our staff. They denied it. But we know it was 
them.
    Senator McCaskill, would you like to make any statement at 
all before we turn it over to our witnesses?

             OPENING STATEMENT OF SENATOR McCASKILL

    Senator McCaskill. Well, there are a number of people that 
are testifying today that have been of great assistance to me 
since I have arrived in Washington. This is, in a weird way, 
the stuff that I find most exciting. I know that is hard for 
people to understand that I think contracting and following the 
money is very important. And I am glad we are having this 
hearing, Mr. Chairman.
    I learned a lot when I was in Kuwait and Iraq looking at 
contracting issues, and most of it was not good. Most of it 
would make most Americans sick to their stomach.
    We clearly were not prepared for contracting in the way 
that we engaged in contracting in this conflict. We were not 
prepared by being trained. We were not prepared by process. We 
were not prepared by oversight. And we certainly were not 
prepared for accountability.
    And I think it is very important that we focus on one 
important fact. Things don't change unless there are 
consequences. If people are not fired or demoted or if there is 
not a failure to promote in the military because of massive 
failure of appropriate oversight and management, things will 
not change.
    One of the most disheartening things I heard when I was in 
Kuwait and Iraq was the admission by many people I talked to 
that the exact same mistakes had been made in Bosnia.
    And guess what they did after Bosnia? They did a lessons 
learned. And guess what happened to the lessons learned? Nobody 
read it before Iraq. And so, the same mistakes were repeated 
again.
    And there is no way we can look the American people in the 
eye and say that we are not going to let this happen again 
unless there are consequences when people fail to look out for 
the taxpayers' money in a way that is responsible.
    So this hearing is important, but I do think that the 
Contracting Commission, which I am very excited about that will 
be a bipartisan effort beginning next year, if we do not look 
at their recommendations in the coming years, and make sure 
that this is not just about talk, and these hearings are very 
important and I know how many of them we have had. There have 
been, by my count, I think 300 different reports written about 
contracting problems. And there have been, by my count, tens 
upon thousands. I think we have figured out now, there are 
around 30,000 auditors in the Department of Defense alone.
    Now, this does not make America feel good about where we 
are.
    So, I am glad we are having this hearing. And I do not want 
to be the gloom and doom person here, but I will tell you I do 
not think all the hearings in the world are going to make a 
difference until somebody starts losing their job. Somebody 
loses a star. Someone fails to get a star. Someone at the 
Department of Defense is fired because of how they have done 
their job when it comes to watching taxpayer money. Thank you, 
Mr. Chairman.
    Senator Carper. Senator McCaskill, we thank you as well. 
Mr. Bowen, please proceed.

STATEMENT OF STUART W. BOWEN, JR.,\1\ SPECIAL INSPECTOR GENERAL 
                    FOR IRAQ RECONSTRUCTION

    Mr. Bowen. Thank you, Mr. Chairman, Ranking Member Collins, 
Senator McCaskill, and Members of the Committee. I am pleased 
to be here to address the topic of today's hearing, Management 
and Oversight of Contingency Contracting in Hostile Zones, one 
of which I travel regularly.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Bowen appears in the Appendix on 
page 57.
---------------------------------------------------------------------------
    I am here to tell you that there are two fundamental 
aspects to analyzing this issue in my view: First, the 
oversight of the contracting processes in a contingency zone; 
and, second, oversight of contractors on the battlefield.
    My office's work has focused chiefly on the former issue, 
and my testimony today, which I will summarize briefly, 
analyzes that matter.
    SIGIR's mandate gives us broad jurisdiction to look across 
agency lines in overseeing the use of about $45 billion in U.S. 
Government money appropriated for the relief and reconstruction 
of Iraq.
    We have issued more than 200 audits, opened more than 200 
inspections, opened more than 300 investigations, and issued 
three lessons learned reports. My talk today will focus on our 
lessons learned report on contracting and procurement.
    Our next quarterly report will be delivered to the Congress 
in 5 days, and, as you noted, I leave for my 19th trip to Iraq 
next month.
    In my remarks, there are three matters I would like to 
address briefly: One, our recommendations regarding contracting 
in Iraq reconstruction; two, what congressional actions have 
been taken and their efficacy, and three, the core challenge 
with analyzing and addressing the problems of contingency 
operations management.
    In 2006, we issued our second lessons learned report on 
contracting and procurement. The first lessons learned report 
was on human capital management, and the last one, presented to 
this Committee last spring, was on program management.
    At the hearing before the full Committee in August, we 
presented our findings and conclusions. We noted that our 
extensive review, which included interviewing all those in 
charge of contracting in Iraq and reviewing all the documents 
related to it that, indeed, found contracting procurement 
personnel were not adequately included in the planning for Iraq 
reconstruction. There was too broad a use of sole source 
contracts early on in the process and especially limited 
competition contracts; that there was no single set of 
contracting regulations at work in Iraq. There were a whole 
series of agency-driven versions of the Federal Acquisition 
Regulation.
    There was no deployable contracting system available at the 
time that the Iraq relief and reconstruction began. There was 
no single unified contracting entity to manage contracting in 
theater. There was a failure in Iraq to definitize contracts as 
one of our audits identified in detail, and there was an 
overuse of the expensive design-build, cost-based contracts, 
with limited, or not effective enough, invoice review. We 
continue to do our invoice review of those contracts, but 
different contracting mechanisms would have been better.
    Our recommendations promoted the creation of a contingency 
Federal Acquisition Regulation, institutionalization of 
programs like the Commanders' Emergency Response Program, 
including contracting officials early on in contingency ops, 
and creating a contingency contracting corps, which S. 680 
proposes to do, and which has passed the Senate.
    The Senate has acted through S. 680 in a very effective way 
to address some of our recommendations, including the 
contingency contracting corps issue; the need to address cost-
plus contracts and get control and oversight on them; and to 
address the dramatic drop in the acquisition workforce over the 
last 15 years.
    The OMB Office of Federal Procurement Policy has adopted 
SIGIR's guidance for contingency contracts, and, so, that 
recommendation is having an effect within the Executive Branch 
as well, and additional evidence is the Gansler Report, a very 
effective review of the Department of the Army's contracting 
challenges, echoing similar problems, ones that this Committee 
has uncovered in hearings and ones that we have identified in 
our reporting.
    The next phase of our lessons learned effort will be to 
look at contingency operation management writ large, which was 
the issue that Senator McCaskill was addressing. The 
contracting problems, the personnel problems, the program 
management problems are symptoms of a larger issue, and that is 
for the U.S. Government to address how it is structured to 
manage operations, relief and reconstruction operations, in a 
contingency environment.
    And with that, that concludes my brief statement. I look 
forward to your questions. Thank you, Mr. Chairman.
    Senator Carper. Very fine. Thank you for that statement and 
for your work. Mr. Solis, you are recognized.
    Mr. Solis. Thank you.
    Senator Carper. Why don't you proceed?

      STATEMENT OF WILLIAM M. SOLIS,\1\ DIRECTOR, DEFENSE 
 CAPABILITIES AND MANAGEMENT, ACCOMPANIED BY CAROLE F. COFFEY, 
 ASSISTANT DIRECTOR, DEFENSE CAPABILITIES AND MANAGEMENT TEAM, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Solis. Chairman Carper, Senator Collins, and Senator 
McCaskill, I am pleased to be here today to discuss a number of 
issues regarding the oversight and management of the 
contracting with the beginning of military operations in Iraq, 
the scope, size, and use of contractors has grown 
exponentially, making the management and oversight of them more 
complex.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Solis appears in the Appendix on 
page 73.
---------------------------------------------------------------------------
    Your continuing oversight of this issue is paramount, not 
only to improving the management of contractors, but also helps 
ensure our military members receive high quality contract 
services in the most economical and efficient manner.
    My testimony will focus first on the problems that DOD has 
faced in managing and overseeing contractor support to deployed 
forces; and second, the future challenges that DOD will need to 
address to improve its oversight and management of contractors 
at deployed locations.
    In addition, as you requested, we have developed several 
actions the Congress may wish to consider requiring DOD to take 
on.
    Since 1997, we have reported on long-standing problems that 
have hindered DOD's management and oversight of contractors at 
deployed locations. Examples of these problems include: The 
failure to follow planning guidance; an inadequate number of 
contract oversight and management personnel; the lack of 
visibility over contracts and the number of contractors; 
failure to systemically collect and distribute lessons learned; 
and a lack of comprehensive training for contractor oversight 
personnel and military commanders.
    In addition, we have also reported on the lack of high 
level attention and leadership within DOD to deal with these 
problems. Not surprisingly and in some cases where there has 
been a lack of oversight and training with contractors, there 
have been both monetary and operational consequences.
    To its credit and in response to some of our 
recommendations, DOD has begun to address some of these long-
standing issues by designating a focal point within the OSD to 
deal with contractor oversight issues, implementing a database 
to maintain accountability of contractor personnel in Iraq and 
Afghanistan, issuing in 2005, a comprehensive guidance on 
contractor support to deployed forces, which is a noteworthy 
improvement.
    However, we found little evidence that DOD and its 
components were implementing the 2005 guidance or much of the 
other guidance addressing management and oversight of 
contractors supporting deployed forces.
    Therefore, we believe, the issue is now centered on DOD 
leadership ensuring that existing guidance is being implemented 
and complied with.
    Based on our past work, several additional challenges will 
need to be addressed by DOD to improve oversight and management 
of contractors supporting deployed forces in future operations.
    These challenges include a number of broader issues, such 
as incorporating contractors as part of the total force, 
determining the proper balance of military, civilians, and 
contractors in future contingencies and operations, clarifying 
how DOD will work with other government agencies in future 
contingencies and operations, and addressing the use and role 
of contractors in its plan to expand and transform the Army and 
Marine Corps.
    As requested, we have considered some specific legislative 
remedies for the challenges facing DOD. While we believe DOD 
bears the primary responsibility for taking actions to address 
these challenges, there are three actions that the Congress may 
wish to consider requiring DOD to take in order to improve 
oversight and management of contractors and ultimately to 
improve services provided to the war fighter.
    These include: Again, determining the appropriate balance 
of contractors and military personnel as it shapes its forces 
for the future, including the use and role of contractor 
support to deployed forces and force structure and readiness 
reporting; and ensuring that operation plans include specific 
information on the use and role of contractor support to 
deployed forces.
    In closing, I think it is important to recognize that we 
are dealing with a very complex and complicated issue. Today, 
there are as many contractors supporting military forces in 
Iraq as there are military forces themselves.
    These contractors provide a large range of services. Put 
simply: Contractors are an enormous and essential part of our 
way our military operates today, and DOD's efforts to address 
long-standing challenges with its oversight and management of 
contractors at deployed locations touches fundamental aspects 
of how the military is organized, how resources and 
responsibilities are allocated, and how it prepares for and 
executes the missions in peace time and during combat.
    What is needed is an institutional change that accepts the 
reality of contractors as a vital part of the total force and 
fundamental change in how DOD thinks about, plans for, and 
executes its use of contractors to support deployed forces.
    As an officer told us in 2006, ``contractors are not fire 
and forget.''
    This concludes my prepared remarks. I will be happy to 
answer any question that you may have.
    Senator Carper. Mr. Solis, thank you very much for your 
testimony, to both of you for your help in past months and also 
in preparation for this hearing.
    Mr. Solis. Thank you.
    Senator Carper. Ms. Rasor, you are recognized and please 
proceed.

   STATEMENT OF DINA L. RASOR,\1\ DIRECTOR, FOLLOW THE MONEY 
     PROJECT; AND CO-AUTHOR OF ``BETRAYING OUR TROOPS: THE 
            DESTRUCTIVE RESULTS OF PRIVATIZING WAR''

    Ms. Rasor. OK. Thank you very much for having us today. I 
wanted to say--I guess we are kind of dating ourselves--but 
between the two of us we have 50 years of experience of looking 
at this, so it is very frustrating to see where we are today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Rasor and Mr. Bauman appears in 
the Appendix on page 101.
---------------------------------------------------------------------------
    We took time out of our normal work to write this book, 
because we heard so much from so many soldiers that troubled 
us. And when we were writing the book, we wanted to write it 
from the soldier and the contractor employee's point of view. 
And we spent a lot of time talking to a lot of people.
    But one of the things that I learned the most about--in the 
course of writing this book--is how did this get started? How 
is it that we suddenly had this giant leap in the amount of 
contractors compared to the Gulf War and wars before this?
    And I am going to be discussing about contractors on the 
battlefield in hostile areas where they should be, where they 
should not be, and then I am going to defer to Robert Bauman 
with all his years of training in oversight, although we both 
talk about oversight.
    When we interviewed General Paul Kern, the head of the Army 
Materiel Command, for this book, he brought out something that 
I had not thought of, and it just did not dawn on me. He said, 
I was told to prepare for this war in a short--I am 
paraphrasing him here--amount of time for this war. And there 
was suddenly a troop cap put on us, and it was not just a troop 
cap on people who pulled the trigger. It was a troop cap on the 
people who did the logistics.
    And, of course, many of you may know that logistics is the 
weak sister in the sense of getting funding in the Army and the 
Department of Defense. It is not the glamour career.
    And so, he is looking around saying I do not have enough 
people. What am I going to do?
    Well, they pulled out the LOGCAP III contract that KBR had 
to service troops around the world--Bosnia and other places. 
And when they pulled it out, it was a $60 million a year 
contract. It has now accrued, most estimates I have heard, $26 
billion. That is contract growth.
    So what happened was suddenly because of this troop cap, 
because of this force, this contract was exploded in ways never 
thought of before, and I think of Iraq now as the land of 
unintended consequences. And one of the unintended consequences 
that I am very concerned about that is where the contractors 
are and how much do you rely on them and how do the troops rely 
on them?
    This situation was an anomaly. It does not have to be 
permanent. We do not have to have contractors in hostile zones 
at this level. I am not against contractors. I am not against 
the use of contractors. I am for using contractors where it 
makes sense, where it saves money, and when they have effective 
oversight.
    But there is an Achilles' heel here. The Achilles' heel is 
you cannot put people--contractors and contractor employees--in 
vital logistics areas in a hostile zone, where the soldiers 
have to rely on them getting through for their food, water 
supplies, ammunition, and everything else.
    And there is a reason for that. When you join the Armed 
Forces, you take an oath. You are under the Uniform Code of 
Military Justice. And we all know how patriotic our troops are. 
But the reason that we have the Uniform Code of Military 
Justice is you give up some of your constitutional rights, and 
one of them is you cannot just quit and go home. You stay.
    And you are expected to stay and fight. If you are an Army 
truck driver and you think that road is dangerous and you tell 
your sergeant you do not want to go there--you know in the back 
of your mind, your goal is--your choices are drive or be 
brought up on charges.
    And the reason is that war is chaos. War is dangerous, and 
you ask people in war to do things against their own self 
interest. And that is why we have a military.
    When you put a contractor truck driver in that situation--I 
am not talking about driving in a safe situation--I am talking 
about driving those long convoys, those thin lines of supply 
support from base to base in Kuwait--you have got two problems. 
One, are you asking the contractor to supply food and water to 
soldiers in outlying areas, which, by the way, the LOGCAP 
contract requires them to do, but they do not do it.
    When you do that, you have two problems. You have a 
contractor who has a statement of work who may decide I do not 
want to do some of this or all of it. I do not want to do some 
of it. Our book is full of that, of them halfway doing it.
    And the commander does not have the same kind of control of 
going up as he would someone under him, relieving him of 
command for not doing his job and putting in someone else.
    The commander has the job going back and forth with our 
peace time procurement rules; to run back, start a breach of 
contract proceedings in the United States. And the other part 
of that is contractor employees can quit at any time. That is 
their constitutional right, and they have.
    One of the examples is when you all remember when one of 
the first KBR truck convoys blew up and Tommy Hamil got 
kidnapped, and he was in a car with the insurgency, with a gun 
to his head. And that was flashed all over the news. Well, a 
whole lot of contracting truck drivers quit, and there were a 
thousand trucks stopped at the Turkish border, and the Army had 
to scramble to find somebody to drive them.
    Senator Carper. Ms. Rasor, I could listen to you testify, 
frankly, for a whole lot longer, but finish your thought. And 
we will----
    Ms. Rasor. Yes. OK.
    Senator Carper [continuing]. Turn it over to Mr. Bauman.
    Ms. Rasor. All right. So, I wanted to put this into the 
mix, because this is something people do not think about.
    Now, what are we going to do if the Iraqi Parliament 
decides to pull the immunity for the contractors? How many more 
will go home and leave us in the lurch? I really would like you 
to listen to Perry Jefferies on this.
    So, I would like to say that my suggestion is you have to 
pull the contractors back to the safe fortified bases, to 
Kuwait, to the Green Zone, and figure out the line in the sand 
that you do not go across so that our soldiers are not stuck 
when the contractor fails to perform or the contractor 
employees quit. Their lives are at stake. And I am just 
appalled that this could happen to our troops.
    Now, I am going to turn it over to Mr. Bauman to talk more 
about the things that----
    Senator Carper. Mr. Bauman, you are welcome. Thank you.

  STATEMENT OF ROBERT H. BAUMAN,\1\ INVESTIGATOR, FOLLOW THE 
  MONEY PROJECT; AND CO-AUTHOR OF ``BETRAYING OUR TROOPS: THE 
            DESTRUCTIVE RESULTS OF PRIVATIZING WAR''

    Mr. Bauman. Good afternoon, Mr. Chairman, and Members of 
the Subcommittees.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Rasor and Mr. Bauman appears in 
the Appendix on page 101.
---------------------------------------------------------------------------
    I am here today with Ms. Rasor to speak about the problem 
with acquisition management and oversight for contingency 
contracts in Iraq.
    It has been well documented by government agencies that the 
Army's management and oversight of its contingency contracts 
for services in Iraq and Afghanistan has been seriously 
deficient. Our book also discloses on-the-ground accounts of 
how poor acquisition management and oversight has affected our 
troops.
    Deficient acquisition management and oversight seriously 
erodes the government's ability to maintain control and 
accountability of its contracts.
    Such deficiencies should not have been a surprise for the 
Army. As far back as 1994, the GAO and other agencies have 
disclosed these problems on the part of the Army on contingency 
contracts.
    Despite years of being aware of the problems, the Army has 
taken no substantive action to resolve their management and 
oversight problems. There is no telling how many billions of 
dollars have been wasted as a result.
    A startling example of just how dysfunctional and 
ineffective oversight has been on the ground in Iraq, 
especially for the LOGCAP contract, was revealed in a 2005 
LOGCAP Team Detachment after-action report we obtained from a 
source who was part of that team.
    LOGCAP support personnel, who are also called planners, 
were assigned to all the primary bases in Iraq between 2004 and 
2005 and were required to submit comments and issues regarding 
their tour of duty.
    These submissions were rolled up into the after action 
report submitted through the LOGCAP chain of command. I request 
this report be included for the record.\1\
---------------------------------------------------------------------------
    \1\ The report entitled ``Logistics Civil Augmentation Program 
(LOGCAP) LOGCAP Support Unit (LSU) Det. Y8--Iraq, After Action Report & 
Lessons Learned, Operation Iraqi Freedom,'' submitted by Mr. Bauman 
appears in the Appendix on page 176.
---------------------------------------------------------------------------
    Senator Carper. Without objection.
    Mr. Bauman. These planners were there to monitor the 
contract and provide advice, assistance, and recommendations on 
LOGCAP issues to the Administrative Contracting Officer, the 
military, and KBR. Unfortunately, they did not have authority 
over the contractor or the ACO.
    The report disclosed a lack of support by their chain of 
command and being at the mercy of KBR for life support that was 
inadequate, untimely, and unresponsive.
    ACOs were not trained in LOGCAP and inexperienced in their 
roles. The LOGCAP program manager acted as a cheerleader for 
KBR and led the charge in supporting boondoggles for the 
contractor.
    Planners suggested possible conflicts of interest and 
unethical or criminal activities between DCMA, the LOGCAP 
program manager, other unnamed government agencies, and KBR in 
monitoring the contract, including possible collusion.
    Although the Gansler Commission Report was correct in 
recommending the need for more skilled acquisition and contract 
monitoring personnel, that alone does not address the root 
problems for defense contracting in general.
    Those root problems are the significant weakening of 
contract laws and regulations over the last 13\1/2\ years, 
under the guise of acquisition reform, and the partnering 
process between DOD and contractors.
    The Federal Acquisition Streaming Act and the Federal 
Acquisition Reform Act, both enacted in the 1990's, impacted 
Federal procurement laws and regulations by repealing or 
superseding various aspects of the statutory basis for 
government contracting such as weakening the use of the cost 
accounting standards, the backbone of controlling contractor 
costs.
    The partnering process in DOD contracting is a concept that 
has been a disaster for government agencies and the taxpayer. 
Based on a mutual commitment between government and industry to 
work cooperatively as a team, it accepts the concept of mutual 
common interests among the parties to further the interests of 
the contract. But it does not consider where those interests 
might be different, especially when it comes to pricing of 
contracts, technical issues, or differences in manpower, skill, 
and experience.
    Large contractors in particular have far more acquisition 
resources, skill, and experience than DOD, and, therefore, 
dominate the acquisition process under this process.
    With partnering, a large contractor can insinuate itself 
into the acquisition process and dominate or influence 
acquisition management and oversight to its benefit.
    It seems the Army has decided the best way to remedy its 
deficiencies in acquisition management and oversight is to 
outsource these functions, such as what has been happening for 
the new LOGCAP IV contract. Contractors managing contractors 
compromises the government's control of the process and creates 
a conflict of objectives between contractors in the DOD.
    It also questions the support contractor's relationships 
and motive with the contractors it will oversee and evaluate.
    But who is going to watch the watchers? Certainly, not the 
Army. They do not have the resources to do that. Acquisition 
and oversight should be considered an inherently governmental 
function to maintain the government's authority over 
contingency contracting and to have a contractor manage other 
contractors is tantamount to having a fox guarding the hen 
house.
    We recommend that the Congress incorporate remedies 
strongly recommended by GAO, SIGIR, and the Gansler Commission 
to grow the oversight acquisition personnel who have been 
trained and are skilled in this type of contracting.
    At the same time, FASA, FARA, and SARA laws should be 
repealed or modified, as they effect government contracting to 
include strengthening CAS to provide acquisition and oversight 
personnel with the tools to control costs.
    We also recommend eliminating the partnering process. There 
needs to be a clear acquisition authority over the contractor 
and over the process.
    Acquisition management and oversight should be an 
inherently government function. Therefore, Congress should 
enact a law restricting or eliminating the privatization of 
this process.
    I look forward to your questions.
    Senator Carper. I am sure you will have some. Thank you so 
much, Mr. Bauman, for being here and for your help today.
    Mr. Jefferies, again, we are grateful for your service. We 
are grateful that you are here. And you are recognized for 5 
minutes or so. Take a little more if you need it, but try to 
stick to that if you can. Thank you.

  STATEMENT OF PERRY JEFFERIES,\1\ FIRST SERGEANT, U.S. ARMY 
        (RET.), IRAQ AND AFGHANISTAN VETERANS OF AMERICA

    Mr. Jefferies. Thank you, sir. Good afternoon, Chairman 
Carper, Ranking Member Collins, and Senator McCaskill.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Jefferies appears in the Appendix 
on page 114.
---------------------------------------------------------------------------
    I am here to speak about the effects of contingency 
contracting on the battlefield as I encountered them in my role 
as a Calvary First Sergeant in Iraq. This is a short version of 
my full statement, and you have got the rest of it for the 
record.
    Senator Carper. Your full statement will be made a part of 
the record.
    Mr. Jefferies. I encountered these effects as the First 
Sergeant for Headquarters Troop, 1 Squadron, 10 U.S. Cavalry 
where I was assigned since June 2000 until I retired in 2004.
    I served in that role while I was in Iraq from April 
through October 2003. My troops' role was to staff, supply, 
treat, arm, and support Force Package I, the lead element of 
the 4 Infantry Division during Operation Iraqi Freedom I.
    We were tasked organized with a field artillery battalion 
and elements of a support battalion, specifically the Forward 
Logistics Element that we called the FLE.
    Just to try to give you an idea of how big this element 
was, my troop or my squadron on its own normally had about 800 
people. In Iraq, we moved with about 2,000 people, a fairly 
self-sufficient task force.
    I retired from the Army in 2004 and I am testifying today 
as a private citizen.
    But Chief of Staff General Peter Schoomaker wants retirees 
to wear this new Army Retired lapel pin and think while you are 
doing it: ``I was a soldier, I am a soldier, and I always will 
be a soldier.'' My director asked me what made me an expert to 
come here and testify today, and I told him because I lived it, 
and I am still a soldier.
    Soldiers are expected to maintain the Professional Army 
Ethic, and that means to speak out with the value of candor 
when it is needed. And I think there are some important issues, 
and I think that my soldiers were affected by the way these 
contracts worked while we were in Iraq and that needs to be 
said.
    I would like to point out that I work as a contractor at 
Fort Hood, and I understand that some services can be delivered 
by contractors in an efficient and responsible manner, and I 
try to do that every day. And that frees soldiers to train for 
war and to do those other important tasks instead of some of 
the miscellany that they might get caught up in otherwise.
    But what I refer here to are some large-scale support tasks 
doctrinally provided by combat support or combat service 
support units that were supposed to be provided to our unit in 
Iraq by civilian companies.
    While I was in Iraq, the task force that I was part of 
moved independently from our higher headquarters and support 
units. That made us rely on contractors in various locations to 
provide bulk supplies and services to us. When these 
contractors failed to provide or to deliver, their failure 
impacted my soldiers in a negative way. And I will discuss two 
issues now. There are others in my longer statement and some 
examples. To paraphrase one of my former commanders, whom I 
discussed my appearance with here today, he said we had just 
enough stuff to kick in the door, but we could not stay in the 
room for very long without help. And I think that should be 
changed.
    We were affected when water, food, and repair parts were 
not delivered to my unit in a timely manner. There were many 
weeks in Iraq when my entire unit survived on what we called 
two and two's--two bottles of water and two MREs, or packaged 
meals ready-to-eat a day.
    It is infuriating to know now that the water from our unit 
was sitting inside storage containers inside Iraq, but never 
moved forward. By Army supply doctrine, our higher headquarters 
was supposed to push these supplies to us--in other words, 
deliver what we needed. But, since the Army was relying on the 
LOGCAP contract to provide these supplies, other missions were 
assigned to our support, transportation, and logistics 
personnel that were supposed to get that done. So even though 
those supplies were paid for and designated for our use, they 
did not make that final mile, and they were never handed off to 
my unit or the element that supported them.
    When we departed from Kuwait to attack into Iraq, we 
carried with us all the food, water, and other supplies we 
could put our hands on. We literally covered our tracked 
vehicles with bottles of water and food.
    Thankfully, we were organized with the Forward Logistics 
Element from the 404th Forward Support Battalion, so we had a 
little bit of extra capability, and we were near to self-
sufficient for a few days. But even with all those plans and 
all of our soldiers' hard extra work to make them work, we felt 
our first supply shortages as soon as we crossed the gate into 
Iraq and saw Iraqi children standing by the side of the road. 
They held leaflets that the U.S. forces had dropped before them 
promising them food, water, and medicine. And they were 
literally begging for food and water, and we did not have any 
to give them.
    This system was troubled, too, by the absence of the normal 
supply runs. We were not able to evacuate our prisoners or 
broken equipment to rear areas as we had trained to do because 
since there were no trucks coming forward, there was no back 
haul capability to take it back.
    We moved through Iraq from Kuwait to Baghdad to Tikrit and 
then finally out to the eastern border, near Iran. As the main 
hostilities settled down so did we; first, in some positions in 
the desert that we called the dust bowl, and later we moved to 
the Kirkush Military Training Barracks--named Camp Caldwell 
after a young soldier who died there the first night we 
arrived.
    While we were at the dust bowl, water ran so short that 
even our scouts who stood on the checkpoints in the 120-degree 
sun were restricted to one or two one-liter bottles of water 
per day.
    When a laundry unit finally reported to us, I was forced to 
commandeer the water and use it to supply my soldiers. And then 
I put all their soldiers on guard duty. All this happened while 
supplies designated for my unit and supposedly delivered by KBR 
sat elsewhere in Iraq and went undelivered.
    Our soldiers had to add the mission of re-supply to their 
other activities just to ensure our survival. For example, the 
logistics officer from our Forward Support Element organized 
convoys to go to Baghdad and other places looking for supplies. 
In one case, they drove all the way back to Kuwait City to get 
hydraulic oil that we needed for our tanks. These were soldiers 
whose time was already accounted for since KBR was supposed to 
be providing these deliveries.
    We felt other effects when contractors and subcontractors 
not only did not provide the required deliverables to the 
government, and my unit had to provide these or accomplish the 
task that these companies had been contracted to do.
    In late July, the trainers for the new Iraqi Army reported 
to our forward operating base at Camp Caldwell. Instead of 
relieving us from non-mission-essential tasks, they added to 
them.
    We had to provide food and water to the contractors. There 
was pressure on us to provide hot meals to these contractors 
even when we could not deliver them to all of our soldiers.
    Once again, we had to restrict the amounts of water 
provided to American soldiers to two bottles a day so that we 
could provide the new Iraqi Army trainees four bottles of water 
a day. We had to cover gaps in their contractor security and 
training. Meanwhile, our other military missions continued, 
and, in some cases, multiplied because of while we were out.
    One day at Camp Caldwell, I spent a day escorting a 
contract officer from General Sanchez's office and several KBR 
contractors around while they discussed services they were 
supposed to provide to us. That was the first time I heard the 
words ``statement of work.''
    While I was in Iraq, these people never followed through on 
work we discussed or other support that I only found out about 
once I had returned to the United States.
    Part of the problem with contingency contracts is that 
there is only a very remote connection between the people 
managing the contract and those receiving the service. Contract 
oversight personnels are assigned to the higher levels of 
leadership, not generally to the tactical levels supposed to 
receive these services.
    We were certainly not set up to monitor the terms and 
conditions of most contracts and receive services or had no 
idea of the scope of work, the conditions, or terms, we were 
responsible for, and we did not have a 1-800 contact number 
that we could call and find out about the contracting.
    I understand that the Army is creating a new type of 
contracting non-commissioned officer to help monitor contracts, 
but they are not deployed where the rubber meets the road, at 
least not yet.
    Worse, to me, it seems like a self-defeating proposition. 
If we have to add all these additional structures for oversight 
to the contracts in the front of the battlefield, then why 
don't we just let those people execute the mission to start 
with?
    Just have them do the job the contractor is doing. The best 
way to prepare for tactical logistics, I feel, is to allow 
commanders to plan them and execute them with their own proper 
resources.
    There were a lot of other issues while I was in Iraq, but a 
lot of people worked very hard and eventually to good effect to 
correct a lot of the problems. But that in itself is a problem.
    During the invasion, during the crucial tactical phase, 
when units are contending for battle space and fighting for 
position, that is a bad time to be figuring it out. That needs 
to be done ahead of time, and then trained to as near 
perfection as possible, because plans will go wrong when they 
are executed. They are going to go wrong. That is the nature of 
war. But if you have a good plan at least you have got a good 
basis for change.
    Hoping that your beans, bullets, and Band-Aids show up 
magically on time and in the right place, that is no kind of a 
plan. It is only a recipe for disaster. The best way to prepare 
for tactical logistics is to allow commanders to plan them.
    In my opinion, the Department of Defense should reduce its 
dependence on contractors and rebuild a self-sustaining 
logistics capability into its units. It should never again find 
itself in a position where it can only accomplish the mission 
with the permission of a civilian company unless the 
Administration is prepared to immediately nationalize these 
companies in time of war.
    And what I am talking about is delivery--trucks, security, 
the people to move supplies, all this must be under military 
control from the combatant commander on down at least until 
security is established and the kinetic part of the fight has 
ended.
    Thank you for the opportunity to appear before you, and I 
would be pleased to answer any questions you have.
    Senator Carper. Mr. Jefferies, thank you very much for your 
excellent testimony. It went on little bit, but that was worth 
waiting for.
    The point that you make and your testimony, Mr. Jefferies 
is we sometimes focus understandably on the amount of money 
that is wasted, or the amount of money, tax dollars that are 
used ineffectively or inappropriately.
    We do not always focus on the consequences for the war 
fighter.
    Mr. Jefferies. Yes, sir.
    Senator Carper. And what you have done is to just give us 
very graphically what the consequences are for the people that 
are out there fighting. Their lives are on the line, and trying 
to do their job, and how they need better support than in too 
many cases they have gotten in the last 4 years.
    Mr. Jefferies. Hooah.
    Senator Carper. For those of you who do not know, that is 
an Army term, ``hooah.'' We do not have those in the Navy, but 
maybe we should. It is a good one.
    I sort of thought about this question as you all testified, 
I was born 2 years after World War II ended. I do not remember 
much about the Korean War except from my uncle, who has told me 
about it who served over there as a Marine. My dad, along with 
my uncle, served in World War II, so I know something of that.
    And I served in the Vietnam War myself, and was involved as 
the Governor and Commander-in-Chief of our National Guard in 
Delaware, and was in Congress during the Persian Gulf War, so I 
have some idea what was going on in those wars.
    I do not ever recall in the war that I served in or that my 
uncles and my father served in, where we had this kind of 
reliance on contractors. I just do not remember anything like 
this. I know we had some reliance in the Vietnam War, but 
nothing of this magnitude.
    How did this happen? My recollection is that our Secretary 
of Defense, Secretary Rumsfeld, wanted us to sort of redesign 
our defense and to have a smaller force, and I suppose a 
smaller uniformed force, and maybe the flip-side of that is by 
having a smaller uniformed force, we end up with a larger 
civilian force and private sector force that we use as 
contractors.
    Now, maybe that is the genesis of this. But how did we go 
down this road in the first place? What started us down there? 
Anyone?
    Ms. Rasor. Well, I felt really compelled to tell Perry 
Jefferies' story in my book, because, I, like I said it never 
dawned on me that troop cap meant logistics. And it also never 
dawned on me that they would actually believe that you could 
rely on contractors not to leave.
    And so, I think that is the start of it, but I think it was 
sort of the perfect storm. There was a lack of oversight 
already. There was already a problem. There was a rush to go to 
war. And this set up a situation where the troops and troop set 
all the way up--amazing, and one of our people we talk about in 
the book is now at West Point, and a brilliant captain. They 
just did not know what the logistics situation was because it 
got changed. It got changed while they were on the way to the 
war. And I think that people are kind of lost on that--because 
people say well, now contractors are there, and we rely on 
them, but we cannot change it.
    No, this was an unusual circumstance. And so, I am really 
hoping that the Army and the Congress look at this and say we 
do not have to do this again.
    Senator Carper. All right. Mr. Solis and then Mr. Bowen?
    Mr. Solis. Yes, I was going to say part of it has to start 
with if you go back to the early 1990's, when after the first 
Gulf War, we downsized the forces.
    I think also, which is maybe a beginning of a more recent 
phenomenon and General Casey even talked about it yesterday, is 
that one of the core missions that the Army is going to take on 
now is stability operations. And so, the missions are changing. 
And not only are we using more folks like in the logistics 
area, we have linguists in Iraq. We have interrogators that we 
are now using as contractors or intel analysts. So, we are 
expanding----
    Senator Carper. We even have sociologists and----
    Mr. Solis. That's right.
    Senator Carper [continuing]. And anthropologists----
    Mr. Solis. That's correct.
    Senator Carper [continuing]. Who, I am told, are doing 
pretty good work for you.
    Mr. Solis. Right. I mean, in addition, private security 
contractors. A number of different fields are being used. But I 
think part of the genesis is the downsizing of the force, the 
increase in different types of missions.
    So, I think there is--and part of that, also, I would 
mention that there is a requirement. There is a lot of 
requirements on the books for guidance in terms of preparing 
for the types of missions you are going to have into the future 
for the military, what are going to be your needs, not only for 
the military and civilians, but for contractors.
    And so, there is a lot on the books already. So, this 
necessarily should not be a surprise that we have these 
problems because there has been planning and there is planning 
guidance on the books already.
    Senator Carper. All right. Mr. Bowen, please.
    Mr. Bowen. A policy decision was made in the Department of 
Defense in 1991 to outsource primary logistical support for the 
Army and for military members in contingency operations. That 
resulted in the issuance of the first LOGCAP contract. It was a 
multi-year contract. It went to Kellogg, Brown, and Root. They 
retained it; it was annually renewed until 1995 or 1996, when 
it was recompeted and awarded to DynCorp.
    DynCorp held that contract for five more years. It was 
recompeted again in 2000, and Kellogg, Brown, and Root earned 
that contract. And it was recompeted last year, and it was 
divided up for the first time among three different 
contractors--Fluor; Kellogg, Brown, and Root; and a third one. 
It has been challenged, so it is still--the issuance is still 
pending.
    The point being is the outsourcing of providing food, fuel, 
and billeting, or shelter, to troops in the field through 
contractors was made in the late 1980s, early 1990s--that was a 
policy decision. It resulted in the LOGCAP series of contracts, 
and it was a philosophical reflection, I think, of the trend 
towards outsourcing of many previously governmental functions 
within the U.S. Government as they evolved and also, perhaps, 
was part of the peace dividend process as well.
    Senator Carper. All right. Thank you.
    Ms. Coffey. Senator, if I may?
    Senator Carper. Please.
    Ms. Coffey. Some of these decisions are actually the result 
of unintended consequences. For example, when an acquisition 
person decides not to buy the technical data package for a 
weapons system, then they have to depend on contractors to 
support that weapons system because they do not own the 
technical data.
    Decisions that have been made to buy a limited number of 
aircraft or some kind of weapons system and then does not--is 
no longer economically feasible for the Department to train 
people to fix these weapon systems, then makes us rely on 
contractors.
    So, it is not--no one made a decision to bring 120,000 
contractors into Iraq. Many, many people make a decision to 
bring one or two based on decisions that have been made maybe 
20 or 25 years ago.
    Senator Carper. All right. That was a helpful insight. 
Thank you.
    My time has expired. I am going to yield to our co-chair 
here, Senator Akaka, and, if you would, Mr. Chairman, I ask 
each of us to keep ourselves to about 7 minutes. And then we 
will have time for a second round, maybe a little shorter 
second round. Mr. Chairman, thanks very much again.
    Senator Akaka. Thank you very much, Mr. Chairman. Mr. 
Bowen, you recommend that any civilian agency contracting in a 
contingency environment should conduct Gansler-type studies of 
their contracting practices.
    Mr. Bowen. That's right.
    Senator Akaka. This is a useful proposal, I feel. However, 
it seems that there are several cross-cutting issues affecting 
all agencies with contracts in Iraq that can be identified now.
    What are the most pressing contracting problems that you 
have identified that agencies should address in the short term?
    Mr. Bowen. First, with respect to contingency operations, 
tracking the number of contracts and contracting actions going 
on in theater through a single database is essential.
    Second, developing a single point, a one-stop shop, if you 
will, where theater contingency contracting is carried out 
would help achieve better insight and oversight to what 
contracting actions are going on.
    Third, ensuring that there is an effective continuity or 
process for continuity of contracting officers in theater. One 
thing that we have uncovered over and over again in Iraq is 
that a contract sometimes will not have a contracting officer 
on it, while the previous one has departed, and the next one is 
waiting to arrive.
    The Joint Contracting Command-Iraq, with respect to DOD 
contracts, has done a good job addressing that problem we 
identified early on, but it, nevertheless, continues to be an 
issue.
    And finally, we recommended in our contracting lessons 
learned, our first recommendation, was the development of a 
contingency Federal Acquisition Regulation--in other words, one 
set of regulations that all contractors will know are the rules 
of the game in contingency environments for contracting. That 
is not the case today.
    Senator Carper. Chairman Akaka, can I interrupt for just a 
moment? We are in a situation where Senator McCaskill needs to 
go preside at four o'clock. And Senator Collins is required to 
be at another hearing of equal importance, and what I would 
like to do, if it is all right, is just maybe to yield to 
Senator McCaskill for, say, 5 minutes, and then she could slip 
off to preside and then back to you. Is that all right?
    Senator McCaskill. I think that you should yield to Senator 
Collins for 5 minutes and then back to me, because then I would 
have time for 5 minutes to get there.
    Senator Collins. Thank you.
    Senator Carper. All right. Fair enough. Senator Collins.
    Senator McCaskill. Because you were here before I was, and, 
besides that, you are more senior. See I am figuring it out.
    Senator Collins. You are a quick study. Thank you very 
much.
    Senator Carper. Thanks for helping us work this out.
    Senator McCaskill. And thank you very much, Senator Akaka.
    Senator Collins. Yes, first, let me thank you both. I have 
a classified briefing from the Intelligence Officer that I am 
15 minutes late for already, so I very much appreciate that.
    I wanted to follow up on the issue that Chairman Carper 
raised, because it really is a central issue, and that is when 
is it appropriate to use contractors and when is it not?
    And that is not an easy issue to resolve. I was struck, 
however, Mr. Solis, by your written statement, which pointed 
out that in Desert Storm, the Department of Defense used some 
9,200 contract employees, but in the current war, the 
Department is now using 129,000 contract employees.
    We have heard eloquent testimony from Sergeant Jefferies of 
an appalling situation in which rather than the contractor 
taking care of the soldiers, the soldiers were taking care of 
the contractors.
    We heard Mr. Bauman refer to contractors overseeing other 
contractors. That was a real problem with the Coast Guard 
Deepwater contract.
    So, I would ask you, Mr. Solis, when is it appropriate, 
what criteria would you suggest that the Pentagon should be 
using to determine when a function should be contracted out and 
when it should not be. And specifically, in a war zone should 
logistics be contracted out?
    Mr. Solis. One of the things I am suggesting that the 
Department needs to go back and look at exactly what are going 
to be the requirements for operations into the future? What is 
the mix of people that they are going to need based on those 
requirements? What is the risk of having military--civilians 
and/or contractors do those particular functions?
    I will say that, notwithstanding all the problems that we 
have talked about with LOGCAP, in our conversations, too, with 
military members, when there has been proper oversight, proper 
planning, the contract has worked.
    So, I am not necessarily opposed to necessarily using 
contractors in a hostile zone. I think even if, if you recall 
recently, there were five contractors that were killed in the 
Green Zone. So, I do not know that there is any particular safe 
place.
    But again, I think the Department needs to go back, figure 
out what its core requirements are, then who's going to fulfill 
those requirements? Who's the best at doing it and what are the 
risks? And that is not going to be easy, but I think there 
needs to be some sort of, as we suggest, a QDR type review, a 
Goldwater-Nichols Review of exactly what are my requirements, 
who needs to do it, and how is it going to get done.
    Senator Collins. Mr. Inspector General, in order to have 
accountability, you have to have clear lines of responsibility. 
In order to do what Senator McCaskill correctly suggests should 
be done about holding individuals accountable, it has to be 
clear who is responsible.
    One of your major recommendations--or one of your major 
findings--has been that there is no single agency in charge of 
post-conflict situations. You have the Department of Defense 
prior to the war. You have the Department of Defense in the 
midst of the war. Right now, you have State, Justice, AID, 
Department of Defense, and you have done audits that show that 
they do not necessarily work well together.
    How important is it for us to tackle the issue of making 
sure that there is a single point of responsibility after the--
in the post-conflict situation, though I would argue we are 
still in a conflict situation, too.
    Mr. Bowen. I would say that you have identified the most 
important area for a forum in addressing the structural 
challenges of managing post-conflict contingency operations.
    In Iraq, as a practical matter, in fact, there have been 
three different agencies that have effectively been in charge 
of the relief and reconstruction process. Iraq Relief and 
Reconstruction Fund I was allocated primarily to the U.S. 
Agency for International Development because that was all that 
was deemed at the time necessary to invest in Iraq.
    That quickly changed in the course of 2003 when the 
Department of Defense effectively took over most of the 
contracting, the $13 billion of IRRF II.
    And then in 2004, the Department of State took over. So, 
simply, the experience of Iraq exposes, I think, the challenge 
of identifying who's in charge. And, thus, our lessons learned 
program, which will produce its next report later this year, 
focuses on exactly this issue and will make some 
recommendations to Congress for reform.
    Senator Collins. Thank you. And thank you, Mr. Chairman. 
And I thank my colleagues.
    Senator Carper. You bet. Thank you so much for coming, and 
again thank you for your leadership on these issues.
    Senator McCaskill, thank you.
    Senator McCaskill. Thank you, and I really appreciate 
Senator Akaka giving me just a couple of minutes before I go 
preside.
    As you can imagine, this is really painful for me that I 
only have 5 minutes, and I am like a kid in a candy store right 
now. I do not know where to start.
    Let me ask you this, Inspector General, are you aware of 
anyone who has been fired or demoted because of their failure 
to oversee a contract appropriately in Iraq?
    Mr. Bowen. Off the top of my head, no. I would have to get 
to back to you with information. We may have that in our files, 
but I cannot name one now.
    Senator McCaskill. Can anyone on the panel name anyone who 
has been fired or demoted because of problems with the way they 
oversaw contracts in Iraq?
    Mr. Jefferies. Ma'am, I cannot name them, but they put a 
major from the Reserves from Texas in jail for it. They have 
had a couple go to jail.
    Senator McCaskill. And I am not talking about somebody who 
we caught stealing.
    Mr. Jefferies. Right.
    Senator McCaskill. We had active military, a number of 
active military, that have been caught stealing, and obviously 
this was mostly Army contracting oversight that failed. And we 
know that our weapons, frankly, probably have been used against 
us, because we failed to even do the basics of marking a weapon 
and inventorying a weapon when we brought it into the country 
of even keeping track of where the weapons were, and obviously 
we know. I have seen the myriad arrows and charts with all the 
problems in terms of fraud.
    I am talking about just not thinking it is important 
whether or not something cost a dollar or $10,000, the kind of 
failure to oversee. Anybody that anybody knows has ever been 
fired or demoted for that?
    Ms. Rasor. I have an example of an opposite situation. One 
of the main characters in our book, Major Rick Lambert, was a 
LOGCAP planner and then when he went to the LOGCAP contracting 
office, he said you have no idea what is going on in Iraq. This 
is ridiculous. The troops are not getting what they need. There 
is a lot of waste in time. And he was told by his senior--the 
senior authorities--I will not tell you because it is too 
identifying--but one of them said I want to get my next star. 
Keep your mouth shut. And Major Lambert has been retaliated 
against.
    So, unfortunately, he was very disillusioned because he 
thought, surely, if I go and tell the top-level people in this 
office----
    Senator McCaskill. Something will happen.
    Ms. Rasor [continuing]. Something will happen. So, we have 
not run into anyone. Quite frankly, I have to tell you, 
Senator, having done this for 25 years, I have rarely seen 
anyone fired in 25 years for doing a lot of this kind of stuff.
    Senator McCaskill. Let me ask you also, Inspector General, 
I was really concerned when I read the Center for Public 
Integrity's recent report about the $20 billion in contracts 
that have gone to foreign companies that we do not know who 
they are; that it is impossible to determine who these 
companies are. They are just listed as foreign companies.
    Are you aware of unidentified foreign entities that are 
actually contractors in Iraq that we do not have the 
documentation or the available documentation as to who these 
companies actually are?
    Mr. Bowen. Not within my jurisdiction. I have not uncovered 
that, but we will look into it.
    Senator McCaskill. Well, that is obviously a concern----
    Mr. Bowen. Yes.
    Senator McCaskill [continuing]. That we would have. In 
fact, their key finding from their analysis at the Center for 
Public Integrity is that the number one contractor from 2004 to 
2006 is, in fact, unidentified foreign entities. They actually 
are at $20 billion, and KBR is at $16 billion.
    Mr. Bowen. Are these DOD funds?
    Senator McCaskill. I am assuming they are DOD funds. Then 
on top of that, if you look at that, along with the foreign 
contractors that are identified, 45 percent of all the funds 
obligated in the top 100 contractors in Iraq from 2004 to 2006, 
in fact, are foreign companies.
    Mr. Bowen. That is not true with respect to the Iraq Relief 
and Reconstruction Fund----
    Senator McCaskill. Correct.
    Mr. Bowen [continuing]. Or the Iraq Security Forces Fund. 
There has been over the last 2 years an Iraqi First Program 
that the embassy and the Joint Contracting Command in Iraq have 
pushed aggressively forward and, so, about 60 to 70 percent of 
the contracting actions done now are done with Iraqi firms. And 
that also applies to the Commanders' Emergency Response 
Program.
    Senator McCaskill. And I think that is good. That is 
strategic. I am worried. I mean, some of the ones they 
identified a large contractor was Turkey and other countries, 
and I just--it goes back to the point that Ms. Rasor was making 
is if we are going to contract with foreign entities, they--if 
they are going to be in the hostile zone and they are going to 
be in a situation where they need to be focused on protecting 
the men and women who are there for us, even if they are 
getting less water than the Iraqi folks are getting, we need to 
make sure we know who they are, and we need to make sure we 
know what kind of oversight they have of the men and women that 
are working in the conflict, particularly in an area of the 
world where sometimes it is difficult to figure out who is on 
our side and who is not.
    I would love your follow up on that problem of foreign 
contractors and our ability to oversee them.
    Mr. Bowen. We will get back to you on it.
    Senator McCaskill. Hopefully, you guys will still be going 
when I finish presiding. If you are not, you know we will begin 
hopefully working with the contracting commission next year, 
and I look forward to seeing all of you there. Thank you.
    Mr. Bowen. Thank you.
    Senator Carper. Senator McCaskill, thank you. We will be 
here for a while, I assure you. Thank you for your good work on 
these fronts. Senator Akaka, thank you for your willingness to 
yield. We appreciate that very much.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Solis, you testified about the extraordinary growth in 
contract employees serving the Armed Services, and stated that 
DOD does not have an adequate number of contract oversight and 
management personnel.
    In particular, your written testimony provides staggering 
statistics that Army contracting personnel experienced a 600 
percent increase in their workload and are performing more 
complex tasks, while the Army, civilian, and military 
contracting workforce has remained stagnant or declined.
    What can be done in both the short term and long term to 
address this shortage of contracting personnel? Is DOD taking 
any positive steps in this regard?
    Mr. Solis. Well, I believe they are taking some steps for 
the short term.
    But nonetheless, again I keep jumping back to what is going 
to be needed for the future, and I think, as you think about 
growing the force, as you think about your requirements for the 
future, how many of those, for example, the 70,000 in terms of 
growing the Army and the Marine Corps I believe, how much of 
that is going to be devoted to this kind of activity in terms 
of contract oversight?
    I think there needs to be a look at those kinds of things 
before the Department moves along to make sure that if we are 
going to continue to contract at the level that we are at, that 
there is some insurance that there is adequate contractor 
oversight personnel to do the kinds of things that we are doing 
either like Iraq or for future stability operations.
    Senator Akaka. Has the GAO looked at how many acquisition 
specialists the Federal Government has compared to their 
counterparts at the contracting firms, such as KBR?
    Mr. Solis. I do not think we have. I know we have reported 
on many problems with the acquisition workforce in general and 
some of the things that you alluded to--the number of people 
who are eligible to retire. But I do not know that we have 
looked specifically at that issue.
    Senator Akaka. Mr. Bowen, your office's October 2007 
quarterly report states that, to date, your office's cases have 
resulted in 13 arrests and five convictions.
    Could you provide any update to those numbers and tell us 
how many cases your office has referred for prosecution and how 
you make that determination?
    Mr. Bowen. Yes, sir. We have 52 open cases; 36 are at the 
Department of Justice for prosecutorial management and review; 
14 persons have been arrested; 14 indicted; 5 convicted; 5 in 
prisons; and we've recovered over $17 million in forfeiture or 
simple direct recovery of stolen funds.
    The process for deciding how a case gets prosecuted is 
carried out through a joint effort between the Department of 
Justice attorneys and my investigators, as well as several task 
forces, of which SIGIR is a part.
    Senator Akaka. Have these cases come about because of 
complaints or reports?
    Mr. Bowen. Yes, they have. The largest case we have 
uncovered to date involved a corruption scheme in Hillah, South 
Central Baghdad, resulting in the imprisonment of four 
individuals. Five more are going to trial in March.
    That case arose from a whistleblower. And, of note, the 
National Defense Authorization Act strengthened protections for 
whistleblowers who report to SIGIR.
    Senator Akaka. Yes. Thank you very much, Mr. Chairman.
    Senator Carper. You bet. Thank you, my friend.
    GAO and SIGIR have made several suggestions for 
congressional action. If you can think out of all those 
suggestions that have been made, what are one or two of the 
most important actions that Congress should take to ensure that 
the problems experienced in Iraq are not experienced in the 
future?
    Mr. Solis. Again, I would come back. I think there needs to 
be some kind of Goldwater-Nichols, some sort of QDR Review, 
within DOD that need to be done. But I think the Congress needs 
to get a report back on where the Department stands in terms of 
that particular action.
    Until they decide what the core requirements for its future 
missions are and who is going to do that, I think that is the 
kind of thing that needs to be done and what is the role of the 
contractor not only for combat zones, but it can be a wide 
sweeping contractor look not only again for deployed locations, 
but also for maintenance and weapon systems and things of that 
nature.
    Senator Carper. All right. Ms. Coffey.
    Ms. Coffey. I would just add that I believe and GAO 
continues to believe that all of the recommendations that we 
have made in the past continue to be valid and should be 
implemented as soon as possible.
    Senator Carper. Which one or two would you say are the most 
important?
    Ms. Coffey. Well, in several reports, we have made 
recommendations that the Department establish teams of experts 
to go in and review the services of contracts like LOGCAP 
because the need for service and the appropriate level of 
service can change. So, periodically, experts should go in and 
determine whether the service is the right amount at the right 
time.
    We have found that when the government looks for savings, 
the government finds savings. And in several of our reports, we 
have noted that even small little changes can result in big 
savings.
    For example, the Marines, when they took over the activity 
in Djibouti, changed from commercial laundry detergent to 
laundry detergent that is available in the military supply 
system, and was able to save a considerable amount of money.
    So those kind of little things can add up, and that kind of 
process should take place regularly.
    Senator Carper. Good. Mr. Bauman.
    Mr. Bauman. One of the GAO recommendations I thought was 
very noteworthy going all the way back to about 1996 in the 
Balkans, but it certainly is appropriate today because it has 
not been acted on and that is determining level of service. 
When we deal with the labor issues, a lot of labor costs are 
going to be probably the overwhelming largest costs of the 
contract.
    Back in Bosnia, there was a real concern about the fact 
that the LOGCAP acquisition people did not have a handle at all 
on what the level of service should be, and relied on KBR--
relied on their estimates and their level of service that they 
recommended. And they went with that without really determining 
on their own whether it was appropriate or not.
    And now, we see in Iraq that this issue has been raised 
time and time again, because we have received many reports 
about the fact that there are a lot of workers over there, 
especially on the bases, who only work a few hours a day, but 
charge 12 hours a day. And it goes on 7 days a week.
    We had on a radio show, a truck--former KBR truck driver 
that called in and said yes, he made an awful lot of money, 
$100,000 or whatever it was. It was great money. All I had to 
do is to work 3 hours. Then I just worked 3 days and sat around 
for 4 days, but still had to charge 12 hours a day, 7 days a 
week. And that would seem to be the routine.
    So, this is an issue that I think is very important for 
someone to pick up, whether it is--it could be DCAA. It could 
be the Army Audit Agency. It could be GAO. It could be anybody 
or even SIGIR, but it is an issue that I think cries out for a 
real hard look, because of the costs that are spiraling out of 
control. And I would put labor costs into that category.
    Senator Carper. All right. Thank you. Ms. Rasor.
    Ms. Rasor. I have been looking at this in the last 25 
years, and you certainly understand having to deal with this, 
it seems like every new weapon system is exponentially more 
expensive than the last until finally we only have one plane 
for all three services.
    This war is starting the same thing. The way you game a 
system on a cost-plus, cost-reimbursement contract is not the 
little margin of profit you are going to get calculated. You 
make sure, especially when there is no auditors, investigators 
around, you run up your charges--and labor charges are one of 
them. You run up your costs to the max as much as you can, as 
fast as you can. That increases your overhead rate. Then the 
next time, when you are ready for the next statement of work, 
that becomes the baseline. And that baseline and then you say 
OK, now, we are going to do this, and we are going to do a 
little more. And then you run that one up. And then that 
becomes the new baseline. And then you run that one up.
    And so, what happens is this new normal. This has happened 
now in Iraq, and now we have this incredibly unscrubbed, 
loaded, historical cost of what it costs to use contractors and 
fight a war using contractors in the battlefield or outside the 
battlefield.
    What I think needs to be done is all these contract costs 
need to be scrubbed back down to reality, and looked at and 
scrubbed--labor costs, overhead costs, and everything else. 
That is how you game the system. You get well on the next 
contract. It is called contract nourishment. It is old as the 
hills.
    But in this situation, it is worse because there were very 
few governors on it.
    So, if we accept these historic costs as what it is going 
to cost to go to war, we will not be able to afford to go to 
war with contractors no matter how much money you pour in.
    Now, it took weapon systems many generations of weapon 
systems of fraud and fat to get to where we are now. This new 
industry, the war service industry, has already run their 
historic costs up to astronomical numbers, and that has to be 
scaled back.
    Senator Carper. Thank you. Senator Akaka, any other 
questions of this panel? Please proceed.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Solis, one issue that Ms. Rasor and Mr. Bauman have 
raised in their book is that the media, and, therefore the 
public, generally sees conditions at large bases in Iraq, where 
top military officials are often stationed. They went on to 
observe that at these bases contractors took very good care of 
our troops, while at more remote bases, soldiers had to use 
duct tape and take care of their boots in that way, and drink 
shower water because there was no clean drinking water 
available.
    So, based on your work in military operations in hostile 
zones, have you observed similar differences in conditions at 
large bases compared to remote bases?
    Mr. Solis. Yes. Let me go back to, I think, as I have 
testified before you, too, there have been longstanding 
problems with DOD's and the Services' supply chains.
    I would offer, though, that I think the further you go out 
to a forward operating base--not that they should not get a 
certain level of supply and service--the more difficult it does 
become in a hostile zone. But nonetheless, there have been 
problems with the distribution and management and movement of 
supplies within the theater.
    Ms. Coffey. Well, and recently, we have been speaking to 
units who have recently returned from Iraq within 30 days of 
their return, and we have spoken to them about these kinds of 
situations. And I will say that generally at this point, 
military members we speak to are very happy and generally very 
appreciative of the services they have received, and they 
generally, or at this point in time, seem to be happy with what 
they are getting.
    Ms. Rasor. Can I make a point on this? These are the 
statements of work for KBR, of where they are supposed to 
deliver food, supplies, and water. Now, this is true this is 
earlier in the war and maybe it is better now, although I just 
heard a story today that shows the opposite.
    In the first statement of work, they were supposed to go 
100 kilometers around main bases. Perry was within that 100 
kilometers. It did not happen. And the second statement of work 
has to do with different supplies. KBR was supposed to go 250 
to 400 kilometers among that bases.
    And I know that people come back and say well, it is 
getting better. It is getting better. We are 5 years into this 
war. And the fact is that KBR refused when it got hostile to go 
out there, and do that perimeter run.
    And so, it was in their statement of work to do it, to get 
the water to Perry, get the food and water to him and others. 
But they just did not--would not do it. They would tell the 
commander and the LOGCAP planner we are not doing it. They even 
went so far and what we illustrate in our book at one point 
saying we are not going to have our guys come out of our 
trailers and feed the troops at this base because you have not 
paid the bills, which, by the way, was legal for them to do.
    The bottom line is that you--when these outlying areas, 
when it gets dicey and they do not go, the troops do not get 
the food. But it was in their statement of work that they were 
supposed to do this. And they just chose not to do it.
    Ms. Coffey. Senator, if I could add one more thing?
    Senator Akaka. Ms. Coffey.
    Ms. Coffey. When we looked at the use--the activities in 
Bosnia, we found that the U.S. Army in Europe had developed 
very strict standards for what each base should have. And that 
was a lesson learned that was not necessarily taken forward to 
Iraq. And so, the size of the housing, the number of 
facilities, the size of the gym, that was all laid out, and 
that is what each base commander had to have depending on the 
personnel at his base.
    And so it made making these decisions much easier, and it 
also was an opportunity to sort of use those standards to limit 
contract growth, because these were the standards everyone had 
agreed to. This is an important lesson learned, as I say, that 
was not taken forward.
    Senator Akaka. Ms. Rasor, you noted that the Military 
Extraterritorial Jurisdiction Act can be used to prosecute 
crimes committed by contractors.
    I have been distressed by media accounts that contract 
employees in Iraq may have committed serious offenses, 
including rape, without punishment. Do you know of any case of 
MEJA being used to prosecute any contract employee for 
wrongdoing committed in Iraq or Afghanistan?
    Ms. Rasor. Well, since I am not a legal expert on this, I 
would defer to Scott Horton, whom we spent a lot of time 
talking to, and he has been testifying in Congress. He is 
writing a book right now, on the law in Iraq.
    I do not know of any specific cases. I do know that we have 
talked an awful lot about KBR employees who came back. As an 
investigator, it is actually amazingly easy to find people who 
are former KBR employees because there are so many people who 
came back.
    And there was a fear of lack of--there was sort of a whole 
attitude, and not just KBR, with contractors, that you could 
pretty much get away with whatever you wanted out there; when 
they had the immunity thing, that set a mindset that the 
contractors were not under any umbrella.
    Now, we saw it very graphically with Blackwater, but I am 
sure there were lots and lots of other instances like that. But 
when I talked to Scott Horton about--for this hearing to write 
my testimony, he said to me you can use it for the most 
egregious type of criminal stuff, and it will probably work. 
And he does not think that the UCMJ will work because a 
civilian has not given up their constitutional rights. But he 
said you cannot use it administratively. You cannot use it 
because a contractor says I quit and go home. You cannot use it 
because a contractor or employee, refuses to do a job.
    He said only for the most egregious crimes.--we do cover a 
lot of the security contractors in our book, too. And almost 
all of them told us that when they got there, they felt that 
they had no law over them.
    Senator Akaka. Well, Mr. Chairman, my time has expired, and 
I will submit my questions.
    Senator Carper. Fair enough. I have just one last question 
for this panel. And then we will excuse you, thank you, and 
bring forth our second panel. Then we will break for dinner--
no, no. [Laughter.]
    This last question would be for Mr. Bowen, if you would, 
please. And I believe that you said to us that there ought to 
be what we call a one-stop shop for contractors in Iraq, and I 
guess in Afghanistan as well.
    And let me just ask whose responsibility do you think that 
ultimately should be? And what can my colleagues and I do to 
make sure that happens?
    Mr. Bowen. I think developing such a resource would be part 
of the reform of contingency relief and reconstruction 
operations writ large, namely that once you identify an entity, 
be it new or an existing agency, that will be charged with 
managing contingency ops, then that entity will be in charge of 
developing human capital management policies, contracting 
policies, and program management policies that would be 
applicable to all the contracting in-theater.
    So, I think to take it piecemeal would be a challenge--and 
would perhaps Balkanize the solution to a Balkanized problem.
    I think that the larger and more ambitious reform would 
empower whomever is put in charge of contingency operations 
with the authority of effectively coordinating these important 
functions.
    Senator Carper. Who should that entity be?
    Mr. Bowen. Well, there are several ways that the Congress 
could choose to go. One would be a USTR-like entity, a new 
entity where a director of contingency operations reports to 
the President and has charge of managing the interagency issues 
and develops the civilian reserve corps, the contingency 
contracting corps--all of the elements that would go into 
deploying a ready team to carry out contingency operations.
    Alternatively, it would involve the Congress directing the 
various departments that play the largest role in contingency 
operations to work better together through more effective 
coordinated systems.
    Senator Carper. All right. Well, all of you have been very 
generous with your time, and we are grateful to you for that. 
We are grateful to you for your testimony, your responses to 
our questions, and for your service to our country.
    Several of my colleagues were unable to join us who had to 
leave and will probably want to submit questions for the 
record, and I would just ask that you do your best to respond 
promptly to those.
    But our thanks to each of you for joining us today, and you 
are excused at this time, and we will welcome our second panel 
to take your seats. Thank you so much.
    Mr. Bowen. Thank you, Mr. Chairman.
    Senator Carper. All right. I am going to ask all of our 
witnesses to try to keep your comments to 5 minutes. But we 
appreciate your patience. I will quickly introduce our 
witnesses on panel two.
    Jack Bell, Deputy Under Secretary of Defense for Logistics 
and Materiel Readiness. And prior to this appointment, Mr. Bell 
was the Deputy Under Secretary for the Army, and earlier as the 
First Chief of Staff of the State Department's Afghanistan 
Reconstruction Group in Kabul. I understand you are a highly 
decorated officer, having served in the Marine Corps. Semper 
Fi. Thank you for your service, my friend.
    Next we have General David Maddox, U.S. Army, Retired. 
General Maddox is the former Commanding General, U.S. Army, 
Europe, and Seventh Army. He led the reduction of armed forces 
in Europe from 213,000 to 75,000 troops and restructured the 
force footprint and training of the U.S. Army forces in Europe.
    Our third witness is Ambassador John Herbst. He is the 
Coordinator for Reconstruction and Stabilization in the U.S. 
Department of State. Ambassador Herbst was the U.S. Ambassador 
to Ukraine and Uzbekistan. Are you currently the U.S. 
ambassador there?
    Mr. Herbst. No, I left there 18 months ago.
    Senator Carper. All right. Thank you. He also served our 
embassies in Israel, Russia, and Saudi Arabia.
    Next, William Moser is Deputy Assistant Secretary for 
Logistics Management at the Department of State and one time a 
basketball referee in the State of Delaware. [Laughter.]
    No, there is another Bill Moser.
    Mr. Moser. Even though I love basketball, I will not claim 
that.
    Senator Carper. All right. Another Bill Moser. Mr. Moser, I 
understand, has served in the Foreign Service since 1984 across 
many disciplines, including financial management, political-
military affairs, and energy affairs. We are glad you are here.
    And finally, James Kunder, Acting Deputy Administrator of 
the U.S. Agency for International Development is joining us 
today.
    Mr. Kunder has served with USAID in numerous leadership 
roles in Afghanistan as well as Asia and the Near East. Mr. 
Kunder was also an infantry platoon commander in the U.S. 
Marine Corps from 1970 to 1973. That is when I was on active 
duty, as well. Thank you for your service. We have got a couple 
of Marines here, and an Army fellow, we are delighted that you 
are all here.
    I am going to ask Mr. Bell, if you do not mind, just 
kicking it off, and we will again try to hold it to 5 minutes, 
and we will go through all of our witnesses and ask some 
questions. Thank you.

    STATEMENT OF THE HON. P. JACKSON BELL,\1\ DEPUTY UNDER 
SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS, U.S. 
                     DEPARTMENT OF DEFENSE

    Mr. Bell. Thank you, Chairman Carper, Chairman Akaka. 
Thanks for this opportunity first of all to discuss the 
Department of Defense's initiatives to improve the management 
and oversight of contingency contracting.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Bell appears in the Appendix on 
page 123.
---------------------------------------------------------------------------
    As has been discussed here today, contractors supporting 
our military forces, both at home and deployed, are performing 
critical support functions that are integral to the success of 
our military operations. They have become part of our total 
force that DOD must manage on an integrated basis with our 
military forces.
    At the end of Fiscal Year 2007, CENTCOM reported 196,000 
contractor personnel working for DOD in Iraq and Afghanistan, 
and the 160,000 figure that is reported in the Gansler Report 
was the one up to date for Iraq.
    Faced with the unprecedented scale of deployed contractor 
operations I have just identified, the Department of Defense 
obviously has confronted major challenges associated with the 
visibility of contractors, their integration, their oversight, 
and the management of such a large contractor force working 
along side our deployed military personnel, a challenge that, 
frankly, DOD was not adequately prepared to address.
    At DOD, we have launched a series of major initiatives to 
strengthen the management and contractor personnel accompanying 
our forces. This does include the DOD follow up to the 
recommendations on the Gansler Report.
    However, a work still in progress, the Gansler Report 
follow up will not be covered in my testimony today, with the 
Army having the lead.
    In the limited time that I have available for oral 
testimony, I do want to identify three other major DOD 
initiatives that are discussed in more detail in my written 
testimony, and I would be happy to discuss those initiatives in 
more detail during the discussion period.
    In the first area, as mentioned earlier by Mr. Solis, my 
office has led a DOD effort since 2006 to establish a 
comprehensive framework for managing contractors deployed with 
our military forces.
    We provided a preliminary report to Congress last October 
identifying the major elements of this framework. We will be 
providing the final report to Congress in April.
    However, many of the elements of this framework are already 
being implemented in our current contracting management 
operations in Iraq and Afghanistan.
    The second major initiative was launched in September 2007, 
when Secretary Gates directed that an assessment be made of 
improvements needed in strengthening the management of 
contractor operations for DOD in Iraq.
    To this end, I led an OSD Team to Iraq, where we consulted 
with our military and civilian leaders and recommended five 
initiatives. These recommendations were endorsed by General 
Petraeus and were approved for implementation by Secretary 
Gates.
    Implementation of these initiatives is already underway. 
Among them, two of note that have been discussed earlier in the 
hearing today, one of them was to strengthen further the 
authority of the Joint Contracting Command for Iraq and 
Afghanistan to give it overall authority to review and clear 
contracts and task orders being implemented in Iraq and 
Afghanistan.
    The JCCIA, as we call it, is adding up to 48 additional 
personnel in theater as we speak to provide this additional 
oversight.
    We also recommended the strengthening of the Defense 
Contract Management Agency, or DCMA's, post-award contract 
administration and oversight for contracting in Iraq and 
Afghanistan. In response to that recommendation, DCMA has 
already deployed 100 additional personnel to theater in 
December and is preparing to deploy up to an additional 150 
DCMA personnel in March to the theater as needed.
    The third area I would like to highlight was identified 
earlier, which is the development of an MOA, which has been 
implemented by DOD and the State Department. Both DOD and the 
State Department recognize the need to improve the coordination 
of personnel security contractor operations in Iraq.
    We executed the MOA on December 5, 2007. It covers a broad 
range of management policies and procedures to achieve a more 
effective coordination of PSC operations in Iraq. Again, I will 
refer you to my written testimony for a listing of the key 
elements in this MOA.
    Many aspects of it have already been implemented, and 
others are in implementation.
    Taken together, these three initiatives substantially 
strengthen DOD's capabilities and performance in managing our 
contractors and contractor personnel.
    And with that introduction as an index of my written 
testimony, I will be happy to answer your questions. Thank you 
again for the opportunity.
    Senator Carper. Mr. Bell, thank you so much. General 
Maddox, welcome.

  STATEMENT OF GENERAL DAVID M. MADDOX,\1\ U.S. ARMY (RET.), 
FORMER COMMANDER IN CHIEF, U.S. ARMY EUROPE; AND MEMBER OF THE 
                       GANSLER COMMISSION

    General Maddox. Senator Carper, Senator Akaka. I was a 
member of the Gansler Commission, and----
---------------------------------------------------------------------------
    \1\ The prepared statement of General Maddox appears in the 
Appendix on page 131.
---------------------------------------------------------------------------
    Senator Carper. Roughly how many people served on the 
Gansler Commission? And for what period of time were you 
operating?
    General Maddox. The Chairman, of course, was Jacques 
Gansler, who had been the Under Secretary of Defense for 
Acquisition Technology and Logistics from 1997 to 2001. We had 
five additional commissioners to cover a broad range of 
aspects. I was one of the five. I represented the Army's 
operational community. The four others were Retired General Lee 
Solomon, who represented Army Acquisition; Retired Rear Admiral 
Dave Oliver, who provided alternative service perspective, but 
also the experience in Iraq when he served with the Coalition 
Provisional Authority; and Dave Barteau and George Singley, who 
are very senior experienced Department of Defense civilians.
    Senator Carper. And who appointed you? Were you appointed 
by Secretary Geren?
    General Maddox. We were appointed by Secretary Geren, and 
because of the criticality of the issue, when we were 
appointed, we were given 45 days to do our work.
    Senator Carper. All right. Pretty quick turnaround. OK. 
Thanks very much. I am sorry for interrupting.
    General Maddox. Our charter was forward looking. That is, 
we were tasked to ensure that institutionally the Army is best 
positioned for future operations, which we view will be 
expeditionary, joint, and most likely multi-agency.
    It is important to recognize that we did not address 
current fraud, equipment accountability, and private security 
contracts because there were actions going on in each of those 
three areas.
    In looking at our charter, in September and October, we 
conducted 122 interviews. We talked to people across the board 
in the United States and deployed.
    We did one thing, and that was when we looked at the word 
expeditionary in the dictionary, it relates to overseas. We 
broadened that definition to include CONUS for emergency 
conditions like Hurricane Katrina, because the responsiveness 
requirements are very similar.
    Despite the broad spectrum of our interviews--122 people in 
Iraq, in Afghanistan, in Kuwait, in the United States--we 
received almost universal agreement on what the issues are, 
what changes are required, and the absolute need for change.
    The Commission crafted a broad strategy for addressing the 
shortcomes, which we published as an independent report dated 
October 31, 2007, entitled ``Urgent Reform Required: Army 
Expeditionary Contracting.''\1\
---------------------------------------------------------------------------
    \1\ The report entitled ``Urgent Reform Required: Army 
Expeditionary Contracting'' appears in the Appendix on page 142.
---------------------------------------------------------------------------
    I would request, Mr. Chairman, that the executive summary 
from that report be included in the record of today's 
proceeding.
    Senator Carper. Without objection.
    General Maddox. One thing hit us very quickly and that was 
an understanding that the Army, and more broadly DOD, did not 
have a problem with a single organization or a group of 
individuals, but had, in fact, a very systemic problem.
    The operational Army is clearly expeditionary and it is on 
a war footing. Yet, it has not fully recognized the impact of 
the large number of contractors involved in expeditionary 
operations and their potential impact on mission success.
    In fact, with our number of 160,000, half of the total 
force are contractors. And that aspect on both sides needs to 
be understood. I, in fact, in looking at your goals, would 
suggest that the third goal, the one on who gets trained, is 
not limited to contracting personnel; that the role of the 
operational people, that is, the contract requirement is not 
done by a contracting officer. It is done by the customer, who 
is in the operational side. Source selection is not done by the 
contracting officer. It is done by the operational side. And 
the majority of the people supervising what is going on are 
contracting officer representatives, which come from the 
operational force.
    Senator Carper. Mr. Bell, did I see you nodding your head 
vigorously when General Maddox made that statement?
    Mr. Bell. Yes, sir. You did.
    Senator Carper. All right. Thanks very much. Just want to 
get that head nod in for the record. [Laughter.]
    General Maddox. But it is important because it is a 
cultural issue, and culture does not change quickly. But it is 
not just the contracting officers that need to be helped. It is 
the whole force that recognizes the role of the operational 
aspect of the force and the contracting part.
    Based on the problems we discovered and the valuable 
information that we learned, we developed recommendations that 
address the gravity of the situation and the urgent need for 
reform.
    In short, we identified four areas for our future success. 
One was contracting personnel--increase the stature, quantity, 
and career development of contracting personnel--military and 
civilian--especially for expeditionary operations.
    Second, organization and responsibility. Restructure the 
Army Contracting Organization and restore its overall 
responsibility to facilitate high quality contracting and 
contract management in both expeditionary and peace time 
operations.
    Third, training and tools. Provide training and tools for 
overall contracting activities in expeditionary operations.
    And fourth, legislative, regulatory, and policy. Obtain 
legislative, regulatory, and policy assistance to enable 
contracting effectiveness in expeditionary operations.
    Our report covers the details of the first three. So, 
today, I would like to focus on this fourth category and ask 
for congressional assistance with the legislative aspects of 
the Commission's recommendations.
    First, we recommend that Congress authorize general officer 
billets for Army contracting and joint contracting. 
Specifically, this Commission recommends that five new Army 
general officers, as well as one senior executive service 
billet, be established and fenced for the Secretary to assign 
to meet this urgent need.
    We have identified a requirement for five general officers.
    The five additional joint officers be established and 
include a three-star for the expanded scope of the Defense 
Contract Management Agency, which we strongly recommend and 
would service backfill authorizations for joint positions.
    These military billets should not be created at the expense 
of existing civilian senior executive service contracting 
authorizations with the Army workforce. These need to be 
maintained.
    In the past decade and a half, we have witnessed the 
elimination of general officers in the contracting field. In 
1990, there were five Army contracting general officers. Today, 
there are none.
    In joint commands, there were four contracting flag and 
general officer positions, and they have similarly disappeared. 
When the question was raised what general officer has been 
fired, there is none to fire.
    Today, all that remains is one temporary position, the 
Joint Contracting Command Iraq-Afghanistan, which at the time 
of the report was being filled by an Air Force officer.
    The Commission believes that this backslide needs to be 
remedied, and we must get back at least to where we were in 
1990.
    We need general officers to lead the Army transformation. 
We need some general officers so when you look in the career 
field, there might be a place that you would aspire to be.
    We need those general officers to be advocates to 
understand what is going on and provide the right leadership 
that is needed for this effort.
    Second, the Commission recommended an increase in Army 
contracting personnel authorizations by 1,983. That includes 
increasing Army military by 400; civilians by 1,000, as well as 
providing 583 billets, military and civilian, for Army support 
to the Defense Contract Management Agency.
    In the DOD Authorization Act for Fiscal Year 1996, DOD was 
required to reduce the acquisition force by 25 percent by the 
year 2000. They did it.
    But after September 11, 2001, we have had a seven-fold 
increase and greater complexity in the contracting environment, 
and yet, the workforce has not grown.
    On top of that, of those that remain, only 56 percent of 
the military officers and 53 percent of the civilians in the 
contracting career field are certified for their current 
positions.
    Senator Carper. General Maddox, I am going to ask you to go 
ahead and try to wrap up. You are about 5 minutes over.
    General Maddox. OK.
    Senator Carper. It is very interesting testimony, but I 
just want to make sure everyone has a chance to testify. Thank 
you.
    General Maddox. We need enough people to fill the billets 
that are in theater, and they are not being filled.
    With regard to DCMA, they are the contract management 
agency for Defense. They are not doing the job across the 
board, and they need the additional resources to do that.
    If DCMA does not do that, and that is where the 583 for the 
Army were identified, then the Services need to pick up that 
responsibility by service and be resourced accordingly.
    Third is the incentives for our civilian personnel. We 
order uniformed military people to go to war. We do not order 
civilians. They volunteer. And yet, the authorizations for our 
civilians who are doing the contracting do not compare with the 
force that they support nor the people that are being 
contracted.
    Specifically, they do not get a tax write-off for their pay 
while they are in country. While they are cared for if they are 
hurt there, they have no sustainment if they need long-term 
care. And if they have civilian life insurance with a war 
clause and are killed, they are not covered.
    Fourth, we believe that the Congress should enable 
flexibility of funding through a contingency operation transfer 
fund, without color of money and fiscal year. We picked up that 
recommendation from the Overseas Contingency Operation Transfer 
Fund, which was approved by Congress and is currently in 
existence for AID. But it needs to be created on a standby 
basis.
    Fifth, and lastly, we recommend standby legislation to 
waive small business and U.S. labor provisions, Buy America, 
Berry Amendments, especially medical and other such provisions 
to allow rapid local buying, if required, in expeditionary 
operations. In Iraq, Buy America has been waived, but it is 
currently tied to this operation.
    We have a lot of other recommendations that do not involve 
the Congress. They are in the report, and they are to be 
observed.
    Sometimes it takes a crisis to bring out major change. We 
have got the crisis. We have got the opportunity to fix this 
and not go through this problem again. We hope we can have 
congressional assistance, and I am ready for your questions 
later.
    Senator Carper. You bet. I know you will have that 
assistance and thank you for your testimony today. Thank you 
for serving as a commissioner as well, and for your service to 
our country.
    Ambassador Herbst.

  STATEMENT OF THE HON. JOHN HERBST,\1\ AMBASSADOR OF UKRAINE 
    (2003-2006) AND UZBEKISTAN (2000-2006), COORDINATOR FOR 
   RECONSTRUCTION AND STABILIZATION, U.S. DEPARTMENT OF STATE

    Mr. Herbst. Mr. Chairman, thank you very much for the 
opportunity to testify today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Herbst appears in the Appendix on 
page 155.
---------------------------------------------------------------------------
    I am going to be a little bit bolder than I had planned to 
be. The last two plus hours have explored in some depths the 
problems of running stabilization operations.
    I am here before you to say that we, my organization, the 
Coordinator for Reconstruction and Stabilization, has a well 
conceived answer to many of the problems that we have discussed 
and specifically to help you to achieve the goal you have at 
the top of that sheet over there--planning a U.S. Government-
wide reconstruction and stabilization crisis in conflict and 
post-conflict areas, and knowing how to implement interagency 
precisely on that operation.
    My office was created to do two things. I work directly for 
the Secretary of State, and the Secretary of State was asked by 
the President to ensure that we could mobilize all resources of 
the civilian agency of the U.S. Government to deal with a 
stabilization crisis, and to coordinate what they do with the 
military; and to ensure that we have the civilians we need with 
the right skills, the right equipment, and the right training 
to deploy to crises in the golden hour, the first hours after 
we deal with that crisis.
    SCRS in the State Department--that is what my office is 
known as--has had real success, although not enough, in 
achieving those two objectives. Specifically, we have done the 
following to deal with the first of those challenges--to 
coordinate the U.S. Government.
    The Administration has agreed at senior levels to the 
creation of something called the Interagency Management System, 
which would be used in the next stabilization and 
reconstruction crisis.
    This interagency management system has the following 
elements.
    The first is the least interesting. It is something called 
the Country Reconstruction and Stabilization Group. It is an 
assistant secretary-level group, which involve every single 
agency which has some contribution to make to deal with the 
crisis.
    This group, the CRSG, would both define policy options for 
the leadership of our government, as well as oversee 
implementation.
    The CRSG would be assisted in this by a secretariat. The 
secretariat would be also interagency, run by my office. It 
would have the critical function of writing a plan of civilian 
operations that includes all the assets that every single 
civilian agency can bring to bear on this.
    Since the Department of Defense would be represented in 
this secretariat, it would link up at the highest level defense 
and civilian planning for a military operation.
    The third part of this interagency management system is 
called an integrated planning cell. If, in fact, there is a 
military operation alongside a civilian operation, this 
integration planning cell, which is interagency and led by 
SCRS, would deploy to the military headquarters which is 
conducting military operations.
    If it is an American-led operation, say, in Latin America, 
it means it would be deployed to SOUTHCOM. If it was an 
international operation led by the United Nations, we would 
deploy to U.N. headquarters.
    The purpose of this integration planning cell is to make 
sure that at the theater level, military and civilian plans are 
completely linked.
    The last part of this integration, the Interagency 
Management System (IMS), is called advance civilian teams. This 
is another word for PRTs. This would be an interagency group 
led in many cases by my office, but not exclusively. There 
might be cases where AID would be in charge of this 
interagency--this active advanced civilian team. They would 
deploy to the country in crisis. They would have all the 
civilians you need with the right skill sets to deal with 
civilian side of operations. If there is an American embassy 
there, they would be under the command of the Chief of Mission, 
the ambassador; if there is none, it would be the senior U.S. 
Government civilian presence in the country.
    This system, again, is now part of the Administration's 
policy. It is there to be employed in the next stabilization 
crisis. That is our first task.
    The second task is making sure we have the civilians with 
the right skills needed to deploy to these places. We also have 
agreement in the Administration on creating three pools of 
civilians who would have all of the skills you need to deal 
with a stabilization crisis.
    The skills we are talking about are not those normally 
found in the State Department. We are talking about engineers 
of all kinds. We are talking about all the people involved in 
the rule of law--policemen, judges, corrections officials. We 
are talking about city planners. We are talking about health 
officials, public administrators, port officials, and so on.
    We will find people with the right skill sets, and we will 
create first, an active response corps. These will be people 
whose job it will be--civilians in the U.S. Government--to 
deploy to countries in crisis. These people will be in the 
State Department, in USAID, in Justice, in Treasury, in 
Commerce, etc.
    They will be folks who will train substantially, including 
with the military, and within 48 hours of a decision to deploy, 
they will be on their way. They will be able to arrive, if 
circumstances require, with the 82 Airborne at the beginning of 
an operation. They could also go in lieu of the 82 Airborne. 
But they will be ready to deploy immediately.
    Backing them up will be something we call the Standby 
Response Corps. These are folks who will be sitting in the same 
civilian agencies as the Active Response Corps. They will have 
full-time day jobs. But they will be training several weeks a 
year for deployment in a crisis.
    We feel that these people will be--we should be able to 
deploy a minimum of 10 percent of them once we need them; a 
maximum of 25 percent.
    For every one Active Response Corps member, there will be 
eight Standby Response Corps members. So we have a large pool 
to draw from. That is the second part of the civilian response 
capability.
    The third is something called the Civilian Reserve Corps.
    Senator Carper. Actually, I am going to ask you to go ahead 
and try to wrap it up, and I want to make sure we have time to 
hear from Mr. Moser and Mr. Kunder----
    Mr. Herbst. OK. By my count----
    Senator Carper [continuing]. Before we start our votes. 
Thank you.
    Mr. Herbst. OK. The Civilian Reserve Corps is going to be 
like our military reserves, people in the private sector. They 
will have day jobs, but they will be training like our military 
reserves for several weeks a year. They will sign up for 4 
years. They will be able to deploy for--they will have an 
obligation to deploy for 1 year in that 4-year period.
    If these things are funded, we have received appropriations 
for a 500-person Civilian Reserve Corps. We are waiting for 
authorizing legislation. S. 613 or H.R. 1084 could provide the 
authorization we need. If we had these various capabilities, we 
will have a command and control structure with the trained 
civilian talent we need to oversee any stabilization operation.
    Thank you. I think I was about 4\1/2\ minutes.
    Senator Carper. That was great. Thank you very much. Mr. 
Moser.

 STATEMENT OF WILLIAM H. MOSER,\1\ DEPUTY ASSISTANT SECRETARY 
       FOR LOGISTICS MANAGEMENT, U.S. DEPARTMENT OF STATE

    Mr. Moser. Chairman Carper, Chairman Akaka, thank you for 
the opportunity to appear here, and I would ask that my full 
written statement be a part of the record.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Moser appears in the Appendix on 
page 162.
---------------------------------------------------------------------------
    Senator Carper. Yes. In fact, your full written statement 
and the full statement of everyone else will be entered in the 
record.
    Mr. Moser. Thank you very much.
    Senator Carper. Please proceed.
    Mr. Moser. And I will keep this as brief as possible.
    The Department of State has extensive experience with 
contracting in crisis situations. Diplomatic activity is ever 
changing, and to meet the needs of our diplomatic activity and 
our country amid evolving world events, we have to do effective 
contracting.
    Contracts were needed to evacuate staff, protect property, 
and close missions in the 1990s in Pakistan, Somalia, Sudan, 
Liberia, and the country formerly known as Zaire.
    During the Bosnian War, we contracted for vehicles, 
equipment, and supplies for the Sanctions Assistance Mission, 
and as hostilities decreased in the Balkans, we provided 
contracting support for supplies, services, and equipment, to 
embassies in the region, and set up new embassies in Skopje, 
Sarajevo, Zagreb, and Ljubljana.
    One of my other duties besides contracting--the contracting 
activity is also the transportation activity, and I would like 
to note here that our contingency transportation contract 
successfully aided in the evacuation of 13,000 American 
citizens from Lebanon in 2006, and I think many would applaud 
the State Department for having--for mounting a very successful 
effort at that time, and contracting was there at the core of 
that activity.
    Just after the Al Qaeda bombings in Nairobi and Dar es 
Salaam, we further refined our strategy for dealing with 
contingency contracting support. Our Office of Acquisition 
Management partners with various State Department offices both 
at headquarters and around the world to determine the type of 
contracts that would best support their emergency requirements. 
And we have identified first responders in our contracting 
corps who will go with those program offices in crisis 
situations.
    That is not to say, though, that our experience in Iraq and 
Afghanistan has not shown us that there are areas where we need 
to improve our contingency capabilities.
    We have learned that we need more resources on site that we 
can improve planning, price analysis, contract formation, and 
oversight. And I think that all of these areas are things that 
have been highlighted in the discussion today.
    However the State Department's resource limitations have 
prevented us from expanding the resources as rapidly as the 
growth in our contract requirements.
    Since 2001, the workload of the State Department's Office 
of Acquisitions has grown dramatically, with no commensurate 
increase in staffing. The volume of transactions grew from $2 
billion in 2001 to $6.1 billion in 2007. And we kept 
approximately--we gained three full-time equivalent employees 
during this period.
    To rectify this situation and to gain the flexibility 
required in a rapidly-changing geopolitical environment, the 
Under Secretary for Management directed the transformation of 
the Office of Acquisition Management, our contracting activity, 
to a working capital funded organization. A 1 percent fee for 
service, based on the amount of contract award, will hopefully, 
with the approval of our appropriations and authorizing 
committees, cover the expenses of the acquisition activity.
    The working capital fund structure will permit the State 
Department to significantly increase the amount of cost and 
price analysis, legal review, and contract oversight performed.
    We want to ensure that our contracts meet the standard of 
integrity demanded by this committee, the rest of Congress, and 
the American people.
    The contracting operation needs to be more agile and 
responsive to all future contracting needs, including 
contingency contracting. We want to be able to rapidly increase 
the resources devoted to such contract action, whether the 
contract performance is in Iraq, Darfur, or Haiti.
    Successful contracting depends on close partnership with 
program offices. The Department's Office of Acquisitions 
Management is working closely with Ambassador Herbst's office, 
the Coordinator for Reconstruction and Stabilization, to 
improve contingency contracting.
    And I have also had the pleasure of working with Mr. Bell 
on our joint--on the MOU that John Negroponte, our Deputy 
Secretary, and Gordon England, the Deputy Secretary of Defense, 
signed in December 2007 to improve management and oversight of 
private security contractors in hostile zones.
    We look forward to the further cooperation with the 
Department of Defense and to provide the best contract support 
possible to our diplomatic and military forces around the 
globe. And we hope that we can, through these things that we 
are discussing today, offer solutions to the problems that you 
have so admirably highlighted.
    Thank you for your testimony--and I welcome your questions.
    Senator Carper. You bet. Mr. Moser, thank you so much. Mr. 
Kunder, you are going to wrap it up for us. And then we will 
ask some questions and call it a day.

   STATEMENT OF JAMES R. KUNDER,\1\ ACTING DEPUTY ASSISTANT 
    ADMINISTRATOR, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

    Mr. Kunder. Thank you, Chairman Akaka. You are very kind to 
hear out 11 witnesses on a long Thursday afternoon. I am number 
11. I realize that.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kunder appears in the Appendix on 
page 166.
---------------------------------------------------------------------------
    We took seriously your request to look at lessons learned. 
And we have five bullet point lessons that we tried to distill 
from our experience that I would like to share with you.
    First, is to get the IG involved early and often. We 
decided early on in both Afghanistan and Iraq to seek 
concurrent audits from our Inspector General, and we invited 
them to join our team on the ground in both Kabul and Baghdad. 
That has paid dividends. We are also fans of Stuart Bowen, but 
we brought our own Inspector General on and I think that has 
helped to add a layer of accountability that was important to 
us.
    Second, we need to increase civilian military training, 
because the civilian military teams lash up during these kinds 
of contingency operations, and we have to bring the contracting 
culture and the broader culture together ahead of time. Sitting 
five rows behind me are two of our colleagues in town from 
Kabul, Jim Hope and Fareed Ahmed Payan. They are on their way 
to Fort Bragg, North Carolina----
    Senator Carper. Would both of you just raise your hands? 
Thank you. Thanks for joining us.
    Mr. Kunder. They are on their way to Fort Bragg for Joint 
Provincial Reconstruction Team training. We have been trying to 
do that kind of thing, but we need to invest more resources so 
that when we lash up out in the field, we are talking the same 
language and working with the same kind of contracting 
procedures.
    Third--and I have listened very intensely--I know there is 
a lot of interest in the Subcommittees, which we appreciate.
    I have listened intently to all the discussion about sole 
source contracting and full and open competition. And I would 
just appeal to the Subcommittees to think carefully about 
maintaining in the Federal Acquisition Regulations sufficient 
authority to handle the kind of flexibility, and the changing 
environment that we encounter in these kinds of contingency 
operations. Almost by definition, the circumstances on the 
ground are going to change very rapidly in Afghanistan and 
Iraq.
    I plead guilty. I have waived full and open competition 
requirements. And when I did that, I did it because I was 
saving--thought I was saving lives of U.S. troops by acting 
quickly to turn on a dime so that we could get roads built or 
schools built or health clinics built. And I am a strong 
believer in full and open competition, but we have got to 
preserve the authority we currently have under law to do less 
than full and open competition when it is essential to 
accomplish the mission in these complex and changing 
environments.
    The fourth point, the next to last point, I just want to 
add USAID's endorsement for what Ambassador John Herbst said. A 
year and a half ago, or 2 years ago now, the U.S. Interagency, 
Department of Defense, the Joint Chiefs of Staff, USAID, the 
State Department got together at the NSC, and we thought we 
came up with the comprehensive fix for getting everybody on the 
same page in contingency operations, both in contracting, but 
beyond contracting. That was by creating the Coordinator for 
Reconstruction and Stabilization. And that is an important 
initiative which I hope in the category of Congress playing an 
effective role we would appeal that more resources be put 
behind that operation.
    And fifth, and finally, I provided for the Subcommittees 
this page of analysis on our staffing levels. We have reduced 
our oversight capability under both Republican and Democratic 
Administrations and Republican and Democratic Congresses. Over 
the last 25 years, we have reduced our USAID staffing 
overseas--our technical experts in engineering, health care, 
education--by 80 percent. \1\
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 175.
---------------------------------------------------------------------------
    So now that we are grappling with these oversight and 
accountability issues, as General Maddox said, it comes back to 
having bodies on the ground who can go out and look at these 
projects. And we simply are running on fumes when it comes to 
accountability issues, and, again, that is something that we 
would like to talk to the Congress about.
    Thank you very much for the opportunity to testify.
    Senator Carper. Thank you. Very nice to have you 
summarizing those recommendations. Thanks so much.
    Let me start off with a question for Mr. Bell. And the 
Department's October, I think it was 2007, Interim Report to 
Congress outlines a significant list of initiatives that the 
Department plans to take to help improve its oversight of 
contractors supporting deploying forces.
    Just explain for us, if you will, specifically how will you 
manage and oversee contractors during the next contingency 
operation?
    How will you sustain this effort during the transition to a 
new Administration? Again, how will you sustain this effort 
during the transition to a new Administration?
    I understand from my staff that your position is being 
downgraded from a level three to a level four? I do not know if 
that is correct or not. But what implications, if that is true, 
does this have for the important work that you and your office 
is directing?
    Mr. Bell. OK. Thank you. Let me address those questions. In 
the proposal we gave to Congress outlining the new framework 
for managing this, we have identified the requirement to 
empower a joint contracting command to be deployed into the AOR 
with the military forces. We have, in fact, done that in Iraq 
and Afghanistan.
    At the time we originally deployed them, we did not enable 
them to have the necessary authority we thought was necessary.
    We have since corrected that, and in the trip the Secretary 
sent us on in September, we went ahead and empowered the joint 
contracting command to have authority over all contracts to be 
implemented within Iraq and Afghanistan.
    So our intent in the future is to give that same sort of a 
joint contracting command authority to oversee all contracts 
that are going to be implemented in theater to ensure they have 
all of the necessary provisions regarding compliance with rules 
and laws to make sure that we standardize the approach to life 
support and essential services, and that will all be 
accomplished through a joint contracting command.
    To enable us to deploy that sort of a command, we are also 
creating a launch agency, which we have called different names, 
but essentially, it is a contract acquisition support office, 
and that organization has a standing joint contracting command 
ready to deploy. And each time it deploys one, if we deployed 
one, for example, to an operation in Africa or South America, 
it then creates another standing joint contracting command to 
be able to deploy to the next operation.
    That is the answer to your first question.
    The second question is how do we plan to sustain the effort 
we have underway for the Administration change?
    What we have done is we have embedded within DOD policies, 
instructions, directives, and regulations, the provisions about 
how this will function. The framework that you see there is 
actually pursuant to and will be documented in a DOD 
instruction called 3020.41. It is also specifically responsive 
to legislation in Section 854 of the 2007 NDAA, and so, for 
that reason, it is not subject to change with Administrations.
    Your third comment: In the 2007 NDAA, a provision was put 
in that when I leave my position here, the position is to be 
downgraded from a level three to a level four.
    That was done I think in advance of the decision made for 
us--for my office to take on the total contracting oversight 
policy responsibility for the Department of Defense.
    My personal experience has been that it takes all of the 
standing and status of a level three, four-star equivalent 
officer, if you will, to have the access to get into theater 
and into the field that you need in order to provide this 
effective oversight. My personal recommendation is that is a 
decision that we would like to see Congress reverse.
    Senator Carper. OK. Anybody on the panel want to comment in 
response to anything that Mr. Bell has said?
    I am going to yield to Senator Akaka. I want to make sure 
if the bell goes off for the next vote, that we both have a 
chance to ask questions. But, Mr. Chairman, feel free to engage 
right now if you want.
    Senator Akaka. Thank you. Thank you, Mr. Chairman.
    Mr. Kunder, first, let me thank you for your testimony. I 
would like to note that your nomination to be Deputy 
Administrator of USAID has been pending for some time now, and 
I hope the Senate will be able to move it soon.
    You have an impressive resume. And I thank you for your 
willingness to continue serving our country.
    Presidential Directive 44 designated Ambassador Herbst's 
office as Coordinator for Reconstruction and Stabilization in 
Iraq.
    The Directive explicitly spells out that the Secretary of 
State and Defense are to coordinate through this office.
    In addition, USAID already takes policy guidance from the 
Secretary of State. What extent have you worked directly with 
the Office of the Coordinator for Reconstruction and 
Stabilization?
    Mr. Kunder. Sir, as I mentioned, we believe very strongly 
that the civilian side of the U.S. Government needs to be a 
better partner for the military side of the U.S. Government 
when it comes to contingency operations, and we believe 
strongly that the Coordinator for Reconstruction and 
Stabilization should be the overall coordinator of that 
function.
    We have detailed a number of staff from the U.S. Agency for 
International Development to Ambassador Herbst's operation, and 
we are also beginning to organize our internal staffing so that 
we can be part of the team that he described.
    I am not here to lobby about dollars today, but the 
legislation that would provide the funding for Ambassador 
Herbst's operation is also hung up. And so we have not yet been 
able fully to move forward.
    But at USAID, we strongly endorse the concept. We have been 
providing staff, and we stand ready once we stand up this 
interagency team to play our role in that operation.
    Senator Akaka. Thank you. Ambassador Herbst, I would like 
to follow up with you on that same Presidential Directive which 
made your office the Coordinator for Reconstruction and 
Stabilization.
    According to your office's Web site, you have a budget of 
about $20 million, 15 permanent staff, and a dozen interagency 
detailees. Is that about correct?
    Mr. Herbst. Our budget in Fiscal Year 2007 was a little bit 
over $7 million. And with that budget, we have a staff right 
now of approximately 88, but only 24 of our staff are permanent 
FTE positions. We have detailees from other agencies. We have 
something called Y Tours, which are 1-year assignments that are 
given to us by the main complement at the State Department. And 
we also have some contractors.
    Senator Akaka. The Department of Defense, on the other 
hand, gets billions of dollars of reconstruction funds for Iraq 
and has thousands more people tasked to reconstruction.
    Do you have any authority or influence over reconstruction 
contracts entered into at any of the various agencies discussed 
in the Directive?
    Mr. Herbst. Our office was created to make sure that we are 
prepared to deal with the stabilization crises that come up 
next.
    So we have played a very small, tiny role, in Iraq. We have 
played a somewhat larger, but still not large, role in 
Afghanistan.
    So we have not been involved in these sorts of issues that 
you have described in current operations.
    Senator Akaka. All right. Thank you. Thank you, Mr. 
Chairman.
    Senator Carper. You bet. We have been joined by the 
Chairman of the Armed Services Committee and the Chairman of 
the Investigations Subcommittee of the Homeland Security 
Government Affairs Committee, and it is just great to see you. 
We appreciate very much working with your staff in anticipation 
of this hearing, and you are welcome to speak, ask questions 
for as long as you wish. Thank you for coming.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Mr. Chairman, thank you very much for all 
the work you are doing on this, and our staffs have, indeed, 
cooperated. We thank you and Senator Akaka for delving into 
this issue the way you have. We have been into it, too, and it 
is going to take all the work of many committees and 
subcommittees, I think, to try to straighten this out.
    Section 1088 of the 2005 Defense Authorization Act extended 
criminal jurisdiction of the U.S. civilian courts to personnel 
whose employment relates to supporting the mission of the 
Department of Defense overseas regardless of whether those 
personnel are contracting with the Department of Defense or a 
civilian agency.
    Section 552 of the National Defense Authorization Act for 
Fiscal Year 2007 extended criminal jurisdiction of the military 
courts under the Uniform Code of Military Justice to persons 
serving with or accompanying an armed force in the field during 
a time of declared war or a contingency operation, such as our 
current operations in Iraq and Afghanistan.
    Now, despite the enactment of these provisions and the 
presence of those provisions on the books, we continue to hear 
questions raised about the jurisdiction of U.S. military and 
civilian courts over criminal misconduct by contractor 
employees on the battlefield in Iraq and Afghanistan.
    Do you believe that there is a gap in the jurisdiction over 
criminal misconduct by contractor employees in Iraq and 
Afghanistan or do you believe that all such conduct is subject 
to jurisdiction of either the military or the civilian courts?
    Mr. Bell, you want to start off?
    Mr. Bell. Yes, sir. First of all, I would be the last one 
at the table to attempt to make a legal interpretation, but if 
you will grant me the liberty of a layman's----
    Senator Levin. Well, what is your understanding? Is there a 
gap?
    Mr. Bell. We believe there is a gap. And with regard to 
MEJA and the application of Section 1088 from 2005, the 
provision was I believe the term of art was supporting DOD 
regardless of whether they were contractors of DOD. I think 
there has been some question about whether contractors who were 
supporting the operations of the State Department in a country, 
for example, in Iraq, were supporting DOD or were supporting 
the diplomatic mission, and that has caused some questions 
about the applicability of MEJA to those forces that are not 
associated with the term supporting DOD.
    I think that has been the question. We have consulted with 
the State Department. Our general counsel's offices have 
consulted with the State Department's general counsel's office. 
We believe that the provisions need to be clarified to ensure 
that gap, to the extent it represents a serious gap, is closed.
    Senator Levin. Does anyone else want to add anything to 
that?
    Mr. Moser. Well, as the State Department official that has 
actually been most--closely involved in with this, Jack has 
essentially stated what the joint position that we have. And in 
the Memorandum of Understanding signed between Mr. Negroponte 
and Mr. England that is very much clear that we want to seek--
that we are seeking a legislative remedy.
    Senator Levin. You support a legislative remedy?
    Mr. Moser. Yes, we do.
    Senator Levin. I assume you do, Secretary Bell?
    Mr. Bell. We do, sir.
    Senator Levin. OK. Now, the Department of Defense has not 
yet issued a guidance implementing the expanded jurisdiction of 
the military courts under Section 552 of the National Defense 
Authorization Act. When are we going to get that guidance?
    Mr. Bell. Well, first of all, sir, we have issued a 
memorandum to the military forces indicating that the 
provisions of the UCMJ are in effect and, in fact, they are 
being followed in Iraq and Afghanistan today. The wording of 
the implementing guidance is in its final stages, and the 
Secretary has been consulting with the OGC. We expect him to 
issue that sometime in the very near term.
    Senator Levin. Does that mean within a month?
    Mr. Bell. Yes, sir.
    Senator Levin. Thank you. The Gansler Commission Report 
states that ``the number and expertise of the military 
contracting professionals must be significantly increased.'' To 
address the problems which have been experienced in theater, 
the Commission recommends that the Army hire 2,000 new 
contracting personnel.
    So, Secretary Bell, does the Department of Defense plan to 
implement that recommendation?
    Mr. Bell. Sir, as I have said at the beginning of my 
testimony, the provisions for my testimony here were not to 
include responses to the Gansler Report, for which the Army has 
the lead responsibility. That is being reviewed at this time, 
and they will have a response soon.
    Senator Levin. I am wondering, Mr. Chairman, if we can then 
ask the Army, for the record, if they would answer that 
question.
    Senator Carper. Yes, we can.
    Senator Levin. Thanks. Now, the Gansler Commission also 
says that the Army's difficulty in adjusting to the singular 
problems of Kuwait, Iraq, and Afghanistan is, in large part, 
due to the fact there are no generals assigned to contracting 
responsibilities.
    The Commission recommends Congress authorize a core set of 
10 additional general officers for contracting positions.
    Is your answer to the intent of the Department on that 
point the same as before?
    Mr. Bell. It is, sir, although I would say in the work we 
have done on developing a strategic framework, we have 
identified the same problem, which is the need to create 
significant and meaningful career paths up through the general 
officer rank for contracting officers.
    Senator Levin. OK. Mr. Chairman, then, if we could--these 
Subcommittees could ask the Army the question.
    Senator Carper. And we will.
    Senator Levin. Thank you.
    Section 862 of the National Defense Authorization Act for 
Fiscal Year 2008, which is going to be sent to the President 
for signature today, requires for the first time that private 
security contractors hired by the State Department and other 
Federal agencies to work in a war zone comply with directives 
and orders issued by our military commanders, as well as with 
DOD regulations.
    Mr. Bell, Mr. Herbst, Mr. Kunder, will this provision be 
promptly implemented?
    Mr. Bell. Let me take that answer. Sir, as I indicated 
earlier before you arrived here, we have already reached a 
Memorandum of Agreement with the State Department on 
implementing exactly those provisions in Iraq, and that has 
been implemented. We are now in process of working with the 
State Department, and USAID. Our intention is to fully 
implement those provisions.
    Senator Levin. Well, the agreement did not have this law in 
front of it, nor did it, as I remember, the language go as far 
as this law does?
    Mr. Bell. That's correct. And we intend to.
    Senator Levin. It was a consultation or coordination rather 
than under the direction of; is that correct?
    Mr. Bell. We understand the implication of the difference.
    Senator Levin. OK. Then let me re-ask my question.
    Mr. Bell. Yes, sir.
    Senator Levin. Are you going to fully implement the new 
law?
    Mr. Bell. It is our intention to do so.
    Senator Levin. I will take that as a yes.
    What about State Department folks? Are you familiar with 
what we have done?
    Mr. Moser. Yes, sir. We have had serious discussions, 
particularly with Mr. Bell and his group, and we have expected 
the enactment of the legislation. But I am really not--this is 
not something that I am really allowed to make a comment on. 
Thank you.
    Senator Levin. Not allowed to?
    Mr. Moser. Well, I am head of contracting. I cannot give 
you a policy position on a piece of----
    Senator Levin. OK.
    Mr. Moser [continuing]. Legislation that hasn't been signed 
by the President.
    Senator Levin. All right. If it had been signed this 
morning, could you---- [Laughter.]
    So if it is reported to you it has now been signed, could 
you comment on it?
    Mr. Moser. Well, something our intention is, it is just 
like the Federal Acquisition Regulations. If it is law, we are 
going to comply with it.
    Senator Levin. OK. There is a new commission on wartime 
contracting that has been adopted as part of the Defense 
Authorization Act, which we hope has been signed this afternoon 
or tomorrow. Will there be full cooperation with the operations 
of the new commission, Secretary Bell?
    Mr. Bell. Senator Levin, we actually welcome that 
opportunity. We think the focus that the Congress has provided 
with Section 854 and with the follow-up legislation that 
Sections 861 and 862 ares very helpful to this cause. We are 
very mindful of the urgency of improving and strengthening our 
contractor management, so we would welcome that.
    Senator Levin. OK. And, Mr. Herbst, Ambassador Herbst, and 
I think, Mr. Kunder, you would be the ones to answer that for 
the State Department and USAID? Are you familiar with what we 
did? And are you going to fully cooperate?
    Mr. Herbst. This is not my area of responsibility. Sorry, 
Senator.
    Senator Levin. Mr. Kunder? Either one. Mr. Moser?
    Mr. Kunder. You pass the law, sir. We will obey the law.
    Senator Levin. Are you familiar with what is in it?
    Mr. Kunder. We generally are familiar with the 
authorization, sir.
    Senator Levin. All right.
    Mr. Moser. Yes, and I would say that is true for the State 
Department as well, Senator Levin.
    Senator Levin. OK. Secretary Bell, more than a year ago, 
senior Army officials told the Senate Armed Services Committee 
that the Army's $20 billion LOGCAP contract, which until now 
has been performed by a single contractor, was going to be 
broken up into multiple contracts so that we would have 
competition for individual task orders awarded under the 
contract.
    Now, the Armed Services Committee feels so strongly that 
this is the right approach that in our 2008 authorization bill, 
soon to be an act, there is a strong new requirement to award 
contracts of this type to multiple companies.
    So far, the Army has been unable to live up to the 
commitment to split up the LOGCAP contract among multiple 
companies because the award of the new contracts was held up by 
a successful bid protest.
    Can you give us a idea as to how soon the Department will 
determine how to proceed in light of this successful bid 
protest? And how soon we can expect to have new contracts in 
place so that we can have competition for those tasks orders?
    Mr. Bell. Sir, we certainly agree with the intent of the 
Congress on that. I would like to take that as a question for 
the record for the Army if we may.
    Senator Levin. All right. Will you give us a timetable on 
that?
    Mr. Bell. Yes, sir, we will.
    Senator Levin. Thank you. Mr. Chairman, I appreciate your 
courtesies as always.
    Senator Carper. You bet. Thank you so much for coming here 
and for letting us work with you and vice versa.
    I have a series of three questions that I am going to ask 
both Mr. Bell and General Maddox to comment on.
    How does our military capture contracting lessons learned 
and incorporate them into operational planning?
    Mr. Bell. We have several mechanisms within DOD to do that. 
One is that JFCOM has an overall DOD responsibility to do 
lessons learned on all of our contingency operations.
    In addition to that, within the contracting framework that 
we have established and reported to Congress on, we have a 
specific module requirement to do lessons learned on 
contracting management and to input that both to our own 
operations as well as to the JFCOM overall operation.
    Senator Carper. All right. General Maddox, would you like 
to add or take away?
    General Maddox. We have got an organization that is charged 
with lessons learned. They are collecting them. We are not 
convinced that they get passed as well as they could. One of 
the suggestions that came out of our interacting within the 
Army during the Commission was in addition to the lessons 
learned to establish a blog on the Web, where contracting 
personnel can exchange their lessons back and forth with each 
other.
    Senator Carper. All right.
    General Maddox. And I think that is going to be 
implemented.
    Senator Carper. OK. Thanks.
    The second question for both of you is how is feedback 
circulated back to each of the forces to ensure continued 
improvement?
    Mr. Bell. We think in terms of the continuity of military 
operations, which is the one of greatest concerns because of 
the rotation of troops, one of the things we have done is 
extended the overlap of command transitions. For example, we 
have just had a succession and change of command of the head of 
the Joint Contracting Command for Iraq and Afghanistan. And 
that overlap between the succeeding commanding officer and the 
outgoing commanding officer was spread out over a full 2\1/2\-
month period to ensure that we got continuity in that 
operation.
    In addition, the departing commander is going be available 
for ongoing consultations, both here in the States and back in 
Iraq.
    Senator Carper. All right. General Maddox.
    General Maddox. I do not think that is adequate. I think 
that is necessary. But it gets to the issue that this problem 
is not limited to the contracting people. And while we do 
overlaps from an operational point of view between units coming 
in and out of Iraq, I am not convinced that we do enough in 
recognition of the relationship of their operation and 
contracting.
    One specific is contracting officer representatives. They 
are people who go and watch the execution of a contract. If it 
is the dining facility operation, it is somebody that operates 
with mess halls. If it is fuel resupply, it is somebody that 
has been in the fuel business. During our investigation, we 
found out that many of the contracting officer representatives 
did not know that they were going to have that function until 
they got in country.
    And then, in some cases--and I actually experienced this in 
my career, I became a contracting officer representative, and I 
did not know what the term meant.
    There is some education going on, but I think we need to 
make sure that while the operational units are switching that 
we do a better job of the new unit comes in, knows what the 
unit going had in responsibility for contracting officer 
representatives and other aspects of it, and that gets 
overlapped, too.
    Mr. Bell. If I could amplify on that, Senator Carper.
    Senator Carper. Sure. Go ahead.
    Mr. Bell. We certainly agree within DOD and certainly 
within my organization working on the strategic framework that 
one of the great difficulties we have been confronted with is 
the significant downsizing of contracting personnel as well as 
contracting oversight personnel.
    It is clear that in order to do an effective job on the 
scale that we need to do it for a deployed operation, we are 
going to have to have a significantly larger force of qualified 
individuals so that they can do the job as well as have orderly 
transitions.
    Senator Carper. My third and final question of each of you 
is should these lessons be considered and/or implemented in the 
development of curricula and be institutionalized in the Center 
for Army Lessons Learned?
    Mr. Bell. With regard to our efforts, one of the parts of 
the strategic framework that we are developing at this point in 
time is a training program not only for contracting and 
acquisition personnel, but for line commanders and NCOs who 
increasingly are dependent on contracting support in the field 
of operation.
    We have that program in place now at the Duke Defense 
Acquisition University. We are in the process of getting it in 
actually at the Service Academies as well as places like ICAF 
and NDU.
    Senator Carper. General Maddox.
    General Maddox. And I know in the Army that they are 
putting it into their own curriculum. There is an effort 
ongoing right now by the Chief in trying to do a better job of 
bringing his new two stars on board. And in the next month they 
have already put together a program to do that, and I know that 
the contracting part is an integral part of that.
    Senator Carper. All right. Thank you.
    In closing, I am going to ask each of our witnesses--I am 
just going to start with you, Mr. Kunder, if I could--and if 
you just want to leave us with a closing thought as to 
something you think is just extremely important for us to keep 
in mind, for us to keep in mind as Members of the Senate 
relevant Subcommittees that we should particularly focus on and 
be mindful of.
    Mr. Kunder. Thank you, sir. I just wanted to emphasize the 
criticality of what General Maddox has been talking about----
    Senator Carper. OK.
    Mr. Kunder [continuing]. That we need to pay attention to 
staffing both on the contract officers side, and then on the 
technical officers side.
    I will not take time to cite the numbers--grotesquely short 
on the contract officer side. We are relying on contractors at 
USAID not just for logistic support, but to do our core work of 
building schools, building hospitals, building roads. And so 
what we also need is engineers, education specialists, 
healthcare specialists out there looking at that.
    I just got a great note the other day from General John 
Allen, the Marine Commander in Anbar Province, citing the role 
of our men at the Provincial Reconstruction Teams. He called 
them heroes. The problem is there are only three heroes out 
there.
    So we have the staffing issues that General Maddox has 
emphasized both on the contract officers' side and then on the 
technical officers side to go out and make sure that school is 
being built right or that road is being built right.
    I would emphasize that we have got to focus on these 
staffing issues that are so critical to the oversight that I 
know the Subcommittees cares about. Thank you, sir.
    Senator Carper. All right. Thank you. Mr. Moser, any 
closing thoughts that you would like to emphasize?
    Mr. Moser. Yes. Thank you very much, Senator Carper.
    I would like to emphasize as well what my colleague, Mr. 
Kunder, has emphasized is that if you look at our contracting 
operation, if you look at USAID's contracting operation, we do 
not have the contracting personnel that we need to guarantee 
that the taxpayer dollar is being protected.
    We think that if we come up--we have a reasonable proposal 
on the table that we think could modify that. We are going to 
work with USAID to work through some of their problems, but we 
are very concerned about the integrity in the contracting 
process. We do not feel that we have had major scandals up to 
now, but we do not feel like that we can continue in the same 
situation.
    And then we also want to put in--make sure that we are 
ready to do the contracting support that we can take care of 
Ambassador Herbst and make sure that his operation in our next 
crisis gets off to the right start.
    Senator Carper. All right. Thank you.
    Mr. Herbst, a closing thought?
    Mr. Herbst. We have created the means to deal effectively 
with the next stabilization crisis. There is an Administration 
position on this, supported across the interagency. We request 
the support of the Congress to both authorize and support it. 
Thank you.
    Senator Carper. Thank you.
    Senator Carper. General Maddox.
    General Maddox. I think the majority of the recommendations 
that the Gansler Commission put together can be implemented 
within the DOD.
    Senator Carper. But without the congressional involvement?
    General Maddox. The majority of them can be done within 
DOD. The critical piece is we are not going to solve this 
problem if we do not put leaders in place and enough people to 
get the job done.
    Senator Carper. Leaders at what level?
    General Maddox. I am talking about the five general 
officers for the Army.
    Senator Carper. OK.
    General Maddox. If we do not put them in place and increase 
the number of people that are charged to do this job, this 
problem is going to continue.
    Senator Carper. Thank you, sir.
    Mr. Bell, the last word?
    Mr. Bell. Yes, sir. We believe at DOD that the execution of 
our national military strategy with the military forces that 
were authorized by Congress will continue to make us dependent 
on significant contractor support for our deployed forces.
    We recognize it is a complex challenge. We recognize now we 
must manage our contracting force as part of an integrated 
effort with our military forces. We believe that we are making 
significant strides forward, notwithstanding the problems that 
have been identified. We appreciate the congressional support. 
The provisions of Section 854 and 552 with regard to 
application of UCMJ are very important steps forward in helping 
us integrate our management of the total force, and so we look 
forward to being able to report to you the actual results and 
benefits of what we are doing.
    Senator Carper. Thank you.
    Let me say in conclusion, I was first drawn to this issue 
as a former State Treasurer and one who was mindful of spending 
my State's money judiciously and squeezing every dime as much 
as we could. And I feel like we had an obligation to the 
State's taxpayers to do that.
    And I thought about the contracting work and some of the 
horror stories that we have all heard, but my first thought 
really focused on the waste of money, money that we do not 
have, money that we are borrowing around the world as it turns 
out, and the fraud and it just rubs me the wrong way, annoys 
the heck out of me. I know it does for other folks, too, that 
are trying to put food on the table, a roof over their heads, 
and send their kids to school and all.
    But sometimes we get lost in all this--when we let this 
kind of behavior occur and reoccur again and again, we 
undermine our troops, and we make their difficult tasks even 
more so.
    None of this is good. All of this is bad. And they deserve 
better. And frankly so do the people who pay my salary and the 
salary of all those who work around here. I am encouraged that 
over 4 years into this war, we are starting to figure this one 
out. It is a little bit like closing the barn door when the 
horses have escaped. But it is better than never closing it, 
and we have to make sure that we follow through on the good 
intentions that have been outlined. I know some good work has 
been done. But we want to make sure that we follow through and 
finish this job.
    And finally, when we do and we get it right this time, the 
key is when we find ourselves in another episode along these 
lines in the future, and we probably will, that we will not 
make the mistake that we did with respect to the Balkans where 
we kind of had learned those lessons, wrote them down, and when 
this one rolled around in Iraq and Afghanistan we frankly have 
had to learn those lessons over again. It is tragic. It is not 
necessary. We have got to not let that happen again.
    That having been said, I thank you all for your testimony 
here today and for preparing for this and for helping us to 
focus on these issues.
    I think the questions that my colleagues have asked are 
important ones, and we want you to know as you leave here that 
we stand prepared to be supportive, to work with you, and to be 
supportive of getting us on the right track and making sure 
that we stay there.
    I hope to join my colleagues in pushing for the Gansler 
Commission recommendations, for their implementation, and as 
well as to ensure that we have the military and civilian 
workforce on hand, trained and prepared to do their jobs. And 
we are going to continue to look forward to you for some 
guidance in that regard.
    The hearing record is going to be open for 2 more weeks for 
the submission of some additional statements and questions. I 
would ask of each of you and our previous panel of witnesses 
for your cooperation in trying to get prompt responses to the 
questions that you might receive and that are going to be 
submitted for the record.
    With that having been said, again, our thanks to each of 
you, and this hearing is adjourned. Thanks so much.
    [Whereupon, at 5:35 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

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