[Senate Hearing 110-366]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-366
 
``URGENT REFORM REQUIRED: ARMY EXPEDITIONARY CONTRACTING,'' THE REPORT 
    OF THE COMMISSION ON ARMY ACQUISITION AND PROGRAM MANAGEMENT IN 
                        EXPEDITIONARY OPERATIONS

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

                                HEARING

                               before the

            SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT

                                 of the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 6, 2007

                               __________

         Printed for the use of the Committee on Armed Services



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                      COMMITTEE ON ARMED SERVICES

                     CARL LEVIN, Michigan, Chairman

EDWARD M. KENNEDY, Massachusetts     JOHN McCAIN, Arizona
ROBERT C. BYRD, West Virginia        JOHN WARNER, Virginia,
JOSEPH I. LIEBERMAN, Connecticut     JAMES M. INHOFE, Oklahoma
JACK REED, Rhode Island              JEFF SESSIONS, Alabama
DANIEL K. AKAKA, Hawaii              SUSAN M. COLLINS, Maine
BILL NELSON, Florida                 SAXBY CHAMBLISS, Georgia
E. BENJAMIN NELSON, Nebraska         LINDSEY O. GRAHAM, South Carolina
EVAN BAYH, Indiana                   ELIZABETH DOLE, North Carolina
HILLARY RODHAM CLINTON, New York     JOHN CORNYN, Texas
MARK L. PRYOR, Arkansas              JOHN THUNE, South Dakota
JIM WEBB, Virginia                   MEL MARTINEZ, Florida
CLAIRE McCASKILL, Missouri           ROGER F. WICKER, Mississippi

                   Richard D. DeBobes, Staff Director

              Michael V. Kostiw, Republican Staff Director

                                 ______

            Subcommittee on Readiness and Management Support

                   DANIEL K. AKAKA, Hawaii, Chairman

ROBERT C. BYRD, West Virginia        JOHN THUNE, South Dakota
EVAN BAYH, Indiana                   JAMES M. INHOFE, Oklahoma
HILLARY RODHAM CLINTON, New York     SAXBY CHAMBLISS, Georgia
MARK L. PRYOR, Arkansas              ELIZABETH DOLE, North Carolina
CLAIRE McCASKILL, Missouri           ROGER F. WICKER, Mississippi

                                  (ii)

  




                            C O N T E N T S

                               __________

                    CHRONOLOGICAL LIST OF WITNESSES

``Urgent Reform Required: Army Expeditionary Contracting,'' The Report 
    of the Commission on Army Acquisition and Program Management in 
                        Expeditionary Operations

                            december 6, 2007

                                                                   Page

Gansler, Hon. Jacques S., Chairman, Commission on Army 
  Acquisition and Program Management in Expeditionary Operations.     4
Bolton, Hon. Claude M., Jr., Assistant Secretary of the Army for 
  Acquisition, Logistics, and Technology; Accompanied by LTG Ross 
  N. Thompson III, USA, Military Deputy to the Assistant 
  Secretary of the Army for Acquisition, Logistics, and 
  Technology; and Kathryn A. Condon, Executive Deputy to the 
  Commanding General, Army Materiel Command......................    14

                                 (iii)


``URGENT REFORM REQUIRED: ARMY EXPEDITIONARY CONTRACTING,'' THE REPORT 
    OF THE COMMISSION ON ARMY ACQUISITION AND PROGRAM MANAGEMENT IN 
                        EXPEDITIONARY OPERATIONS

                              ----------                              


                       THURSDAY, DECEMBER 6, 2007

                           U.S. Senate,    
                  Subcommittee on Readiness
                            and Management Support,
                               Committee on Armed Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:31 p.m. in 
room SR-222, Russell Senate Office Building, Senator Daniel K. 
Akaka (chairman of the subcommittee) presiding.
    Committee members present: Senators Akaka, Levin, 
McCaskill, Inhofe, and Thune.
    Majority staff members present: Daniel J. Cox, Jr., 
professional staff member; Gerald J. Leeling, counsel; Peter K. 
Levine, general counsel; Michael J. McCord, professional staff 
member; and William K. Sutey, professional staff member.
    Minority staff members present: Pablo E. Carrillo, minority 
investigative counsel; David G. Collins, research assistant; 
Gregory T. Kiley, professional staff member; Derek J. Maurer, 
minority counsel; Lucian L. Niemeyer, professional staff 
member; and Diana G. Tabler, professional staff member.
    Staff assistants present: Kevin A. Cronin, Ali Z. Pasha, 
and Benjamin L. Rubin.
    Committee members' assistants present: Jay Maroney, 
assistant to Senator Kennedy; Jon Davey, assistant to Senator 
Bayh; Stephen C. Hedger, assistant to Senator McCaskill; Sandra 
Luff, assistant to Senator Warner; Anthony J. Lazarski, 
assistant to Senator Inhofe; and Stuart C. Mallory, assistant 
to Senator Thune.

     OPENING STATEMENT OF SENATOR DANIEL K. AKAKA, CHAIRMAN

    Senator Akaka. The hearing of the Readiness and Management 
Support Subcommittee will come to order.
    The Readiness and Management Support Subcommittee meets 
today to hear testimony about the report of the Gansler 
Commission on Army Acquisition and Program Management in 
Expeditionary Operations.
    But, before we begin, I would like to note that today's 
hearing is our first since Senator Thune succeeded Senator 
Ensign as the ranking member of this subcommittee. Whether as 
chairman and as ranking member, Senator Ensign always took a 
bipartisan approach that put the interests of our men and our 
women in uniform first. I also want to say that, when Senator 
Inhofe was chairman, we also shared that, as well. Now, I'm 
confident that Senator Thune will do the same.
    So, Senator Thune, I want to personally welcome you as our 
new ranking member.
    Senator Thune. Thank you, Mr. Chairman.
    Senator Akaka. I look forward to working with you, as I did 
with Senator Inhofe and with Senator Ensign, and I really 
enjoyed working with all of them.
    This subcommittee has long been concerned about 
shortcomings in the acquisition and contracting processes of 
the Defense Department. We have expressed particular concern 
about an acquisition workforce that simply has been stretched 
too far and too thin to get the work done.
    Last January, I opened our first meeting in Congress by 
noting that we have fewer and fewer procurement officials 
responsible for managing more and more contract dollars. In the 
view of many, these trends long ago passed the point where our 
acquisition force lost the capacity needed to perform essential 
functions.
    Last month, the Gansler Commission weighed in, reporting 
that systemic failures in the Army acquisition system have left 
the Department vulnerable to fraud, waste, and abuse. According 
to the Gansler Commission, ``The cause is a culture that does 
not sufficiently value or recognize the importance of 
contracting, contract management, and contractors in 
expeditionary operations. The Army has excellent, dedicated 
people, but they are understaffed, overworked, undertrained, 
undersupported, and, most important, undervalued.''
    The question before us is not how we got where we are 
today, but, what are we going to do about it? The Gansler 
Commission has made a series of recommendations for far-
reaching changes in the Army acquisition system, including 
significant improvements of the size, status, and training of 
the acquisition workforce. Most dramatically, the Commission 
says that we need 10 new general officers for contracting 
positions, and 2,000 new contracting personnel, to meet the 
needs of the Army alone. These recommendations have my full 
support, but it will not be possible to implement without 
strong support from the Army, the Department of Defense (DOD), 
and Congress.
    Fortunately, the initial reports that we have received 
about the views of the Army and DOD are positive. I hope that 
we'll be able to get these views on the record in the course of 
today's hearing.
    Senator Thune, it's time for your statement.

                STATEMENT OF SENATOR JOHN THUNE

    Senator Thune. Thank you, Mr. Chairman. I appreciate very 
much the opportunity to serve as ranking member on this 
subcommittee, and I look forward to working with you. You have 
conducted this subcommittee's work in an exemplary way, and I 
have great respect for your leadership; and so, I look forward 
to working with you and the other members of the subcommittee 
as we take on the important tasks at hand.
    I want to thank you for convening the hearing on this very 
important matter. I also want to thank Dr. Gansler, of the 
Commission, and the members of the Commission, for their 
valuable assistance, and, of course, Secretary Bolton, General 
Thompson, and Ms. Condon for their service.
    With the Commission's report, we've hit a critical 
milestone in finally getting a handle on the scope of the 
problem associated with expeditionary contracting, but much 
work has yet to be done to analyze the report's findings and 
recommendations, and, where warranted, see to the 
recommendations' implementation.
    Against that backdrop, I would just issue a note of 
caution. Some of the Commission's recommendations are very 
ambitious, calling for change throughout the Department of the 
Army, and, in some cases, beyond, particularly with regard to 
those recommendations requiring congressional assistance. For 
those that may have an impact beyond the Army's contracting 
corps, I would just ask that we measure twice before cutting 
once. At least some of my questions for the witnesses will come 
from that perspective.
    Mr. Chairman, I cannot help but note an element of irony in 
what we're discussing today. In the mid to late 1990s, it was 
Congress that really went after the acquisition corps of the 
Services. Incessant reference to a ``shopper corps'' supported 
huge reductions into the conference reports during that period. 
We are now at a point where only about 3 percent of the Army's 
contracting personnel are Active Duty, where only about half of 
those working in the Army in a contracting career field are 
certified for their current position, and where the Army no 
longer offers a general officer billet for career contracting 
professionals. However, about half of the total force in Iraq, 
Afghanistan, and Kuwait are contractors.
    Without calling into question the integrity of our Army 
contracting corps, there is little reason why, despite serving 
as the executive agent for contracting in Iraq and Afghanistan, 
the Army is relying largely on the Air Force to provide 
contracting support to all ground forces in theater or that of 
all the Services far-and-away most of the investigations into 
contract fraud or abuse arise from the Army. Indeed, there now 
appears to be broad consensus that, when coupled with our 
having contracting out acquisition functions closely associated 
with inherently governmental functions, the cuts that we saw in 
the 1990s probably went too far.
    That being said, I'm unsure about the congressional 
appetite to implement some of the Commission's recommendations; 
in particular, giving the Army more general officer slots to 
address the problem. I suggest that the support of Army 
leadership is going to be important here. Accordingly, at this 
hearing I am interested in knowing what the Army's and the 
Secretary of Defense's reactions are to the Commission's 
recommendations, and to what extent each are implemented? I'm 
interested in seeing how that support is manifested in the next 
annual budget request when we review it in the readiness 
posture hearing in the spring.
    There can be no doubt that rebuilding the Army's 
contracting corps so that it has the required contracting 
capability is not going to happen overnight. I think that, at 
the end of the day, the report stands for the broad proposition 
that all options should be on the table, and, with this 
hearing, we take the first big step to taking a good look at 
many of those options.
    Once again, I want to thank you, Mr. Chairman, for 
conducting the hearing, and I want to thank the witnesses for 
their time today, and I look forward to their testimony.
    Senator Akaka. Thank you very much, Senator Thune.
    I'd like to ask Senator Inhofe----
    Senator Inhofe. Let me just briefly say why I'm here, Mr. 
Chairman.
    You'll remember that, during the time that Senator Thune 
referred to, in the 1990s--I actually was chairing this 
subcommittee, and you were the ranking member; and you and I 
agreed, at that time, that we were critical of some of the cuts 
that were taking place. So, I won't be able to stay very long, 
but I wanted to hear the opening statement. I have a regular 
communication with Secretary Bolton and some of the rest of 
them here, but I'd like to hear about the report so I can get 
an idea of where we're going and be familiar with that.
    So, I appreciate your including me for this hearing.
    Senator Akaka. Thank you very much, Senator Inhofe.
    I'd like to say thank you to our witnesses.
    First, let me mention the Honorable Dr. Gansler, who 
appeared before this committee on numerous occasions in his 
capacity as Under Secretary of Defense for Acquisition, 
Technology, and Logistics.
    Dr. Gansler, I want to welcome you back, and we thank you 
and your fellow commissioners for the outstanding work that you 
have done on this report.
    Also, I want to welcome the Honorable Claude Bolton, who 
has served as Assistant Secretary of the Army for Acquisition, 
Logistics, and Technology, for the last 6 years. In that 
capacity, he has testified before this committee on numerous 
occasions also.
    Secretary Bolton, I understand that you will be leaving the 
Department next month, and we recognize the contribution that 
you have made to the Army over the last 6 years, and we want to 
thank you for your service.
    Also, we have with us Lieutenant General Ross Thompson and 
Ms. Kathryn Condon, and I also want to welcome both of you.
    With that, Dr. Gansler please begin with your statement at 
this time.

 STATEMENT OF HON. JACQUES S. GANSLER, CHAIRMAN, COMMISSION ON 
   ARMY ACQUISITION AND PROGRAM MANAGEMENT IN EXPEDITIONARY 
                           OPERATIONS

    Dr. Gansler. Thank you, Mr. Chairman, and thank you for 
your introductory remarks, they're very kind--and Senator 
Thune, Senator Inhofe--it's good to see all of you.
    The Secretary of the Army established an independent 
commission titled the Commission on Army Acquisition and 
Program Management in Expeditionary Operations. I would 
emphasize the ``expeditionary'' aspect of it. Our objective was 
to review the lessons learned in the recent operations, and 
also to provide forward-looking recommendations to ensure that 
future military operations would achieve far greater 
effectiveness, efficiency, and, particularly, transparency.
    I was honored to chair the Commission and to be joined by 
five very distinguished commissioners with expertise and 
insight into government acquisition, including program 
management and contracting. I would like to note, the 
commissioners included General (Retired) David Maddox, who 
represented the Army's operational community; General (Retired) 
Leon Salomon, who represented the Army's acquisition community; 
Rear Admiral (Retired) David Oliver, who provided alternative 
service representation, but, also, he had recent experience in 
Iraq through his service with the Coalition Provisional 
Authority; and then, two very senior very experienced DOD 
civilians David Berteau and George Singley.
    At the Secretary's direction, we conducted our efforts 
within a very compressed 45-day timeframe that I think is 
indicative of the immediate challenges facing the Army. Our 
focus was on how to prevent any shortcomings in Army 
acquisition and program management in expeditionary operations 
for the next time. Our charter was forward-looking. We were 
tasked to ensure that, institutionally, the Army is better 
positioned for future operations, which will, in our opinion, 
be expeditionary and also joint, and likely to be multi-agency, 
political/military events.
    At the outset, it's very important to note that other 
concurrent activities were underway, focusing on different 
aspects of today's challenges. Lieutenant General Ross Thompson 
and Ms. Kathryn Condon are co-chairing the Army's Contract Task 
Force that was, and still is, looking at the current fraud 
issues. Separately, the DOD Inspector General (IG), Lieutenant 
General (Retired) Claude Kicklighter has been looking at 
equipment accountability issues. Outside of DOD, Ambassador 
Kennedy of the State Department has an effort underway to 
examine private security contracts; thus, current fraud, 
equipment accountability, and private security contracts were 
not within the purview of this Commission.
    To address our forward-looking tasking, in September and 
October the Commission engaged officials within all of the 
relevant communities. We actually had over 122 interviews. The 
individuals we heard from represented a wide range of 
stakeholders, from senior military leadership to field 
operators, to audit personnel, to contract support personnel, 
and so forth. We spoke to people both stateside and deployed. I 
might point out, our discussions with personnel inside the 
continental United States (CONUS) were important, especially 
since we defined expeditionary as not only outside of CONUS, 
but also emergency conditions within CONUS, such as Hurricane 
Katrina, given that there are very great similarities in terms 
of the responsiveness of these two situations. We also heard 
from people currently deployed in Iraq, Afghanistan, and 
Kuwait; and, given the compact schedule, the Southwest Asia 
interviews were conducted by video conference. However, we 
separately interviewed the commander of the Joint Contracting 
Command in Iraq and Afghanistan, then the next level of 
military leadership, and then the working level, all in the 
absence of their superiors so that we were able to get an 
objective, independent assessment.
    Despite this broad spectrum represented by our interviews, 
we received almost universal agreement on what the issues are, 
what changes are required, and the absolute need for change. As 
a result, the Commission crafted a broad-based strategy for 
addressing these shortcomings, which we published in this 
independent report, dated October 31, titled, ``Urgent Reform 
Required: Army Expeditionary Contracting.''
    I would request that the executive summary from that report 
be included in the record of today's proceedings.
    Senator Akaka. Without objection, it will be.
    Dr. Gansler. I appreciate the subcommittee's invitation to 
highlight some of the key findings and recommendations from 
that report.
    Our key findings include the observation that the Army, and 
far more broadly, as you pointed out, Mr. Chairman, the DOD 
does have a problem, but it's not a problem with single 
organizations or even a single individual or even a group of 
individuals. Rather, the Army and the DOD are faced with a 
systemic challenge in executing expeditionary operations, both 
from an operational and an institutional vantage point.
    The so-called ``Operational Army'' is expeditionary and on 
a war footing, yet it has not fully recognized the impact of 
the large number of contractors involved in expeditionary 
operations and on their potential impact to mission success. In 
fact, today, with approximately 160,000 private-sector 
contractors in the Iraq/Afghanistan/Kuwait zone, they represent 
about 50 percent--or half--of the total force in that zone. 
Additionally, critical segments of the ``Institutional Army,'' 
which is the one supporting the ``Operational Army,'' have not 
adapted in order to provide the responsiveness that is required 
in the acquisition and sustainment operations for expeditionary 
operations.
    Let me give you four specific examples where we think 
shortcomings exist:
    First, financial management. On the Logistics Civil 
Augmentation Program (LOGCAP) contract, which was the largest 
one last year, there were 141 incremental funding contract 
modifications. That means that the contract had to be modified 
141 times in that 1 year just because the approved money was 
not being adequately released by the OMB, by the OSD 
comptroller and/or the Army comptroller. This is inconsistent 
with wartime needs.
    We have to be able to provide the money in a timely fashion 
in order to run expedited operations effectively and 
efficiently.
    Second, in terms of civilian personnel, our government 
civil servants do not qualify for the favored income tax 
benefits that their military equivalents and the private-sector 
contractors in the same situation receive. When they are 
deployed in support of an expeditionary obligation, they don't 
get those benefits. They do not have the benefit of long-term 
medical coverage for injuries sustained in the theater, nor is 
their life insurance coverage extended for acts of war. Yet, 
they are asked to volunteer to go into the war zone.
    Third, in terms of military personnel, there are no longer 
any Army general officer positions for career contracting 
professionals. In 1990, not that long ago, there were five. So, 
there is little incentive, if you're a military personnel, to 
go into this career field. Yet, for expeditionary operations 
where there's warfighting going on, we need contracting people 
who are in uniform in this critical area. We want them to be in 
the lead in the war zone.
    Fourth, contracting and contract management, itself. The 
contracting process is very complicated. It involves multiple 
stakeholders. This is not simply signing a piece of paper to 
create a contract, nor is it simply shopping, as Senator Thune 
mentioned.
    The process ranges from defining the requirements all the 
way through the, literally, 70-plus steps of post-award 
contract management in order to ensure mission accomplishment. 
When done properly, these important functions ensure efficient 
use of our tax dollars, and they control waste, fraud, and 
abuse. But we found that these functions were often not even 
being done; and, when done at all, it was referred to as, 
literally, a ``pickup game.''
    Contracting should be a core capability of the Army, but it 
is currently treated as an operational and institutional side 
issue. We found that the DOD has an extremely dedicated core of 
contracting people. The problem is, as you pointed out, Mr. 
Chairman, they are understaffed, overworked, undertrained, 
undersupported, and, I would argue, most important, 
undervalued.
    Let me give you some examples to illustrate the current 
challenges. Only 3 percent of the Army contracting personnel 
are Active Duty military, so the rest are government civilians. 
Many more trained and experienced military personnel, officers, 
and noncommissioned officers are required in an expeditionary 
environment.
    Next, the National Defense Authorization Act for Fiscal 
Year 1996 required the DOD to reduce its acquisition workforce 
by 25 percent by the end of fiscal year 2000. After those 
reductions, the Department has not increased the acquisition 
workforce, even though the DOD budget has gone up dramatically 
since September 11, 2001. In fact, despite a sevenfold workload 
increase and the greater complexity of contracting in this 
intense environment, the government civilian and military 
contracting workforce has been declining; and, of those 
remaining, only 56 percent of the military officers and 53 
percent of the civilians in the contracting career field are 
certified for their current positions.
    Based on the lessons learned, the Commission developed 
recommendations that addressed the gravity of the situation and 
the urgent need for reform. In short, the Commission identified 
four key elements to future success.
    First, contracting personnel. We must increase the stature, 
the quantity, and the career development of contracting 
personnel, military and civilian, especially for expeditionary 
operations.
    Second, organization and responsibility. We must 
restructure the Army contracting organization and restore its 
overall responsibility to facilitate high-quality contracting 
in contract management, in both expeditionary and peacetime 
operations.
    Third, training and tools. We must provide the training and 
the tools for the overall contracting activities that are 
different in these expeditionary operations.
    Last, in the legislative and regulatory and policy area, we 
must obtain legislative, regulatory, and policy assistance to 
enable contracting effectiveness in expeditionary operations.
    Since our report covers the details of the first three 
areas, I thought today I would like to focus on the 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 for joint organization 
contracting. Specifically, this Commission recommended five new 
Army general officers, as well as one senior executive service 
billet. This would essentially reestablish those five positions 
for the general officers in the Army, and we would like those 
fenced for the Secretary to assign them to meet this urgent 
need, and not have them drawn off for other needs; and five 
additional joint general officer or flag billets be 
established; including a three-star position for the expanded 
scope of the Defense Contract Management Agency (DCMA)--and 
this expanded scope, which we strongly recommend and which we 
think is important--requires service backfill authorizations 
for the joint positions. These military officer billets should 
not be created at the expense of existing civilian senior 
executive service contracting authorizations in the Army 
workforce. These have to be maintained, as well.
    In the past decade and a half, we have witnessed the 
elimination of general officers in the contracting field. As I 
noted, in 1990 there were five Army general officers. Some of 
these started as two-star positions; they were then reduced to 
one-star; and then all five were eliminated. In the joint 
commands, all four contracting flag and general officer 
positions have similarly disappeared. Today, all that remains 
is one temporary position, the Joint Contracting Command in 
Iraq and Afghanistan, which is being filled by an Air Force 
officer.
    The Commission believes this backslide needs to be 
remedied. We must at least get back to where we were in 1990. 
General officers must lead the Army transformation to make 
contracting an Army core competence. The Army needs general 
officers who know contracting and can serve as functional 
advocates for expeditionary operations and to avoid the 
problems that are now being experienced in Iraq, Afghanistan, 
and Kuwait. These general officers, who must be permanently 
assigned to contracting, will initiate and sustain improvement 
to Army acquisition. They will also grow future leaders, and 
they will support leadership efforts. Our report identifies the 
specific positions that these general officers will fill, as 
well as the organizational changes required to achieve the 
desired transformation in Army and joint contracting.
    Second, the Commission recommends an increase in Army 
contracting personnel; in fact, by almost 2,000 people. That 
includes increased Army military by about 400, and civilian 
government people by about 1,000, as well as about 600 billets, 
military and civilian, for Army support to the DCMA, which is a 
joint activity not under the Army.
    The Army contracting personnel total increase is not that 
significant relative to the total people currently in the Army 
contracting career field, even including the DCMA fill-in. In 
1990, the Army had approximately 10,000 people in contracting. 
This has been reduced to approximately 5,500, where it has 
largely remained, while the dollar value, as I noted earlier, 
of Army contracts has increased, in fact, 331 percent, and the 
number of Army contract actions increased 654 percent between 
1992 and 2006.
    The Army is the DOD executive agent for contracting in Iraq 
and Afghanistan, but it is unable to fill military or civilian 
contracting billets in either quantity or quality--in 
qualifications. There are simply far too few Army contracting 
personnel in the theater to meet the needs. The people who are 
there are great, they're doing a terrific job, they're totally 
dedicated, but there just are not enough of them, and they're 
not adequately trained for the role or positions needed. 
Congress has to help the Army meet its commitment to support 
the troops on future expeditionary missions by authorizing 
additional Army contracting personnel.
    To meet the critical need for contract post-award 
management, the Commission recommends that the DCMA become the 
DOD worldwide contract management center of excellence. To do 
this, DCMA needs additional resources. The House Appropriations 
Committee has acknowledged the need for more DCMA personnel by 
recently stating, ``It is clear that DOD currently lacks the 
means to provide proper oversight of its service contracts, in 
part because of an insufficient number of contract oversight 
personnel.'' The Commission believes the 583 DCMA billets that 
we asked for are needed for Army support alone. Of course, if 
DCMA does not get this new mission, then the Services are going 
to have to fill that responsibility and get additional 
resources for it.
    Third, the Commission recommends congressional action to 
improve incentives for Army civilian contracting personnel who 
volunteer to deploy for expeditionary contracting. Right now, 
as I said, they are undervalued. They're undervalued in their 
compensation, in their education and training, in their career 
opportunities, and with the lack of other occupational 
incentives. As a result, many approved contracting positions 
simply go unfilled, especially in the theater. The Nation owes 
this dedicated corps of government civilian patriots its 
appreciation and far better treatment than they're getting.
    Congress can help address this problem by providing 
government civilians tax-free status when deployed, just as 
their military and private-sector contractor counterparts are 
receiving, and also provide them long-term medical care and 
life insurance for in-theater injury or death. Our deployed 
military are tax-free from the moment they hit the ground, and 
they have long-term medical coverage and life insurance for 
injuries or death sustained while deployed; yet, comparable 
benefits are not accorded to deployed government civilians. If 
DOD is to incentivize its civilian workforce to deploy to what 
can be extremely hostile work environments, they must be 
afforded tax treatment and benefits coverage comparable to that 
of the military.
    In addition, Congress should provide standby removal of the 
pay cap for deployed civilians for any future expedition. 
Although this has been done for Iraq, it is specific to the 
current engagement and not available for the next time.
    Fourth, the Commission recommends that Congress enable 
funding flexibility through an adequately resourced contingency 
operations transfer fund. This would be a defense transfer fund 
without color-of-money or fiscal-year limitations, with the DOD 
responsible, certainly, for providing Congress with insight by 
reporting on the expenditures and on the savings. This 
recommendation is based on what existed in the Balkans, called 
an Overseas Contingency Operation Transfer Fund, which was 
approved by Congress, and which actually currently exists for 
AID. However, right now, such a fund does not exist for Iraq. 
We believe that, not only should it be created for Iraq, but 
also for any future expeditionary operations, on a legislative 
standby basis.
    Fifth, and finally, we recommend that Congress provide 
standby legislation to waive many of the provisions, such as 
small business and U.S. labor provisions, Buy American, Berry 
Amendment, Specialty Metals, and other provisions to allow 
rapid local buying whenever it's required in expeditionary 
operations. In Iraq, a Buy America waiver does exist; but, 
again, this is specific to the current operation, and, 
therefore, not available to any future expedition.
    What I've just gone through are just some of the highlights 
of the many recommendations contained in the report, but these 
are particularly relevant for today's purposes because they 
require congressional action.
    In addition, the report includes recommended actions for 
the Secretary of the Army and the Secretary of Defense. The 
Commission has briefed both Secretaries, concurrent with the 
report's publication and release; in fact, the next day. Both 
Secretaries have stated in public forums that they fully 
support the Commission's report and have begun to move out 
quickly on its recommendations. But they need congressional 
help on key aspects of the report which I've highlighted here 
today.
    Additionally, the chairman of the House Armed Services 
Committee released a statement on November 1, the day after our 
report was out, saying that ``Congress will seriously consider 
the Commission's recommendations, particularly those that 
require legislative action.''
    Given the importance and urgency of these actions in 
support of our troops, the Commission is hopeful that Congress 
will consider some perhaps out-of-cycle action to address the 
recommendations that I've outlined here today.
    In closing, I'd like to observe that, too often, it takes a 
crisis to bring about a major change. We believe the Iraq/
Kuwait/Afghanistan contracting problems have, in fact, created 
such a crisis. Changes are urgently required in the area of 
Army contracting and across the DOD in related areas, 
especially directed to future expeditionary operations. These 
changes are essential to make the institutional Army the 
generating force in both name and capability. It is up to the 
military and to the secretarial leadership, both in the Army 
and the overall DOD, to bring about these needed changes, but 
they cannot make many of the necessary improvements without 
congressional assistance. I hope you will agree and provide 
that needed support. I believe our troops deserve it.
    That concludes my prepared remarks.
    [The prepared statement of Dr. Gansler follows:]

          Prepared Statement by Hon. Jacques S. Gansler, Ph.D.

    The Secretary of the Army established an independent ``Commission 
on Army Acquisition and Program Management in Expeditionary 
Operations'' to review the lessons learned in recent operations; and to 
provide forward-looking recommendations to ensure that future military 
operations achieve greater effectiveness, efficiency, and transparency. 
I was honored to chair the Commission and be joined by five 
distinguished Commissioners with expertise and insight into government 
acquisition, including program management and contracting. The 
Commissioners included General (Ret.) David Maddox, who represented the 
Army's operational community; General (Ret.) Leon Salomon, who 
represented the Army's acquisition community; Rear Admiral (Ret.) David 
Oliver, who provided alternate Service representation and recent 
experience in Iraq, through his service with the Coalition Provisional 
Authority, and then two very senior, experienced Department of Defense 
(DOD) civilians in David Berteau and George Singley.
    At the Secretary's direction, we conducted our efforts within a 
compressed 45-day timeframe, indicative of immediate challenges facing 
the Army. Our focus was on how to prevent any shortcomings in Army 
acquisition and program management in expeditionary operations for the 
next time. Our charter was forward-looking: we were tasked to ensure 
that, institutionally, the Army is best positioned for future 
operations--which will be expeditionary, joint, and likely to be multi-
agency political/military events.
    At the outset, it is important to note that other, concurrent 
activities were underway, focusing on different aspects of today's 
challenges. Lieutenant General Ross Thompson and Kathryn Condon are co-
chairing the Army Contracting Task Force that was--and still is--
looking at the current fraud issues. Separately, the DOD Inspector 
General, Lieutenant General (Ret.) Claude Kicklighter, has been looking 
at equipment accountability issues. Outside of DOD, Ambassador Kennedy 
of the State Department has an effort underway to examine private 
security contracts. Thus, current fraud, equipment accountability, and 
private security contracts were not within the purview of this 
Commission.
    To address our forward-looking tasking, in September and October 
2007, the Commission engaged officials within all of the the relevant 
communities through 122 interviews. The individuals we heard from 
represented a wide range of stakeholders, from senior military 
leadership, to field operators, to audit personnel, to contractor-
support personnel, and so forth. We spoke to people both state-side and 
deployed. Our discussions with personnel inside the continental United 
States (CONUS) were important, especially since we defined 
``expeditionary'' as not only outside of CONUS but also emergency 
conditions within CONUS (like a Katrina incident); given that there are 
very great similarities in terms of the responsiveness to both 
situations. We also heard from people currently deployed in Iraq, 
Afghanistan, and Kuwait. Given the compact schedule, the Southwest Asia 
interviews were conducted by video teleconference. We separately 
interviewed the commander of the Joint Contracting Command-Iraq/
Afghanistan, then the next level of military leadership, and then the 
worker level; all in the absence of their supervisors, so that we were 
able to get an objective, independent assessment.
    Despite the broad spectrum represented by our interviews, we 
received almost universal agreement on what the issues are; what 
changes are required; and the absolute need for change. As a result, 
the Commission crafted a broad-based strategy for addressing 
shortcomings; which we published in an independent report dated October 
31, 2007; and titled Urgent Reform Required: Army Expeditionary 
Contracting. I would request that the Executive Summary from that 
report be included in the record of today's proceedings. I appreciate 
this subcommittee's invitation to highlight some key findings and 
recommendations from that report.
    Our key findings include the observation that the Army--and, more 
broadly, DOD--does not have a problem with a single organization or a 
group of individuals; rather, the Army and DOD are faced with a 
systemic challenge in executing expeditionary operations, both from an 
operational and an institutional vantage point. The ``Operational 
Army'' is expeditionary and on a war footing. Yet, it has not fully 
recognized the impact of the large number of contractors involved in 
expeditionary operations and on their potential impact to mission 
success. In fact, today, with approximately 160,000 contractors in the 
Iraq/Afghanistan/Kuwait zone, they represent about 50 percent of the 
``total force.'' Additionally, critical segments of the ``Institutional 
Army''--which supports the ``Operational Army''--have not adapted in 
order to provide responsive acquisitions and sustainment for 
expeditionary operations. Some specific examples where shortcomings 
exist include:

         Financial management--On the Logistics Civil 
        Augmentation Program (LOGCAP) last year, there were 141 
        incremental funding contract modifications. That means that the 
        contract had to be modified 141 times, just because the 
        approved money was not being adequately released (by Office of 
        Management and Budget, Office of the Secretary of Defense 
        Comptroller, and/or Army Comptroller). This is inconsistent 
        with war-time needs. We have to be able to provide the money in 
        a timely fashion, in order to run expeditionary operations 
        effectively and efficiently.
         Civilian personnel--Our Government civil servants do 
        not qualify for favored income tax benefits (comparable to 
        military personnel and contractors in the same situation) when 
        deployed in support of expeditionary operations; and do not 
        have the benefit of long-term medical coverage for injuries 
        sustained in-theater. Nor is their life insurance coverage 
        extended for ``acts of war;'' yet they are asked to 
        ``volunteer'' to go into the war zone.
         Military personnel--There are no longer any Army 
        General Officer positions for career contracting professionals. 
        In 1990, there were five. So there is little incentive to 
        pursue this career field. Yet, for expeditionary operations, we 
        need contracting people in uniform in this critical area to be 
        leading in the war zone.
         Contracting and contract management--The contracting 
        process is very complicated and involves multiple stakeholders. 
        This is not simply signing a piece of paper to create a 
        contract. The process ranges from defining requirements all the 
        way through the 70-plus steps of post-award contract 
        management, to ensure mission accomplishment. When done 
        properly these important functions ensure efficient use of our 
        tax dollars and control waste, fraud, and abuse, but we found 
        they were often not done; and, when done at all, it was a 
        ``pick-up game.''

    Contracting should be a core capability of the Army, but it 
currently is treated as an operational and institutional side issue.
    We found that the DOD has an extremely dedicated corps of 
contracting people. The problem is they are understaffed, overworked, 
under-trained, under-supported, and, I would argue, most importantly, 
under-valued. Some data points illustrate the current challenges:

         Only 3 percent or so of Army contracting personnel are 
        active duty military. Many more trained and experienced 
        military personnel (officers and non-commissioned officers) are 
        required in an expeditionary environment.
         The National Defense Authorization Act for Fiscal Year 
        1996 required DOD to reduce its acquisition workforce by 25 
        percent by the end of fiscal year 2000. After those reductions, 
        the Department has not increased the acquisition workforce, 
        even though the budget has gone up dramatically since September 
        11, 2001. In fact, despite about a seven-fold workload 
        increase, and the greater complexity of contracting in this 
        intense environment, the civilian and military contracting 
        workforce has been declining; and of those remaining, only 56 
        percent of the military officers and 53 percent of the 
        civilians in the contracting career field are certified for 
        their current positions.
    Based on the valuable lessons learned, the Commission developed 
recommendations that address the gravity of the situation, and the 
urgent need for reform. In short, the Commission identified four key 
elements to future success:

          1. Contracting personnel--increase the stature, quantity, and 
        career development of contracting personnel, military and 
        civilian (especially for expeditionary operations);
          2. 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 peacetime operations;
          3. Training and tools--provide training and tools for overall 
        contracting activities in expeditionary operations; and
          4. 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 areas, so today I 
would like to focus on the 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. Five additional joint 
general or flag billets be established, including a three-star for the 
expanded scope of the Defense Contract Management Agency (which we 
strongly recommend), and with Service ``back-fill'' authorizations for 
the joint positions. These military officer billets should not be 
created at the expense of existing civilian Senior Executive Service 
contracting authorizations in the Army workforce. These must be 
maintained.
    In the past decade and a half, we have witnessed the elimination of 
General Officers in the contracting field. As I noted, in 1990, there 
were five Army General Officers. Some started as two-star positions, 
were reduced to one-star, and then all five were eliminated. In the 
Joint commands, all four contracting Flag and General Officer positions 
have similarly disappeared. Today, all that remains is one temporary 
position: the Joint Contracting Command-Iraq/Afghanistan, which is 
being filled now by an Air Force officer. The Commission believes this 
backslide needs to be remedied. We must at least get back to where we 
were in 1990.
    General officers must lead an Army transformation to make 
contracting an Army core competence. The Army needs general officers 
who know contracting and can serve as functional advocates for 
expeditionary operations; and to avoid the problems that are now being 
experienced in Iraq, Afghanistan, and Kuwait. These general officers, 
who must be permanently assigned to contracting, will initiate and 
sustain improvement to Army acquisition, grow future leaders, and 
support leadership efforts. Our report identifies the specific 
positions the required general officers would fill, as well as the 
organizational changes required to achieve the desired transformation 
in Army and Joint contracting.
    Second, the Commission recommends an increase in Army contracting 
personnel authorizations by 1,983. That includes increasing Army 
military by 400 and civilian by 1,000, as well as providing 583 
billets, military and civilian, for Army support to DCMA. The Army 
contracting personnel total increase is not that significant, relative 
to the total people currently in the Army contracting career field, 
even including the DCMA fill-in.
    In 1990, the Army had approximately 10,000 people in contracting. 
This was reduced to approximately 5,500, where it has largely remained; 
while the dollar value of Army contracts has increased 331 percent, and 
the number of Army contract actions increased 654 percent (from 
approximately 52,900 to 398,700 between 1992 and 2006).
    The Army is the DOD ``Executive Agent'' for contracting in Iraq and 
Afghanistan, but is unable to fill military or civilian contracting 
billets, in either quantity or qualifications. There are far too few 
Army contracting personnel in-theater to meet their commitments. 
Congress must help the Army meet its commitment to support the troops 
on future expeditionary missions by authorizing additional Army 
contracting personnel.
    To meet the critical need for contract post-award management, the 
Commission recommends that DCMA become DOD's ``worldwide, contract 
management center of excellence.'' To do this, DCMA needs additional 
resources. The House Appropriations Committee has acknowledged the need 
for more DCMA personnel by recently saying, ``It is clear that DOD 
currently lacks the means to provide proper oversight of its service 
contracts, in part because of an insufficient number of contract 
oversight personnel.'' The Commission believes 583 DCMA billets are 
needed for Army support alone. Of course, if DCMA does not perform 
worldwide contract management for DOD, the Services are going to have 
to fulfill this responsibility, and will need to be resourced for it.
    Third, the Commission recommends congressional action to improve 
incentives for Army civilian contracting personnel who volunteer to 
deploy for expeditionary contracting. Right now, they are undervalued--
in compensation; education and training; career opportunities; and 
other occupational incentives. As a result, many approved contracting 
positions go unfilled, especially in-theater. The DOD owes this 
dedicated core of civilian patriots its appreciation and better 
treatment. Congress can help address this problem by providing 
government civilians tax-free status when deployed (like their military 
and contractor counterparts), and long-term medical care and life 
insurance for in-theater injury or death. Our deployed military are tax 
free from the moment they hit the ground and have long-term medical 
coverage and life insurance for any injuries or death sustained while 
deployed. Yet comparable tax benefits are not accorded to deployed 
government civilians. If DOD is to incentivize its civilian workforce 
to deploy to what can be extreme and hostile work environments, they 
must be afforded tax treatment and benefits coverage comparable to that 
of the military. In addition, Congress should provide ``stand-by'' 
removal of the pay cap for deployed civilians, for any future 
expedition. Although this has been done for Iraq, it is specific to the 
current engagement and not available for the next time.
    Fourth, the Commission recommends that Congress enable funding 
flexibility through an adequately resourced ``contingency operations 
transfer fund.'' This would be a defense transfer fund without ``color 
of money'' or fiscal year limitations, with the DOD responsible for 
providing Congress with insight via reporting on expenditures and 
savings. This recommendation is based on the Balkans' ``Overseas 
Contingency Operations Transfer Fund,'' which was approved by Congress, 
and which currently exists for AID. However, right now, such a fund 
does not exist for Iraq, and we believe that not only should it be 
created for Iraq, but also for any future expeditionary operations, on 
a legislative ``stand-by'' basis.
    Fifth, and finally, we recommend that Congress provide ``stand-by'' 
legislation to waive small business and U.S. labor provisions, Buy 
American, Berry Amendment, Specialty Metals and other such provisions 
to allow rapid, local buying, if required, in expeditionary operations. 
In Iraq, a "Buy America" waiver exists, but again this is specific to 
the current operation and therefore not available to any future 
expedition.
    The preceding are just some highlights of the many recommendations 
contained in the report, but which are particularly relevant for 
today's purposes because they require Congressional action. In 
addition, the report includes recommended actions for the Secretary of 
the Army and the Secretary of Defense. The Commission has briefed both 
Secretaries, concurrent with the report's publication and release. Both 
Secretaries indicated that they fully support the committee's report 
and have begun to move out quickly on its recommendations. But they 
need congressional help on key aspects of the report, which I have 
highlighted here today.
    Additionally, the Chairman of the House Armed Services Committee 
released a statement on November 1 saying that ``Congress will 
seriously consider the Commission's recommendations, particularly those 
that require legislative action.''
    Given the importance and urgency of these actions in support of our 
troops, the Commission is hopeful that Congress will consider some out-
of-cycle action to address the recommendations I have outlined today.
    In closing, I would like to observe that too often it takes a 
crisis to bring about major change. We believe the Iraq/Kuwait/
Afghanistan contracting problems have created such a crisis! Changes 
are urgently required in the area of Army contracting--especially 
directed to future expeditionary operations. These changes are 
essential to make the Institutional Army the ``Generating Force'' in 
both name and capability. It is up to the military and secretariat 
leadership (both in the Army and the overall DOD) to bring about the 
needed changes. They cannot make many of the necessary improvements 
without congressional assistance.
    I hope you will agree and provide that needed support. Our troops 
deserve it.
    This concludes my prepared statement.

    Senator Akaka. Thank you very much for your statement.
    Now let me call on Secretary Bolton for your statement.

STATEMENT OF HON. CLAUDE M. BOLTON, JR., ASSISTANT SECRETARY OF 
     THE ARMY FOR ACQUISITION, LOGISTICS, AND TECHNOLOGY; 
 ACCOMPANIED BY LTG ROSS N. THOMPSON III, USA, MILITARY DEPUTY 
    TO THE ASSISTANT SECRETARY OF THE ARMY FOR ACQUISITION, 
  LOGISTICS, AND TECHNOLOGY; AND KATHRYN A. CONDON, EXECUTIVE 
    DEPUTY TO THE COMMANDING GENERAL, ARMY MATERIEL COMMAND

    General Bolton. Thank you, Mr. Chairman, and good 
afternoon.
    Mr. Chairman, Senator Thune, distinguished members of the 
Subcommittee on Readiness and Management Support, first of all, 
let me thank you, Mr. Chairman, for your kind words at the 
beginning of this hearing, and those of Senator Inhofe. You're 
correct, I will step down after 6 years--next month, 6 years to 
the day--and I can tell you that it's been a joy, an honor 
serving the men and women who are on point for us in the United 
States Army. I want to take this time to thank you and the 
other members of this subcommittee for your support to the Army 
and to me over these last 6 years. The issues that we have 
faced have been critical, and with your help, we were able to 
get through all of them. We're about to discuss, in this 
hearing this afternoon, another very important topic that, from 
my confirmation hearing to today, I have always emphasized the 
need for addressing what Jacques Gansler and his Commission has 
already done.
    I thank you for the opportunity to appear before you on the 
Report of the Commission on Army Acquisition and Program 
Management in Expeditionary Operations, chaired by Dr. Jacques 
Gansler, and the complementary in-house Army Contracting Task 
Force, co-chaired by my military deputy, Lieutenant General 
Ross Thompson and Kathryn Condon, the Executive Deputy to the 
Commanding General at the Army Materiel Command, both of whom 
join me here today. We have a joint written statement that I 
respectfully request be made a part of the record for today's 
hearing.
    Mr. Chairman, I would like to take this opportunity to 
commend Dr. Gansler and his Commission members and staff on 
their good work. I would also like to commend General Thompson 
and Ms. Condon for their work.
    If I may emphasize a point also made just moments ago by 
Dr. Gansler, that his Commission looked at the long-term 
strategic view of the Army's acquisition and contracting system 
in support of expeditionary operations, the Army Contracting 
Task Force reviewed current contracting operations and took 
immediate actions, as warranted. The two efforts combined have 
given the Army a clear way ahead.
    Secretary of the Army Pete Geren has directed swift 
implementation of specific recommendations of both the 
Commission and the Task Force. For example, the Army is 
accelerating plans to set up the military structure recommended 
by the Commission. The Army has approved a two-star-level Army 
Contracting Command organization under the Army Materiel 
Command, including two subordinate commands, a one-star 
Expeditionary Contracting Command and a restructured one-star-
level Installation Contracting Organization. The Army also 
plans to grow the military contracting structure in line with 
the Commission's recommendations by approximately 400 soldiers, 
and our civilian contracting workforce by an additional 1,000 
professionals.
    A critically important issue, Mr. Chairman, is the size, 
structure, and training of the contracting workforce, both 
civilian and military. The acquisition workforce has declined 
significantly in the last decade, while the number of dollars 
that are executed by the Army has increased by more than 80 
percent. The United States Army has never fought an extended 
conflict that required such reliance on contractor support.
    We are currently addressing the need to expand, train, 
structure, and empower our contracting personnel to support a 
full range of military operations. We're also initiating 
discussions with leaders of the contracting communities in the 
Navy, Air Force, and the Defense Logistics Agency to explore 
increased collaboration and workload distribution.
    Expeditionary operations in Iraq/Afghanistan have placed 
extraordinary demands on the contracting system and our 
contracting support personnel. The Army has deployed more than 
550,000 soldiers through Kuwait. We went from supporting one 
Kuwait base camp in 2002 to supporting eight in 2007, which 
required increased capacity in billeting, feeding, and general 
support. In Kuwait alone, the annual value of contract support 
increased from $150 million in 2002 to nearly $1 billion in 
2006.
    Mr. Chairman, the vast majority of our military and 
civilian contracting personnel perform well in tough and 
austere conditions. The Army is working hard to ensure that 
policies/procedures are in place for all joint expeditionary 
contracting operations. The success of our warfighters is 
linked directly to the success of the contracting workforce.
    One of the things that you asked me, Mr. Chairman--when we 
met last April--relates to what we're going to talk about 
today, and that's the size of the acquisition workforce and the 
adequacy of that workforce. I mentioned to you then, I 
paraphrased when I said in my confirmation testimony, that, in 
my view--and this was in 2001, when I appeared before the 
committee--that, during my tenure, nearly 50 percent of the 
acquisition workforce was eligible to retire. A lot of that has 
come to pass.
    Last Friday, for example, I retired the most experienced 
program executive officer that the Army has--33\1/2\ years, 10 
years in that position. While the officer who replaced him is 
well qualified and experienced, he does not have 33\1/2\ years 
of experience. That is something you cannot do overnight. Every 
testimony that I've given in every hearing on this Hill, the 
last paragraph has always addressed the need to look at the 
workforce--contracting, engineers, program managers--because we 
have allowed that valuable workforce, talented workforce, to 
atrophy over the last 10 to 15 years, and we must get that 
back.
    We have the world's finest Army--the most powerful, the 
most capable, the most respected the world has ever known. It's 
that way because of the leadership, the men and women who 
occupy the ranks, the training, and the equipment. The 
equipment is world-class, and the equipment is because of the 
acquisition workforce contracting a big part of that. If we do 
not get that right, I submit that our military of the future 
will suffer greatly.
    Mr. Chairman, I thank you for allowing the opportunity to 
appear here this afternoon. I welcome this opportunity. That 
concludes my remarks, and I look forward to your questions.
    [The joint prepared statement of Secretary Bolton, General 
Thompson, and Ms. Condon follows:]

  Joint Prepared Statement by Hon. Claude M. Bolton, Jr., LTG N. Ross 
                Thompson III, USA, and Kathryn A. Condon

                              INTRODUCTION

    Chairman Akaka, Senator Thune, and distinguished members of the 
Armed Services Committee: We thank you for the opportunity to report to 
you on the U.S. Army's comprehensive, ongoing efforts to ensure 
policies and procedures are in place for all joint, expeditionary 
contracting operations in Iraq, Afghanistan, and Kuwait, and to better 
prepare the Army for acquisition and logistical support of combat 
operations in the future.
    The candid and comprehensive report, by Dr. Jacques Gansler and the 
Members of his Commission on Army Acquisition and Program Management in 
Expeditionary Operations on the U.S. Army's acquisition and contracting 
system, has given us insights for the way ahead. The Commission made 
four overarching recommendations to ensure the success of future 
expeditionary operations:

          (1) Increase the stature, quantity, and career development of 
        military and civilian contracting personnel, particularly for 
        expeditionary operations;
          (2) Restructure organization and restore responsibility to 
        facilitate contracting and contract management;
          (3) Provide training and tools for overall contracting 
        activities in expeditionary operations; and
          (4) Obtain legislative, regulatory, and policy assistance to 
        enable contracting effectiveness in expeditionary operations.

    The Commission's four key recommendations for improvement are 
consistent with the issues identified by the Army Contracting Study 
completed in 2005 and the Army Contracting Task Force, which was Co-
Chaired by LTG N. Ross Thompson III, USA, and Kathryn A. Condon, the 
Executive Deputy to the Commanding General at the U.S. Army Materiel 
Command. The Army is aggressively addressing the structural weaknesses 
and shortcomings identified in order to improve current and future 
expeditionary contracting activities. Our actions stretch across the 
Army and include an ongoing, comprehensive review of doctrine, 
organization, training, materiel, leader development, personnel and 
facilities.
    It is important to emphasize that Dr. Gansler's Commission was 
chartered to look at the long-term, strategic view of the Army's 
acquisition and contracting system in support of expeditionary 
operations. To complement the Commission's strategic review, the Army 
Contracting Task Force was formed to review current contracting 
operations and take immediate action where appropriate. The Secretary 
of the Army has directed the Commanding General of the Army Materiel 
Command, General Benjamin Griffin, to report to him, through the acting 
Under Secretary of the Army, Nelson M. Ford, to implement specific 
recommendations of both the Gansler Commission and the Army Contracting 
Task Force as expeditiously as possible. For example, the Army is 
accelerating plans to set-up the military structure recommended by the 
Commission.
    The Army has approved a two star-level Army Contracting Command 
organization under Army Materiel Command, including two subordinate 
commands; a one-star expeditionary contracting command and a 
restructured one-star level installation contracting organization. The 
Army is in the process of identifying the individuals by name to lead 
these organizations. We plan to grow our military contracting structure 
in the Active Force in line with the Commission recommendations by 
approximately 400 soldiers and our civilian contracting workforce by an 
additional 1,000 members.

                           U.S. ARMY ACTIONS

    As a result of the ongoing operations in Southwest Asia, the Army 
has increased the focus on contingency contracting. Up until just a 
year ago, we did not have a defined contingency contracting structure 
to support expeditionary operations or support a modular Army. We 
recently established a contingency contracting structure that consists 
of contracting support brigades, contingency contracting battalions, 
and four-person contingency contracting teams. Each contracting support 
brigade is commanded by a colonel, who assists the Army Service 
Component Commander (ASCC), a three star commander, in his contracting 
support--planning and coordinating contracting operations in a theater 
of operations. The brigades oversee contingency contracting battalions 
and teams--Active, Reserve, and National Guard--in executing the ASCC's 
contracting support plan. The Contracting Support Brigades' battalions 
and teams are just now being activated, and they will coordinate and 
integrate their plans with Army Field Support Brigades. These two new 
brigade designs are designed to support the Army modular force by 
developing a single, seamless, fully integrated planning cell to 
provide quick response and command and control of acquisition, 
logistics, and technology capabilities across the spectrum of conflict. 
As a result of the work of the Gansler Commission and the Army 
Contracting Task Force, we are planning to increase the number of 
brigades, battalions, and teams to better posture the Army to support 
contingency operations.
    As the scope and scale of contracting in Southwest Asia evolved, 
the Army recognized the need to assess its contract management 
capacity. The Army conducted audits and investigations into the 
oversight, execution, and management of contracting in the theater of 
operations, and these audits and investigations are ongoing. While the 
vast majority of our military and civilian contracting personnel who 
award and manage these contracts perform well in extreme conditions, 
auditors and investigators discovered cases of potential fraud in 
contracting operations with the worst cases originating in Kuwait. 
Currently, there are 80 ongoing criminal investigations involving 
contract fraud committed against the U.S. military in the Iraq, 
Afghanistan, and Kuwait theater of operations. The Army acted 
decisively to correct deficiencies specifically identified in Kuwait 
with the following agencies involved in corrective actions: the U.S. 
Army Audit Agency (AAA); the U.S. Army Criminal Investigation Command 
(CID); the U.S. Army Contracting Agency; the U.S. Army Materiel Command 
(AMC); and the U.S. Army Sustainment Command, all working in 
cooperation with the Defense Contract Management Agency.
    In 2005, the Army began audits and CID increased investigative 
activity into allegations of corrupt contracting in Southwest Asia. 
Deployed commanders also expressed their concerns and requested the 
Army to send in additional CID Special Agents and auditors from AAA and 
from CID. In 2005, CID established the Iraq Fraud Detachment and in 
2006, CID established the Kuwait Fraud Office--both staffed with 
specially trained CID Special Agents. Throughout these investigations, 
the Army has updated Congress and taken corrective actions as 
warranted.
    In February 2007, after then-Secretary of the Army, Dr. Francis 
Harvey, was briefed on the matter, he directed further action to 
correct deficiencies, including an assessment of contracting activities 
throughout Central Command and implementation of a Corrective Action 
Plan to address issues.
    As a result, in March 2007, a senior Contracting Operations Review 
Team was deployed to review all contract operations in theater. In 
April 2007, the Army began implementing a Contracting Action Plan that 
reorganized the Kuwait Contracting Office, installed new leadership, 
established a Joint Logistics Procurement Support Board, increased 
staffing, deployed senior contracting professionals and attorneys to 
Kuwait, and provided additional ethics training and assigned legal 
support.
    In addition, the Army published the following guidance designed to 
improve management of service acquisitions and to strengthen oversight, 
surveillance and documentation of contractor's performance.

          (1) The Army's Source Selection Manual was revised and 
        incorporated into our acquisition supplement. It is a 
        comprehensive source selection tool designed to provide 
        flexibility in the source selection process while enabling Army 
        contracting officers to design and execute their source 
        selection plans and Requests for Proposal (RFPs) to provide 
        optimum solutions to meet their customers needs. Source 
        selection training is now required for every source selection 
        team member to ensure they understand their roles and 
        responsibilities.
          (2) In response to section 812 of the National Defense 
        Authorization Act for Fiscal Year 2006, we adjusted our 
        management framework for review and approval of service 
        contracts at both the strategic and tactical levels. Since 
        2003, the Deputy Assistant Secretary of the Army for Policy and 
        Procurement, along with other key senior Army leaders, has 
        reviewed and approved service strategies with a combined total 
        value greater than $231 billion.
          (3) Contracting officers have been directed to appoint a 
        trained contracting officer's representative (COR) for every 
        service contract awarded with an estimated value greater than 
        $2,500. To ensure that systematic quality assurance methods are 
        used during contract administration, quality assurance 
        surveillance plans must also be prepared and implemented.
          (4) A standard, minimum training requirement has been 
        established for Army CORs. They must complete the Defense 
        Acquisition University on-line continuous learning module, 
        ``COR with a Mission Focus,'' prior to appointment. As of 
        November 1, 2007, over 4,500 Army personnel have completed this 
        course.
          (5) Acquisition leadership reiterated the requirement for 
        contractor performance to be adequately documented and 
        performance reports prepared, entered, and maintained in our 
        performance assessment systems. We will not allow poor 
        performers to be rewarded with more work.
          (6) A reminder was sent to the entire Army Acquisition 
        workforce addressing their responsibilities as public servants 
        and stewards of the taxpayer's investment and exhorting them to 
        ensure that their actions remain above reproach, both in 
        reality and appearance.

    Written guidance is of no benefit, unless it is executed by a 
capable, trained workforce. Recognizing this need, the Army convened 
the first Army Procuring Contracting Officer (PCO) Training symposium. 
Over 500 PCOs were trained in critical areas now demanding increased 
proficiency. A wide range of topics were covered, including cost and 
pricing and source selection requirements as well as contracting 
integrity. The Army has also initiated training for our Heads of 
Contracting Activities to heighten their awareness of roles and 
responsibilities associated with supporting the mission of their 
command in the contracting arena.
    Upholding the highest ethical standards while discharging our 
duties is of paramount concern and while we have confidence in the 
talent and professionalism of the Army's acquisition workforce, we must 
remain vigilant to potential compromises of integrity. We are actively 
engaged in the DOD efforts to eliminate areas of vulnerability within 
Defense contracting. The ASA(ALT) staff is leading a subcommittee 
effort looking at Sustained Senior Leadership issues and other 
personnel from the organization are reviewing areas associated with 
proper contract surveillance. To obtain an Army-wide perspective on 
procurement operations we recently chartered a corresponding Army 
Contracting Integrity Panel. We've requested membership from each Army 
functional area involved with contracting. The panel will examine 
contracting integrity drivers that have the greatest impact on 
vulnerabilities relating to fraud, waste and abuse in our contracting 
system.
    As previously mentioned, the Army Contracting Task Force mission 
was to examine current Army operations and future plans for providing 
contracting support to contingency or other military operations. The 
Task Force looked at contracting activities across the Army. There is 
contract authority in many of the commands in the Army, and that 
contract authority is delegated from the Assistant Secretary position 
to the head of contracting activities in different organizations and 
commands within the Army. In addition, the Task Force studied actions 
of AAA and CID for both insight and lessons learned.
    In the short-term, the Army augmented the staff in Kuwait with 
additional individuals to assist the warfighter in translating their 
requirements into statements of work and additional contract 
specialists and contracting officers to facilitate contract execution 
of those requirements. This augmentation is short-term, about 90 days, 
and is designed to make sure that the commander there has the resources 
needed to deal with the present workload. Part of that additional 
workload is the orderly transfer of existing and any future major 
contract actions to the acquisition center at Rock Island, Illinois, 
that supports the Army Sustainment Command under AMC. By the end of the 
90-day period, we expect the staff level to number around 50 people 
manning the contracting office in Kuwait.
    The Acquisition Center at Rock Island established a dedicated team 
of nine contracting experts with the support of legal experts focused 
solely on large dollar contracts in support of Kuwait operations. This 
team is ensuring all past and future contract actions associated with 
these large dollar contracts are executed in accordance with all laws 
and regulations. The team is resolving a number of claim actions, 
definitizing unpriced actions, and issuing new solicitations for 
requirements such as non-tactical vehicles. We expect to keep this team 
in place for the duration of the conflict.
    The Army is systematically reviewing all of the Kuwait contract 
files from fiscal year 2003 to fiscal year 2006 to identify any issues 
that haven't otherwise been addressed by an ongoing investigation by 
either AAA or CID. During this time period there were approximately 
6,000 contracts awarded (totaling about 18,000 contract actions) by the 
Kuwait contracting office, so we are initially using a sampling 
technique to determine if there are any additional indications of 
fraudulent activity. So, this is quite an undertaking, but it is 
important to ensure we have reviewed the files thoroughly. The review 
of contract actions is taking place both in Kuwait where contracts 
under $25,000 are being examined and at AMC's Acquisition Center in 
Warren, Michigan, where the review team is looking at contracts over 
$25,000 with the assistance of U.S. Air Force and U.S. Navy contracting 
experts. We are also working with the AAA, CID, and the Assistant 
Secretary of the Army for Financial Management and Comptroller in 
reviewing financial data to determine if appropriate disbursement and 
accounting of payments have been made. Initial and ongoing review of 
all contracts and contract actions has revealed no additional 
fraudulent activities to date.
    We are increasing Contracting Operation Reviews in both scope and 
frequency. The Army periodically conducts Contract Operations Reviews 
looking at contracting organizations to make sure that contracting 
activities are following the regulations and procedures and 
appropriately addressing emerging issues. These reviews are part of the 
routine examination of contracting activities along with internal 
review audits by the AAA and the Army and Department of Defense 
Inspectors General.
    A critically important issue is the size, structure, and training 
of the contracting workforce--both military and civilian. The 
acquisition workforce has declined significantly in the last decade 
while the number of dollars that we are executing in the Army has 
increased by more than 80 percent. The U.S. Army has never fought an 
extended conflict that required such reliance on contractor support. We 
are currently addressing the need to expand, train, structure, and 
empower our contracting personnel to support the full range of military 
operations. We have increased the number of contracting interns and are 
pursuing associated increases in training funds. We are partnering with 
the Defense Acquisition University and state and local universities to 
incorporate contracting courses into their curriculums. Our goal is to 
bring more qualified, trained individuals into the workforce at an 
accelerated pace and ultimately perform at the jouneyman level in a 
shorter period. We are also initiating discussions with leaders of the 
contracting communities in the U.S. Navy, U.S. Air Force, and the 
Defense Logistics Agency to explore increased collaboration and 
workload distribution.

                               CONCLUSION

    As stewards of the taxpayers' dollars, the Army must do a better 
job of managing and documenting contractor performance. Service and 
construction contracts, whether in Iraq, Afghanistan, the United 
States, or elsewhere in the world, represent an ever-increasing 
percentage of our overall contract dollars--now surpassing the dollars 
awarded under major weapon systems programs. Greater emphasis must be 
placed on the management and oversight of all types of service and 
construction contracts. This includes documenting the contractor's 
performance in accordance with policy.
    Expeditionary military operations in Iraq and Afghanistan have 
placed extraordinary demands on the contracting system and our 
contracting support personnel. As stated before, the vast majority of 
our military and civilian contracting personnel perform well in tough, 
austere conditions. Their customers are the warfighters--the men and 
women who depend on them to do their jobs. In the end, the success of 
our warfighters is linked directly to the success of the contracting 
workforce. We are working hard to ensure that policies and procedures 
are in place for all joint, expeditionary contracting operations in 
Iraq, Afghanistan, and Kuwait or anywhere else we deploy. The objective 
is to better prepare the Army for acquisition and logistical support of 
combat operations in the future.
    We look forward to your questions and thank you for the opportunity 
to address the members of the committee.

    Senator Akaka. Thank you. Thank you very much, Secretary 
Bolton.
    We have been joined by the chairman of the Senate Armed 
Services Committee, Senator Levin, and I would like to ask 
Senator Levin whether he has any remarks to make before we 
begin any questions.
    Senator Levin. I'll wait until my questions. Thank you, Mr. 
Chairman.
    Senator Akaka. All right. Thank you very much.
    I want to thank you again, Secretary Bolton, for your 
testimony and I'd like to ask a question of both you and 
General Thompson. The Gansler Commission report states that the 
Army's difficulty in adjusting to the singular problem of 
Kuwait, Iraq, and Afghanistan, is in large part due to the fact 
that there are no generals assigned to contracting 
responsibilities. The Commission recommends that Congress 
authorize, ``a core set of 10 additional general officers for 
contracting positions.'' My question to you, Secretary Bolton 
and General Thompson, does the Secretary of the Army and Office 
of the Secretary of Defense concur with this recommendation?
    Secretary Bolton. Mr. Chairman, I cannot speak for the DOD; 
however, Secretary Geren has reviewed the recommendations, and 
supports them. He has asked the Task Force, co-chaired by 
General Thompson and Ms. Condon, to review those 
recommendations and give him a plan for implementing those, and 
that includes looking at the general officers. That's five. I 
cannot comment on what the Department will do on that.
    General Thompson. Mr. Chairman, I have a meeting next week 
with the head of our General Officer Management Office, and one 
of the topics of conversation is the support of those five 
positions. I do agree, personally--and Ms. Condon and I, on the 
Task Force, agree with the Gansler Commission recommendations, 
that there is a need for general officers at the top of the 
contracting structure. That gives a clear signal to the people 
that--our military people--their service is valued, and that 
there is an opportunity at the top of the structure, should 
they stick with us and perform throughout their careers. I 
think you will see the Army reflect its support of that in the 
very near term, here, as we pick officers for the next set of 
brigadier generals and then the assignment of the officers off 
of that selection list, subject to confirmation by the Senate.
    Senator Akaka. I heard the recommendations by Secretary 
Bolton. Let me ask you this question. Can we expect to see a 
legislative proposal from the Department in this regard? 
Second, how long do you think it will take for the Army to 
staff these new positions you are recommending?
    Secretary Bolton. I think on the positions, in terms of the 
flag officers, we're working that as we speak. General Thompson 
just alluded to what we're going to be doing over the next few 
days. So, that's in the work, and we're working that.
    With regard to legislative proposals, as we go through and 
look at what Dr. Gansler has offered us, there will be 
opportunities, I'm sure, to make proposals. Of course, the 
Commission has already recommended some of those.
    My view is--and I agree with a number of those--I would 
love to work within the laws that we currently have, within the 
rules and regulations we currently have. It is clear we'll need 
some legislative support, but my view is, we have enough 
flexibility now to do some things that need to be done that are 
recommended by the Gansler report, and we ought to do those, as 
well.
    Senator Akaka. Secretary Bolton and General Thompson, the 
Gansler Commission report states that, ``The number and 
expertise of military contracting professionals must be 
significantly increased,'' to address the problems we have 
experienced in theater. Consequently, the Commission recommends 
that the Army hire, as was mentioned, 2,000 new contracting 
personnel.
    Secretary Bolton, you have told this committee, on many 
occasions, that the Army does not have the acquisition 
workforce it needs. Most recently, you told us last April that 
the Army does not have a sufficient number of contracting 
officers and contract administrators, and that you were working 
on the problem.
    Secretary Bolton and General Thompson, do you believe that 
you now have the support you need within the Department of the 
Army to address this problem, including the support of the 
Secretary of the Army and the support of the Secretary of 
Defense?
    Secretary Bolton. I believe we have won the attention of 
the DOD, as well as the Army. I believe we have the support of 
both. I know that's true for Secretary Geren. It's regrettable 
that it took a crisis such as this to really highlight that for 
everyone, but my discussions with the Secretary clearly 
indicate that we have his support, and his energetic support, 
in making sure that we not only fix this in the short-term, but 
fix it for the long-term.
    Senator Akaka. General Thompson, would you comment on that?
    General Thompson. Mr. Chairman, I agree with what Secretary 
Bolton stated, that we do have the strong support of Secretary 
Geren, and I think that strong support is reflected in the 
statement for the record today, where you'll see us endorsing 
the Gansler Commission recommendation to grow the military 
contracting workforce by 400 and to grow the civilian 
contracting workforce in the Army by about 1,000.
    Ms. Condon and I, over the same period of time that Dr. 
Gansler's Commission was working, have done the analytical work 
to justify those positions from a workload perspective. As a 
matter of fact, next week the military contracting structure 
will be formally submitted to the Army's force structure 
process, which is the way we go through to document the 
positions and to begin to do the necessary actions to stand up 
the units and to begin the recruitment action.
    So, I do strongly believe that the Army is fully behind 
this. The remaining 600 positions that Dr. Gansler referred to 
in his report are positions in support of the Army that would 
be part of the DCMA. This morning, as a matter of fact, there 
was a joint meeting between the Army and the DCMA to get to the 
analytical details about the workload justification for that so 
we could also make the case before the resourcing process and 
the force structure process, in the Army and in the Defense 
Department, that those positions are both necessary and will be 
supported.
    Senator Akaka. Before I pass on to Senator Thune, let me 
ask this question of both of you. How long do you think it will 
take the Army to fill the new contracting positions recommended 
by the Commission? Do you have plans to establish interim 
milestones so that we can monitor your progress?
    Secretary Bolton. I'll let General Thompson talk about the 
details. I think, at the top level, over the next year we'll 
have a good handle on that. I mean that sincerely, even though 
I won't be there. I know the Army will press forward on that.
    The real question, Mr. Chairman, is, how long does it take 
to get experienced contract personnel? That's about a 5-year 
period, to get them recruited, trained, moved through the 
various offices, and enough experience that I would feel 
comfortable putting them in the field, particularly in a place 
like Kuwait or Iraq.
    But, in terms of moving out immediately, we're going out 
and finding as many people as we can.
    General Thompson. Sir, once we document the positions, you 
begin the recruitment process, both with the civilians and the 
military. I believe it's going to take us 2 to 3 years to fill 
that number of positions. I do agree with Secretary Bolton that 
it's probably about 5 to 10 years before you get those people 
to the level of training and certification and experience that 
they need to be able to operate somewhat independently. So, my 
answer would be, probably, 2 to 3 years to fill that structure, 
beginning immediately, and part of that is just a reflection of 
the demographics on the military recruiting; then, in a very 
low unemployment market, we have to make sure that we get the 
message across to the civilian workforce that we want to bring 
in as interns and make contracting professionals for the Army 
and DOD, that this is a viable and a lucrative career field, 
and that we value their service, and we have to put the right 
recruiting incentives, and pay and bonus incentives there to be 
able to bring them in, and then retain them once we bring them 
in.
    Senator Akaka. Thank you.
    Senator Thune.
    Senator Thune. Thank you, Mr. Chairman.
    Again, thank you all for your testimony. Thank you, Dr. 
Gansler and members of your Commission, for a very complete and 
thorough report.
    You've all, I think, answered this already in your 
testimony in response to Senator Akaka's questions, but the 
Army and the Defense Department seem to support and embrace 
many of the report's recommendations. My understanding is that 
the Under Secretary of Defense for Acquisitions, Technology, 
and Logistics, John Young, was going to issue a Department-wide 
directive on the report. Do you know if that's been done?
    Secretary Bolton. I don't know.
    General Thompson. Sir, to my knowledge, that's not been 
done. I do know that there's a number of actions that are 
ongoing between the Office of Secretary of Defense and the 
Services. One of those, in particular, that I am actively 
participating in as a senior member for the Army is the 
response to the section 854 that addresses contingency 
contracting. I was at a meeting just 10 days ago with the 
senior representatives from all the Services and also the 
Secretary of Defense. I do know, because I have talked, not 
directly to Mr. Young, but to his executive assistant, that he 
embraces the recommendations of the Gansler Commission--``he,'' 
Dr. Young--and is going to work with his staff in order to make 
sure that there's consistency across the OSD staff and across 
the DOD to implement the recommendations.
    Senator Thune. Dr. Gansler, the Army has been actively 
engaged in trying to better use its Senior Executive Service 
(SES) in support missions. It seems to me that contracting 
capability could be an area in which the total force, 
especially civilian employees, could help take some of the 
pressure off the uniformed force. But you call for the 
establishment of only one SES billet, five general-officer Army 
billets--some will argue that uniformed personnel simply cannot 
be looked to, in the current force structure, to perform and 
oversee combat support missions that can be undertaken by a 
civilian workforce. Why are they wrong on that?
    Dr. Gansler. Let me begin by pointing out that 97 percent 
of the contracting personnel in the Army are civilians, and 
it's the 3 percent we're trying to increase. In addition, we 
feel that in a war zone it's very important to have military 
leadership and to represent the function at the highest levels 
in the planning functions, in the requirements definition 
functions, and, of course, in the implementation and the 
management functions. So, we think that we want to emphasize--
not that the civilians aren't doing their job and that they're 
very, very dedicated--that we also emphasize we need more of 
them. You notice the numbers we asked for were 400 of the 
military and 1,000 of the civilian, so we also feel the 
civilians need to be increased. But we feel that this is a 
function--in a war zone--in which the military clearly needs to 
play a role.
    Now, the DCMA is a joint agency which has both military and 
civilians in it, and that's one that does fit under the Under 
Secretary of Defense for Acquisition, Technology, and 
Logistics--John Young's role. The changing of that function is 
one of his responsibilities. The staffing of that, the 
additional 580 or 600 people that we talked about for the Army 
will also have to be people contributed by the Navy and the Air 
Force into that organization, and their role increased, in 
terms of the DCMA. I do know that Secretary Gates has been 
concerned to make sure that the Air Force and Navy step up to 
this responsibility of our overall recommendations. It's not 
just the Army that fits into this. It's OSD because of the 
DCMA. It's also OSD because they establish broad policy in the 
overall DOD contracting activities. The other Services have 
somewhat downgraded their contracting responsibilities and need 
to step back up to that, as well.
    Senator Thune. Secretary Bolton, do you agree with Dr. 
Gansler's response?
    Secretary Bolton. Yes.
    Senator Thune. Dr. Gansler, assume, for the sake of 
argument, that the Army can't obtain relief from legal 
constraints on the number of general officers and cannot 
overcome practical limits on the ability to train and reassign 
more soldiers into the contracting career field. What other 
steps can and should be taken quickly to improve the Army's 
contracting capability?
    Dr. Gansler. The reorganization that we suggested can be 
done without waiting until you get the full complement of 
general officers; they can be filled by senior civilians in 
those positions. That can be done immediately. As Secretary 
Bolton pointed out--they've already started moving out on some 
of those organizational changes. Since there are no Army 
general officers to fill those positions, they're going to have 
to fill them, initially, with senior civilians, and that will 
at least recognize the structure. They can also start 
immediately, as General Thompson said, to promote one or two of 
the key people into the contracting field to give out a signal 
to the overall contracting corps from the military side that 
this is a career path.
    From the civilian side, I think Congress can do something 
about recognizing the fact that you're asking these people to 
volunteer to go into a war zone and not compensating them 
appropriately. I think that's not supporting the troops 
adequately, and I think that's something that can be done, as 
well.
    So, there are actions that can be taken, even though you 
can't instantly go out with a chicken hook and bring in all 
these experienced contracting people--they're just not there, 
and they're very much in demand--but you can create incentives, 
both for the military and the civilians, to start actions 
immediately.
    Senator Thune. The report rightly makes the point that, in 
the future, the Defense Department will be conducting more 
joint and expeditionary operations, but the report's focus was 
largely on shoring up the Army's expeditionary contracting 
capability. What do your Commission's findings mean for joint 
expeditionary contracting capability? If there are problems on 
this broader level, given the likelihood that expeditionary 
operations will be more joint in the future, why should 
recommended solutions not be more joint in nature than was 
proposed by your Commission?
    Dr. Gansler. We actually do emphasize the jointness. In 
fact, the DCMA is a joint agency. That will be--the post-award 
period--doing all of the implementation, military and 
civilians, from that organization. We did hear from people in 
the Air Force and Navy that they have a need to step up more to 
the contracting world as well, and to the whole acquisition 
arena. In a wartime environment, that has not received the 
attention that it needs, and we do believe that future 
operations will not only be joint, but will be expeditionary 
and, therefore, of the type we addressed explicitly.
    I would even go a little further and say, because they're 
going to be political/military operations, that we're going to 
have to work out with the State Department and AID in these 
environments, as well.
    General Thompson. Senator, if I could just add a couple of 
points on that. The Joint Contracting Command in Iraq today, 
currently headed by an Air Force major general to be replaced 
by a Navy admiral, here, in January, but the previous two 
commanders of that organization were Army general officers. The 
first commander was Brigadier General Steve Seay, and the 
second commander of the Joint Contracting Command was Major 
General John Urias. The individuals performing the contracting 
function underneath that joint command were from all Services. 
Because of the small number of military officers, and before--
no noncommissioned officers, and I'll get to that in a minute--
the preponderance of the staff in that Joint Contracting 
Command are Air Force, because there's about 2,000 military 
contracting officers in the Air Force, both officer and 
noncommissioned officer.
    I do know as part of this group that I'm part of, on the 
cost of DOD, we are putting dedicated planners with each 
combatant command to plan for, in the war plans, contracting, 
and support with contracting, and the plan for that in the 
exercises, so to make sure that linkage is there. There's also 
going to be some emphasis on putting the right planning cell 
with the Joint Forces Command as they have their global force 
management responsibilities, and also look at exercises across 
DOD.
    No different than the normal way the military brings forces 
together, you plan for it, you have that structure there, but, 
when it's time to execute a mission--be it Iraq or someplace 
else, in the future--you would bring in the members of the 
Service--all Services, that have contracting expertise, fall 
them into a joint structure that you define ahead of time, and 
that you planned for ahead of time. Arguably, that didn't 
happen over the last few years. It was really a pickup game, 
and we've evolved to where we are today. The clear recognition 
across DOD right now is, we can't let that happen in the 
future.
    Senator Thune. Good. Thank you.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much, Senator Thune.
    Let me call on Senator McCaskill.
    Senator McCaskill. Thank you, Mr. Chairman.
    First, I want to thank all of you for being here, and 
Secretary Bolton, for your service. I have visited with several 
of you before, as you are, maybe, painfully aware. [Laughter.]
    I am deeply concerned about this area of our competency 
within our military, and I spent my trip to Iraq looking at 
these issues. I am now aware that there are approximately 300 
different reports that have been issued by someone, surrounding 
the issue of contracting problems in Iraq, whether it is 
military support or reconstruction.
    The reports that you referenced--in fact, the Commission 
that you all worked on, Ms. Condon and General Thompson--that 
was over 2 years ago. I see the word ``urgent'' on this report. 
I hear the word ``crisis.'' I have to tell you, when we decided 
to move thousands of people into harm's way in the surge plan, 
that's how our military normally reacts to a crisis in the 
mission. Can someone explain to me how in the world this has 
gone on year after year after year, committee hearing after 
committee hearing, report after report after report, and yet we 
still don't have anyone who is saying, ``This is getting 
fixed.''
    How many of you have read the ``Lessons Learned'' in Bosnia 
on contracting? Okay. Now, it is a really scary thing to read, 
because--guess what?--it's everything you're saying. These were 
lessons learned in Bosnia, and now we have tens of billions of 
dollars that have gone down the drain. The bottom line is, I 
think we all acknowledge, contracting is here to stay in the 
active military. Would any of you disagree with that?
    Do any of you think we're ever going to go back to the time 
where a soldier is peeling a potato, cleaning a latrine, or 
driving supply trucks? So, if that's the case--now, when they 
were, when my dad was peeling potatoes in World War II, there 
was somebody in a uniform he was answerable to. He knew if he 
did a good job, he had a chance to move up; and, if he didn't, 
there was big trouble.
    Meanwhile, we gave KBR all their performance bonuses, when 
their performance was terrible under the LOGCAP contract. 
Frankly, Secretary Bolton, you defended that in April in our 
exchange, and you said you trusted the people in the field. 
Then this report says we can't trust the people in the field, 
because they don't have the core competency of contracting.
    Now, when you say you're moving into getting 400 more 
people, how quickly will there be sufficient contracting 
oversight in Iraq over the LOGCAP contract? How soon?
    Secretary Bolton. I think, with regard to LOGCAP--and let's 
understand the differences between the operation in Kuwait, 
which does not have LOGCAP----
    Senator McCaskill. Correct.
    Secretary Bolton.--which also does not have DCMA. Within 
Iraq, we have DCMA to monitor the actual performance of the 
contract, along with a number of other folks, to include the 
special IG, the regular IG, the audit folks, the triple-A, as 
well as CID, all to look at that. Because you pointed it out, 
there have been many, many reports on that, and you and I have 
discussed those. So, I think, in terms of the immediacy of 
oversight, there is a lot of oversight, plus the Joint 
Contracting Command.
    Senator McCaskill. I'm talking about the core competency, 
though, Secretary. I'm talking about the contracting officer 
representatives (CORs), I'm talking about the people on the 
ground that are seeing whether those trucks are being burned--
--
    Secretary Bolton. Yes.
    Senator McCaskill.--for profit or whether those people are 
actually working when we're paying them to work. When will we 
have that training and that core competency with those CORs?
    Secretary Bolton. I think, within Iraq and Afghanistan, 
compared to Kuwait, you've had that. In fact, that's what we 
did, was to focus our experienced people in the war zone 
itself, within Iraq and within Afghanistan. That's why we put 
all the oversight there, to also look at that. Were we perfect? 
Absolutely not. Did we learn some lessons? Yes, we have. Have 
we put more people in there? Yes. The Joint Contracting Command 
has grown in the number of people over there, who are 
experienced, to look at that.
    Down in Kuwait, as we went from the LOGCAP after the Gulf 
War the first time, by charter, DCNA no longer looks at those 
contracts. We lost all that oversight, and we relied upon 20 to 
30 folks to do that, as it was escalating, in terms of the 
amount of work. Lesson learned. We can't allow that to happen. 
What have we done? We've put more people over in that office, 
experienced people. The folks who were there, we replaced, we 
put in a new commander. I personally went there and talked to 
every one of the folks there. I talked to the Command, I looked 
at what they were doing. I went out to the CONEXes to see all 
the contracts. We reviewed all of those with experienced people 
there and experienced people back here. What's wrong with that? 
If you're taking experienced people from here to do that work, 
they're not doing the work that we asked them to do back here. 
That gets back to what Dr. Gansler has talked about, ``You need 
more people.''
    The long way of answering your question is, we're putting 
the best people we have available today to take care of the 
problems as we see it today. We're robbing Peter to pay Paul 
right now, until we get additional folks in there. But I 
clearly agree with you that we have to do more. In fact, what I 
would urge, and have urged our folks to do--we've talked about 
the operators, great people doing great work; they train the 
way they fight. I have to tell you, the support community needs 
to do the same thing. When we go on a deployment, when we go 
out to NTC, we ought to take the support element, to include 
the contracting folks, and put them out there. We ought to 
exercise those folks the same way they're being exercised in 
the war zone right now. They ought to be part of the war plan, 
so we know exactly what is going to go on there.
    If you're going to audit or do an IG or something like a 
red hat, we ought to go out there and make sure, doing the 
exercise, that we pull something on them, just the way we do 
with the warfighter, to see whether or not they're going to 
react properly, and then build around that. We're a long ways 
from doing it, but if I could wave a magic wand, I would do 
exactly that.
    Senator McCaskill. I don't understand why we're a long way 
from doing it. If we can put thousands of men and women in 
harm's way in a matter of weeks, why can't we watch taxpayers' 
money before taking a decade and noodling it around with 14 
commissions making the same recommendations over and over 
again?
    Why does it take so long?
    Secretary Bolton. I don't think we took so long, in terms 
of putting people in Iraq and Afghanistan. I did that. In 2003, 
when we went into Baghdad, I couldn't find a contracting 
officer. I had to send one over there. Why? Because we didn't 
expect to be there that long. I sent a colonel over there. He 
came back after a month, and I had to drag him back, because 
folks began to realize how important he was. I then put a 
lieutenant colonel over there who was only supposed to be there 
6 months. He was there 12 months, got promoted to colonel while 
he was there, and we started to build that capability as we 
realized the enormity of the task ahead of us and the need for 
that type of expertise. I think that's an important lesson 
learned, that if you're going to go into an operation like 
that, and particularly one that goes from contingency 
operation--and ``contingency,'' by its very nature, is short-
term--to one that is nation-building and long-term, you'd 
better have the support folks there to take care of it, both in 
theater and reachback.
    Secretary Bolton. That's the lesson that we learned. Also, 
starting in 2004, we actually started to build units that would 
deploy with our commanders over there. They're in place now to 
do just that, focused on Iraq and Afghanistan. Not perfect. It 
was a pickup. We fell behind in a number of areas, but we did 
focus as best we could, with the best expertise we had 
available at the time.
    The last point I'll make, and that is getting the people 
long-term. That will be tough, tough because they're just not 
there. Just within this area, within the Beltway, just for the 
Federal Government, we're short nearly 2,000, what I call 
1102s, contracting officers, not just for the DOD, for 
everybody. They're difficult to get, and then, when you get 
them, you have to train them, and you know this. You have to 
train them, they have to be experienced, have to be warranted 
and then put out there, and that just takes time.
    Senator McCaskill. Hopefully, I'll get a chance to follow 
up with you, Dr. Gansler, in another round of questions. Thank 
you.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you. We will have another round of 
questions.
    I'd like to call now on the chairman of the Armed Services 
Committee of the Senate, Senator Levin.
    Senator Levin. Thank you. Thank you, Senator Akaka.
    First let me join you and the other members of the 
subcommittee in thanking Dr. Gansler and the members of the 
Commission for the great work of that Commission. The central 
finding that the Army acquisition workforce is ``understaffed, 
overworked, undertrained, undersupported, and undervalued,'' is 
consistent with the view that a number of us have expressed in 
this committee and in this Congress, in the Senate. I hope that 
the Army's general endorsement of the Commission's findings and 
recommendations will create some momentum to address this 
serious problem, Secretary Bolton, and that the general 
rhetorical support will be translated promptly into action.
    Seven months ago, Secretary Bolton, I asked you some 
questions at a hearing of the Senate Armed Services Committee 
about the LOGCAP contract. At that hearing I asked a series of 
questions about a KBR subcontract for living containers, which 
is a type of trailer that the Defense Contract Audit Agency 
(DCAA) found to be overpriced by $100 million. I asked you, 
Secretary Bolton, why the Army decided to pay KBR the full $100 
million by which those subcontracts were overpriced, and you 
referred the question to a General Jerome Johnson, who joined 
you in representing the Army at that hearing.
    General Johnson denied that the Army had paid KBR the extra 
money, then I read from an Army document stating that, ``The 
parties have agreed to recognize the costs of the containers 
acquired.'' So, I read from a document saying that, in fact, 
the Army had agreed to pay the extra money. General Johnson 
testified that the document was inaccurate that I was reading 
from.
    Subsequent to the hearing, the Army provided additional 
information to the committee that, in fact, showed that that 
document was correct, that, as a matter of fact, the extra $100 
million was paid, that should not have been paid.
    The acknowledgment from the Army after the hearing was that 
the procuring contracting officer, Valiant Duhart, resolved the 
issue by allowing the costs for the containers.
    So, in other words, Secretary, the Army has acknowledged 
that the memorandum that I read at the hearing was correct, 
that the Army had accepted KBR's arguments for which the DCAA 
could find no factual support and paid the full extra $100 
million by which the subcontracts were overpriced.
    So, now that the Army has acknowledged that KBR was paid 
the extra $100 million, the overpricing, despite repeated 
audits in which the DCAA rebutted every argument that KBR made 
in support of the overpayments, my question to you is, why was 
that $100 million paid?
    Secretary Bolton. General Johnson is no longer within the 
Army Materiel Command who has that contract. Ms. Condon is 
actually representing headquarters, and she can answer that 
question. But before she does, you are absolutely correct, we 
made a mistake; General Johnson made a mistake. It may have 
gotten confused--I won't talk for him because I'm not sure what 
was going on in his mind. We offered you an answer. I read that 
answer later and I sent you a letter this morning, which I hope 
you will get shortly. On behalf of the Army, we apologize for 
not providing you the right answer. That is certainly not the 
Army's style, certainly not my style.
    So, let me let Ms. Condon give you a better answer.
    Senator Levin. All right, thank you. So, why was the $100 
million paid?
    Ms. Condon. Sir, that was part of a larger settlement on 
that task order for that contract.
    Senator Levin. I don't know what that means, $100 million 
was not supposed to be paid. We have said it was not proper. 
So, why would we pay--we mean--they dropped some claim, if we 
paid the $100 million?
    Ms. Condon. There were other claims on that contract that--
--
    Senator Levin. Well----
    Ms. Condon.--that were part of the settlement, sir.
    Senator Levin. Will you give this subcommittee two things--
give us the entire settlement, what was paid, what we objected 
to that we did pay, what the contractor--where did they concede 
things and give up claims, and--give us the whole deal, if you 
would.
    Ms. Condon. Sir, if I could take that one and get the 
information back to you, I will do that.
    [The information referred to follows:]

    Enclosed is a copy of the Post Negotiation Memorandum (enclosure 3) 
[deleted] that provides a summary of the negotiations resulting in the 
definitization of Task Order 59. The costs in question were part of 
this definitization. Task Order 59 authorized KBR to provide life 
support to troops deployed in Iraq for the period of time between June 
13, 2003, and April 30, 2005. This task order was initially issued on 
an undefinitized basis which meant the terms, conditions, and pricing 
were not agreed to at the time KBR was authorized to begin work. 
Unfortunately, due to tempo of operations, changing conditions, and 
fluctuating requirements, AMC did not reach a settlement on the task 
order until March 31, 2005. The total amount of the settlement was 
approximately $6.3 billion.
    The $99 million in questioned costs for containers is specifically 
addressed at pages 10 and 11 of the Post Negotiation Memorandum 
(enclosure 3) [deleted]. Defense Contract Audit Agency (DCAA) had 
questioned these costs in their proposal audit (enclosure 1) [deleted] 
as they identified other sources where the living containers could have 
been purchased at a lower cost. Much discussion took place during the 
negotiations with KBR and it was clear there were differing opinions on 
whether the less expensive containers could have been acquired and 
delivered in the needed time frame and whether the less expensive 
containers included the same amenities as the more expensive 
containers.
    The container costs, while significant in and of themselves, were 
part of a $6.3 billion settlement where many costs were of issue. As 
the Senator may recall, there were a lot of questions regarding the 
cost of meals which represented a much larger portion of the $6.3 
billion settlement. In a perfect world, the container costs in question 
would have been negotiated before KBR was authorized to proceed, but 
KBR was given the go ahead to begin incurring costs prior to reaching 
an agreement on terms and conditions and pricing. As a result, KBR had 
already incurred costs questioned by DCAA and these living containers 
were being used to house troops.
    In order to reach an agreement on the larger settlement, the 
contracting officer agreed to recognize these container costs in the 
total estimated cost of the task order, but did not include them in the 
baseline costs for fee purposes. KBR was told that in order to earn a 
fee against these costs, they would need to produce additional facts to 
better support the reasonableness of these costs. The DCAA memorandum 
at enclosure 2 [deleted] was provided to the contracting officer to 
support his negotiations with KBR in the event KBR elected to provide 
additional information justifying the cost of the containers in 
question. To date they have not done so.
    After reviewing these costs and actions in detail, the conclusion 
of the contracting officer was that given the conditions at the time 
the living containers were being purchased by KBR, the contracting 
officer believed KBR actions were reasonable. Furthermore, the 
contracting officer considered the fact that U.S. troops were already 
being housed in the containers, thus the Government had benefited from 
their use. As a result, the contracting officer recognized the costs in 
the larger settlement of the task order.
    The enclosed Post Negotiation Memorandum [deleted] demonstrates 
that there were many issues surrounding the negotiations. Other costs 
proposed by KBR that were also questioned by DCAA were not recognized 
in the settlement, to include over $55 million in dining facility 
costs.
    In the end, the contracting officer used his professional judgment 
in reaching what he believed to be a fair and reasonable price for the 
effort performed by KBR. In reaching this settlement, there were no 
discussions outside of the Army with the exception of DCAA and Defense 
Contract Management Agency, who were part of the Army negotiation team. 
AMC does not believe there were any outside influences in the 
settlement of these negotiations.

    Senator Levin. Yes, but in addition, I want to know whether 
there were any conversations between anybody outside of the 
Army relating to that settlement.
    Ms. Condon. I personally do not know that, but I will find 
that out as well and get that back to you.
    [The information referred to follows:]

    In reaching this settlement, there were no discussions outside of 
the Army with the exception of the Defense Contracts Audit Agency and 
Defense Contract Management Agency, who were part of the Army 
negotiation team. AMC does not believe there were any outside 
influences in the settlement of these negotiations.

    Senator Levin. All right. That's a huge amount of money to 
pay which we don't owe. Do you know what the whole settlement 
was that was involving hundreds of millions, billions, half-
billions?
    Ms. Condon. No, sir, I don't. As I said, I'll take that for 
the record and get the exact amount back to you.
    [The information referred to follows:]

    Task Order 59 authorized KBR to provide life support to troops 
deployed in Iraq for the period of time between June 13, 2003, and 
April 30, 2005. This task order was initially issued on an 
undefinitized basis which meant the terms, conditions, and pricing were 
not agreed to at the time KBR was authorized to begin work. 
Unfortunately, due to tempo of operations, changing conditions, and 
fluctuating requirements, AMC did not reach a settlement on the task 
order until March 31, 2005. The total amount of the settlement was 
approximately $6.3 billion.

    Senator Levin. All right. As well as any conversations that 
took place?
    Ms. Condon. Certainly, sir.
    Senator Levin. Okay. Thank you.
    Again, my thanks to the subcommittee for taking up this 
issue. We have not taken the time for adequate oversight of 
much of the contracting operations. We, just today, finished 
our defense authorization bill, which takes up an incredible 
amount of time every year, and the members of the committee and 
the staff put huge amounts of time into that bill. There is no 
other committee that has the responsibility, annually, to 
produce an authorization bill, that I know of. There may be one 
that's required by law, to have an authorization bill every 
year, but I don't know of it, and there's no bill this big, in 
any event. So, it does take up a huge amount of time, and we're 
going to continue to look for ways when we can allocate more of 
our committee time and subcommittee time for these kind of 
oversight efforts, which are so critically important. So, I 
want to thank you and the other members of the subcommittee, 
Mr. Chairman--Senator Thune and Senator McCaskill, who bring 
such a welcome experience and background to issues which are 
extraordinarily dry. [Laughter.]
    But so essential to the taxpayers.
    When we get that answer, Ms. Condon, I can assure you I 
will try to understand it, and that Senator McCaskill will 
understand it. [Laughter.]
    Ms. Condon. Noted, sir.
    Senator Levin. Thank you.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much, Senator Levin.
    I have a question here for Dr. Gansler. The Gansler 
Commission was asked to review the Army acquisition system for 
expeditionary operations; however, a number of the Commission's 
findings appear to extend beyond the Army and beyond 
expeditionary contractors. For example, the report states, 
``Contracting, from requirements definition to contract 
management, is not an Army core competence. The Army has 
excellent dedicated people, but they are understaffed, 
overworked, undertrained, and undersupported, and, most 
importantly, undervalued.''
    Dr. Gansler, would you agree that many of the problems that 
you have identified extend beyond the Army and beyond 
expeditionary contracting?
    Dr. Gansler. Very definitely. In fact, when I briefed 
Secretary Gates and his staff, including the Deputy Secretary, 
the Under Secretary (AT&L), and the Vice Chairman of the Joint 
Chiefs, Secretary Gates did say, ``Clearly this reflects a need 
much broader than just the Army.'' Our recommendation, in terms 
of the DCMA, is outside of the Army, although the Army does 
contribute personnel to that. This is a general area that the 
DOD, and, particularly as we go more towards joint activities, 
will have to get involved with other areas, but I think our 
intent was clearly to look at the overall DOD needs. The Army 
is the responsible party here in Iraq/Afghanistan, and the Army 
has, I think, the immediate crying need. So, a lot of our 
recommendations were focused on the Army. But I think Secretary 
Gates intends to have this more broadly looked at by the Air 
Force and Navy, as well, and by OSD, as Senator Thune said, by 
the Under Secretary for Acquisition, Technology, and Logistics, 
for those areas related to him. This would include contracting 
policy, it would include the DCMA, and other cross-DOD 
activities, not just the Army.
    Senator Akaka. Secretary Bolton and General Thompson, would 
you agree with Dr. Gansler's assessment?
    Secretary Bolton. I do agree, and I would also add that 
we've been looking at the Services, and obviously concentrating 
on the Army that this lack of expertise also extends to the 
oversight agencies. They are not immune. We depend upon the 
oversight, whether it's an IG or an audit, to have that 
expertise. I will tell you that in the 30 years that I've been 
in this business, I've watched those organizations--and I 
worked very closely with them, and I admire the work that they 
do--we don't always agree--that they, too, are lacking some 
expertise. Also, the defense finance folks, you need to look 
there, as well. We're asking them to do a heck of a lot of 
work, and they're under the same constraints, in terms of 
numbers of people and so forth--not necessarily in contracting, 
but just people able to process the paperwork. Why is that 
important to me? Because my contract team personnel do business 
with them to get money on contracts and to move things around. 
Without the people there to get the job done, it's hard for us 
to do our work, as well.
    So, I would extend Dr. Gansler's comments to look at the 
oversight, as well.
    Senator Akaka. General Thompson?
    General Thompson. Sir, I also agree with Dr. Gansler's 
statements. Like he mentioned in his testimony, contracting is 
a process. It's not just the people that write the contracts, 
it's a process that goes from the requirement all the way to 
the contract management, into the payment of the contractor, 
ultimately. So you have to value that entire process, because 
it is that entire process, if done right, that gets you the 
product or service that meets the requirement, and gets it at a 
fair price, which is what we all want to have happen, because 
we're spending the taxpayers' dollars.
    Senator Akaka. Secretary Bolton and General Thompson, the 
Gansler Commission report states that most civilians working on 
contracting issues in Iraq were volunteers often with 
inadequate or wrong skill sets for the job at hand, and often 
getting their required contracting experience on the job as 
part of their deployment. The Commission recommends that 
qualified civilians who agree to deploy be provided enhanced 
career and job incentives. These include the elimination of an 
existing pay cap, tax-free status, and long-term medical care 
for injuries incurred in theater.
    To your knowledge, does the Secretary of the Army concur 
with this recommendation? Also, can we expect to see a 
legislative proposal from the DOD along these lines?
    Secretary Bolton. With regard to the DOD, I'm not in a 
position to speak for DOD. For the Army, in our written 
testimony and what I've indicated thus far, the Secretary of 
the Army does support the recommendations. It's now a question 
of how best to implement those, and then, of course, as I said 
earlier, how many of those will result in the request for 
legislation. That's what we're going through right now, and 
that's what the Task Force is charged to do.
    Senator Akaka. General Thompson?
    General Thompson. Sir, one of the things that we're looking 
at is the specific recommendations made by Dr. Gansler that 
require legislative change. The Army has legislative change 
proposals that it has proposed, that it needs to work now with 
the Office of the Secretary of Defense, and then work with the 
administration, before they submit them as administration 
proposals to change the current law.
    Senator Akaka. Thank you.
    Senator Thune.
    Senator Thune. Thank you, Mr. Chairman.
    I just want to follow up on your question, because, Dr. 
Gansler, the Commission recommends, among other things, 
congressional action to improve incentives for Army civilian 
contracting personnel who volunteer to deploy for expeditionary 
contracting. In furtherance of that recommendation, the 
Commission recommends that the statutory caps on civilian 
compensation associated with contingency operations be waived 
completely.
    Beginning in 2006, Congress raised the statutory limit on 
overtime pay for civilian employees who work overseas in 
support of CENTCOM contingency operations. That current cap is 
$212,100. I guess I'd like to have you explain exactly what was 
intended by the Commission's recommendation here, and if there 
was data or analysis that supports lifting all the applicable 
caps on civilian compensation in Title V.
    Dr. Gansler. First let me comment on the cap point, which 
you properly pointed out has been lifted for Iraq. What we were 
proposing there on that particular issue was that there be some 
standby legislation so that the next expeditionary operation, 
we don't have to wait to find out if Congress is going to waive 
it or not. When we ask for volunteers to go, will they know 
that, if they do what benefits they will receive. These people 
put in incredible hours. That was one of the things we heard 
from everybody, that they're working two or three shifts, 7 
days a week, individually, and they need to be compensated for 
that. We did hear, from a lot of the people, this point about 
the tax waiver, that the people--the military there, and the 
contractors--150,000-160,000 of them, all have their taxes 
waived, and these government civilians, who are also in harm's 
way, are not getting that waiver. That just seemed to us wrong, 
from an ethics as well as a national security perspective, 
because you want your best people to be there--as the Senator 
pointed out earlier, you want to have the very best people 
onsite, and you're not going to get people to volunteer if you 
don't recognize that this is a special situation--putting your 
life at stake. You clearly could be harmed. At least Congress 
ought to do things like make sure their life insurance is 
covered, make sure, if they have a need for long-term medical 
coverage, it has to be provided for, that if they, in fact, are 
putting themself at risk like that, they get proper 
compensation for it, because people on each side of them--the 
military and the contractors--are getting it. It just doesn't 
seem fair to me.
    Senator Thune. I understand, too, Dr. Gansler, that the 
Commission is calling for Congress to address some of these 
recommendations for out-of-cycle action. I guess my question 
would be, can you give the subcommittee some guidance on which 
of the Commission's recommendations are of the sense of urgency 
that we may want to undertake them out of cycle, and maybe to 
put more plainly--can you help us prioritize your 
recommendations for out-of-cycle action?
    Dr. Gansler. We could certainly try to do that and come 
back to you with it.
    [The information referred to follows:]

    In preparing my introductory remarks, I tried to highlight the five 
most critical actions by Congress:

          1. Increased general officer billets for the Army and the 
        Joint Organizations, in the contracting area;
          2. An increase in the contracting personnel, military and 
        civilian; including those required for the increased role of 
        DCMA;
          3. Increased incentives and rewards for civilian government 
        contracting personnel who volunteer to go into the dangerous 
        expeditionary operations;
          4. Funding flexibility for future operations; and
          5. Waiver of many special buying provisions when in an 
        emergency environment.

    While all five of these are critical, I would suggest that the 
first three are the most urgent.

    Dr. Gansler. We actually thought all of them were 
important, and that's the reason----
    Senator Thune. Right.
    Dr. Gansler.--we made those recommendations to you. I think 
the sooner that you can respond to these, the better. I think 
it's important to recognize that the Department has to stand up 
for these first. They have to make the request, as you pointed 
out, to make the legislative requests, and recognize that they 
make some internal changes, and then Congress responds to 
those, as well. But I think the sooner that both the DOD and 
Congress can respond to this, the more it will show that, in 
fact, the overall organization, Congress and the DOD, care 
about this, that this is important, that it needs to be done, 
that we need to send the right message to the people. We have a 
lot of very hardworking people putting their lives at stake and 
not getting recognized for it--and not getting adequately 
supported. I think that's wrong.
    Senator Thune. Thank you, Mr. Chairman.
    Senator Akaka. Thank you, Senator Thune.
    Senator McCaskill.
    Senator McCaskill. Dr. Gansler, first let me recognize, and 
all the people at the table are some of these, that there are 
thousands of people trying to do this work well under very, 
very difficult circumstances, and there have been massive 
amounts of mistakes made, but not because there aren't people 
out there trying. They just were completely overwhelmed.
    I know what my perspective is as to how this happened--a 
lack of recognition of the importance of this part of the 
mission, as opposed to the military mission; but what's one of 
the things that is of concern to me is that 70 percent of the 
contracting personnel in Iraq and Kuwait are, in fact, Air 
Force, only 28 percent are Army, but yet, almost every open 
fraud investigation involves the Army. What is it within the 
training and culture in the Army that has caused this 
lopsidedness, in terms of that issue? What is it that we need 
to go back to the Service Academies, to--frankly, one of the 
things that I'm most concerned about is qualifications for 
promotion and whether or not you get demoted. I'm not aware of 
anyone who has lost a rank for failures under their watch that 
they weren't directly responsible for, and that's a problem. 
I've now spent enough time around people in uniform that what 
rank you hold and what rank you are trying to hold is, in some 
ways, the key to the kingdom, in terms of promotion and 
demotion, and yet, I don't see any kind of accountability 
within the Army in that regard.
    Dr. Gansler. Let me mention three points. I think the most 
important one of all, I would say, is that when you have a 
systemic problem, it's often a question of, are you getting 
adequate leadership? Are the people who are in charge of this 
area getting the proper authority, getting the proper 
recognition? As I mentioned in my prepared remarks, that we 
went from five general officers with contracting experience in 
the Army to zero. We went, in the joint activities, also down 
from four positions to zero, and then one temporary one. I 
think there's a clear need for, in the case here, of military 
leadership, and that's the reason we emphasized that.
    We also recognize that there's an important message that 
gets sent out here when the people look around and say, ``Well, 
they've just eliminated all the general officers from 
contracting. I guess I'd better go into a different career 
path.''
    Senator McCaskill. Right.
    Dr. Gansler. So, now the second point I guess I would make 
is the fact that one of the reasons I think the Air Force model 
is more successful in the case of contracting is, they start 
their people as second lieutenants in the contracting field. 
Secretary Bolton mentioned before, the number of years of 
experience matters. It clearly does. In the case of the Army, 
historically they have begun people in the career field after 7 
or 8 years, so half of their career, in a sense, is gone before 
they begin to specialize in contracting. We recommended that 
the Army change that, that they begin as second lieutenants, 
but that they spend 2 or 3 years in a combat position so they 
understand the real Army, what the objectives are, how it 
works, get mud on their shoes, and so forth. So when they read 
or when they learn in classes that they're contracting people 
for their whole career, they have a much greater cumulative 
experience in the contracting field.
    I think, in general, these are the reasons that I can look 
at answering your question, the Air Force has this long-term 
career, and they have had, in the past, more senior people in 
the contracting and acquisition field. They've been reducing 
that, too, though, so I don't want to give them too much credit 
for that. But, on the other hand, I think that they recognize 
they need to make some improvements, themselves; but, I think 
if you look across--to answer your specific question, if you 
had people who were adequately trained and prepared, you 
probably wouldn't see the number of cases of waste, fraud, and 
abuse.
    Now, what Secretary Bolton mentioned that I think is 
equally important, and that's the third point I wanted to 
make--we should train as we fight. The majority of the people 
in the contracting field have not been trained to go into an 
expeditionary operation; they haven't been trained to go out 
into a battlefield. They've been trained to worry about buying 
a tank or buying an airplane in the United States. When we do 
the exercises from the military combatant commander's 
perspective, they should be worrying about the fact that 50 
percent of their force are contractors, and they should be 
trained that way, as well. So, we have to change the whole 
Army, or the whole DOD, in this case, not just the contracting 
community, to recognize the importance of this career field to 
the overall effectiveness of our forces.
    Senator McCaskill. Do we need to begin having a Reserve 
corps? We've relied on the Reserves, we've relied on the 
National Guard in this conflict in Iraq at unprecedented 
levels, in terms of how we have utilized them in the field. Do 
we need to begin to have a special Reserve contract component 
of people who are trained and ready within the Reserves and 
within the National Guard to step into contracting oversight?
    General Thompson. Ma'am, let me take that question, and 
I'll answer that one specifically. If I could, I'd like to come 
back to a couple of the points that Dr. Gansler made.
    The Army did not just begin to stand up a military 
contracting structure. We recognized the problem and began to 
put that structure in place back in 2005. About 70 percent of 
the structure that we've stood up, to date, is currently 
filled. That includes establishing noncommissioned officers--
``51 Charlies'' is the specialty area. There are 70 of those 
noncommissioned officers today, because we looked at the 
success that the Air Force has had with noncommissioned 
officers involved in contracting, and they're world class in 
what they do.
    Part of the structure that we've stood up--it's not just 
Active component structure, it's also National Guard and 
Reserve. I'm taking a very hard look right now--and one of my 
responsibilities as the acquisition career manager for the Army 
at the senior level--can we develop the expertise in 
contracting in the National Guard and the Reserves? Because of 
the skill set there, you almost have to do it on a full-time 
basis, and you can't just do it part-time. So, what we're 
looking very hard right now, with the structure that we've 
stood up already, is--how much of that Reserve component 
structure is full-time? I would not argue that it can be all in 
the Reserves. Like with most of our specialties, it's a 
combination. But you can't be level-2 certified in contracting 
unless you have certain coursework and education, but you also 
have to have 2 years of on-hand, real-world experience doing 
contracting, and you can't get that 38 days a year, or being 
mobilized a couple of months at a time.
    In the National Guard, for example, one of the things 
they're looking at--and I think it's pretty much the way 
they're going to go--is, each one of these four-person 
contingency contracting teams will have a member on that team 
that's a full-time employee that does contracting in that State 
that's represented, but the other three members of that team 
will have to come from some other part of the Guard structure. 
So I have asked the Reserve components, both the U.S. Army 
Reserve and the National Guard, to look at how many of those 
positions in contracting need to be full time. Not all of them, 
but you need enough of those positions as full-time positions 
so they can get the expertise. Once they're certified to a 
certain level, then they can go back to the part-time status 
and be mobilized when necessary.
    You mentioned a couple of points about the individuals--in 
the Army, in particular--involved in a lot of these 
investigations. A point I would make is, it's not just people 
that do contracting, it's contracting officer representatives, 
which, in many cases, are members of the operational force; 
it's not just military, it's civilian; so, it's not just the 
contracting workforce. For those people that took advantage of 
opportunities because the proper internal controls weren't 
there, the Criminal Investigation Command for the Army, and the 
audit agency is boring into those. There's been about 20 people 
indicted already, and I'm fairly confident--and, although I 
can't speak for the investigative agencies, I'm just keeping 
track of what they're doing--those people that violated their 
values and took advantage of the situation are being 
investigated, and where the investigation leads, they'll be 
indicted and, I'm sure, prosecuted, and proper punishment given 
to them.
    We are looking at the point that Dr. Gansler made about 
earlier accessions. I do agree 100 percent that you can't bring 
somebody in at the 8-year point as an officer, expect to get 
them world class in contracting, because then, all of a sudden, 
they're at the 20- to 25-year point. One of the things that 
we're going to move out on is to move the accession point to 
earlier. Dr. Gansler's recommendation about designating 
somebody as contracting, and then branch detailing them to an 
operational assignment, I think, is a good one. We're looking 
at that. The other one we're looking at is just to move the 
accession point from 8 years back to 4 or 5 years, because we, 
in the Army, believe strongly that it's important to have that 
operational experience and that--get your boots muddy, as they 
say, because when you talk to the senior-level folks involved 
in contracting, the best ones involved in contracting have a 
lot of operational experience. But bringing that accession 
point back earlier will give us another 4 or 5 years to get 
those officers, and now noncommissioned officers, properly 
trained so we can use them.
    That's the last point I would want to make.
    Dr. Gansler. Actually, I'd point out that only about 20 
percent of the cases that have been looked at for the fraud 
examples are of the contracting people; the rest--the 80 
percent--come from other areas.
    Senator McCaskill. Right, and I'm aware of that. I also 
think that if you talk to the people on the ground, there's no 
question that these CORs many times feel like they're the ones 
that got the short straw. There's no sense that the CORs in 
these units have the kind of pride and passion they need to 
have for that job, because it's almost seen as, ``It's a short-
term duty. If you're lucky, you won't have to do it long. If 
you're lucky, it's pro forma, you just have to sign off on some 
forms.'' Clearly, there has not been the training about the 
need for being aggressive and being committed in that vital, 
vital--because most of this is, in fact--and you have the 
problem with the definitization at the front end, and in the 
competitiveness at the front end--but so much of this is day-
to-day oversight of that contract, and if you don't get those 
CORs to the point that they are fully trained and passionate 
about their work, and not that they're there for a short stop 
along the way, and, if they're lucky, they'll only have to do 
it for 9 months until the other sucker has to come in and be 
the COR. This is not a position that is looked up to within 
these units. I know you all know this. But it's something the 
Army really needs to grasp.
    General Thompson. Those people that are CORs have to be 
valued, because it's a very important function.
    Senator McCaskill. They are big deals. They need to be 
treated that way.
    General Thompson. Right. They are watching after taxpayers' 
dollars, and the simple missive I give to everybody I talk to 
about taxpayers' dollars is: it would be kind of like you're 
writing it out of your checkbook. We've trained about 4,500 
CORs here over the last few months, but it's not just training 
them. You have to train them, they have to value that 
assignment, and, once you train them, they have to be the ones 
actually doing it when they get over there. You can't designate 
somebody as a COR when they're getting ready to deploy, and 
then change that person out when they get over there. There has 
to be a consistency.
    Senator McCaskill. That's happening all the time.
    General Thompson. Yes, ma'am. We recognize that.
    Senator Akaka. Thank you, Senator McCaskill.
    Let me ask this of Dr. Gansler. Last February, I understand 
that the Army awarded a $225 million planning and support 
contract for the LOGCAP IV contract. Under that contract, the 
support contractor will be responsible for developing scopes of 
work, preparing independent cost estimates, analyzing the 
performance of contractor costs, and measuring contractor 
performance.
    Dr. Gansler, in your view, should these functions be 
performed by a contractor or by government personnel?
    Dr. Gansler. My impression of that--some of those functions 
could be done by the government, and maybe even should be done. 
On the other hand, what we found was--for example, you 
mentioned the pricing of contracts. There was not a single 
person in theater who was doing pricing. So, if you have no 
current people that you can assign to it, having contractors do 
it on a third-party basis, which is what this planning contract 
is, it's an independent third party looking at pricing, for 
example, they will estimate the price, and then the contractor 
would estimate the price. The combination of that and what they 
had planned for the LOGCAP IV, of having competition on each of 
these tasks--I think the combination of those two would be a 
lot better than what we now have. A lot of the functions that 
you listed could be done, and maybe should be done, by 
government employees; but, if there aren't any--and if we don't 
get permission to increase the numbers, we're not going to have 
any--and if we keep it as a volunteer basis, you're not going 
to get many to volunteer under the current conditions, either--
then we are going to have to use this third-party contractor 
operation, and I think that's far preferable than not having 
it.
    Senator Akaka. Secretary Bolton and General Thompson, I 
would like your comment on Dr. Gansler's comments here, and 
also, I want to ask you, do you believe the Army should have 
the capability of planning these functions itself? If they do, 
how long do you think it will take for the Army to develop this 
capability?
    Secretary Bolton. First of all, I do agree with Dr. 
Gansler's comments. The LOGCAP, and now we're into LOGCAP IV--
the current contract is LOGCAP III, and as soon as we move on 
to LOGCAP IV, we'll do that, which offers more competition, it 
does have a planning part to it, and a contractor to do that.
    We must remember how we got into this boat. This is not 
new. We go back to the 1980s and look at what the military was 
asked to do, which is basically to take a look at the things 
that you are doing in the military--some of those, I think, 
Senator McCaskill mentioned earlier, with your father peeling 
potatoes--can somebody else do that? Can somebody in the 
commercial or civilian contracting parts of our country do that 
for us--services-type contracts? So, throughout the 1980s and 
then in the 1990s, that's what we did. Right now, if we were to 
replace all of the LOGCAP folks over there, we'd need three 
times the number of folks. You have about 50,000 or so LOGCAP 
contractors over there. I'd need about 120,000 to 150,000 
soldiers. Why? Because you would need about 50,000 on the 
ground to do the work; you would need 50,000 who were training 
to go there, and you have 50,000 coming out on a rotation. So, 
throughout the 1980s and 1990s, it was our task to give to the 
civilian sector all the work that we could, and this was part 
of it.
    We did not expect a war such as this, this particular 
LOGCAP. The previous LOGCAP, I think we did $50-some-odd-
million on it, total. This one obviously is into the billions, 
because it expanded so quickly. Then, when we finally had an 
opportunity to compete it, we did.
    So, I agree with the comments that Dr. Gansler has on this. 
I would love to be able to do this all ourselves. Right now, I 
don't see that as being a near-term possibility.
    Senator Akaka. General Thompson?
    General Thompson. Senator, I agree with the comments that 
have been made. The one thing that I would add to that is, to 
develop that expertise, again, it's going to take about 5 years 
to get the pricing piece, because it's part of the contracting 
process, because the people we have today that do pricing are 
very, very few. The pricing is, for the most part, not done 
overseas, because there aren't the people overseas to do that. 
So, again, it's one of those: You're going to have to grow the 
expertise, and it's going to take us 5 years or more to be able 
to build that expertise to a sufficient level.
    Senator Akaka. Senator Thune.
    Senator Thune. Thank you, Mr. Chairman.
    Just by way of wrap-up--I don't have any more questions to 
ask, but I do want to thank you all for your service. Secretary 
Bolton, best of luck to you in your future endeavors
    I would say, the bottom line, I think, in all this is 
making sure that the warfighter obtains the necessary required 
expeditionary contract capability in a timely way. I appreciate 
the work that you, Dr. Gansler, and the Commission have done. 
It was necessarily Army-centric, because that was your mission, 
as, I think, chartered by Secretary Geren.
    But, I would simply add that--and then come back to a point 
I made earlier, and I know you contemplated some of this in 
your report--but the report also establishes that the Army 
doesn't have an organic core competency in contracting, and 
some of the other Services are better at it. Since much of what 
we're going to be doing in the future is joint and 
expeditionary, it seems to me at least that cultivating 
contracting core competencies in a joint way makes a lot of 
sense. So, I would just urge you all, as you move forward, to 
look at how that might be incorporated.
    Again, I thank you very much for your testimony and for 
your work.
    Senator Akaka. Thank you so much, Senator Thune.
    Senator Thune. Thank you, Mr. Chairman.
    Senator Akaka. Senator McCaskill.
    Senator McCaskill. I certainly agree with Senator Thune's 
comments about the jointness of this and the necessity for 
jointness, and how important that is, moving forward. I know 
sometimes that's a challenge.
    I also want to close with thanking all of you for your 
commitment, and certainly your service, Secretary Bolton.
    I also want to just make one comment about the culture. I 
think it's so important that, at the very top of the Army, 
there is a culture that this is really important. I think we 
have to be honest that that's part of the problem.
    In Kuwait, when I was visiting with the people there that 
were involved in contracting, one of the generals actually said 
to me, ``I don't care whether it costs $10 billion or $15 
billion, I wanted the ice cream in the mess hall yesterday.'' 
Now, no wonder the CORs don't think their job is that 
important. If that's the kind of messaging that's going on at 
the very top, it is very hard for it to filter down to where it 
matters that this is really important.
    So, to whatever extent--your service, Dr. Gansler, on this 
Commission, obviously your service, Secretary Bolton, and I 
have a feeling that the War Contracting Commission is part of 
the National Defense Authorization Act Conference Report, I 
believe it will become active next year. I think you'll 
probably spend some time in front of that Commission over the 
next 2 years. As we move forward, I think we have to recognize 
that if the generals at the top don't communicate clearly--
because when he said that to me, there were a room full of 
soldiers in the room that did this work--that is not the 
message we need to be sending, and that is, in fact, the 
message that brings about the kind of abuses that we've seen. I 
think we need to be honest about that and continue to work on 
it, as I know all of you will, as committed professionals in 
this area.
    Thank you very much.
    Senator Akaka. Thank you, Senator McCaskill.
    Let me close by saying thank you to all of you, Dr. 
Gansler, Secretary Bolton, General Thompson, and Ms. Condon. 
Thank you also for your service to our country. I want to 
particularly wish Secretary Bolton well and thank you, again, 
for your service to our country.
    What we've heard today and what we've been inquiring about 
really points out great, in a way, misconnection in our work 
here in trying to provide what our troops need. For me, I'm 
looking down the road to a point where we will have--whether 
it's jointly--a command that could be calling this, could be 
called, in this case--in our case today--the Army Contracting 
Command, but a group of people who would be dedicated to 
contracting and working in contracting both with the Active 
Duty people, as well as civilians. We need to structure it so 
that we can do this as a whole and not be splintered, as we are 
now.
    I want you to know that this subcommittee is looking at 
this as a problem that our country needs to correct. We've 
heard from you to say that it will take years for us to try to 
correct this. I hope that that's not true, I hope we can do it 
sooner than that. We'll certainly press for that effort and 
look forward to your cooperation, as well, and the committee's 
cooperation in doing that.
    So, thank you very much for your testimony, and we wish you 
all well.
    The hearing is adjourned.

    [The report ``Urgent Reform Required: Army Expeditionary 
Contracting'' follows:]
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    
      
    [Question for the record with answer supplied follows:]

             Question Submitted by Senator Daniel K. Akaka

                            ARMY CONTRACTORS

    1. Senator Akaka. Secretary Bolton, General Thompson, and Ms. 
Condon, I asked Dr. Gansler during the hearing if the Army should be 
using contractors to develop scopes of work, preparing independent 
government cost estimates, analyzing the performance of contractor 
costs, and measuring contractor performance. He indicated that he 
thought it was appropriate, even necessary, given that there was nobody 
available in theater to do the work.
    The Federal Acquisition Regulations (FAR) state that ``The agency 
head or a designee shall prescribe procedures for . . . ensuring that 
no purchase request is initiated or contract entered into that would 
result in the performance of an inherently governmental function by a 
contractor and that all contracts or orders are adequately managed so 
as to ensure effective official control over contract or order 
performance.'' The FAR further states that ``Inherently governmental 
function'' means, as a matter of policy, a function that is so 
intimately related to the public interest as to mandate performance by 
government employees. This definition is a policy determination, not a 
legal determination. An inherently governmental function includes 
activities that require either the exercise of discretion in applying 
government authority, or the making of value judgments in making 
decisions for the Government.
    Please explain how the Army is ensuring that it is meeting the 
requirements of the FAR when using contractors to perform the above 
functions, which appear to be ``inherently governmental functions.'' 
How long would it take to replace the contractor with government staff 
to perform these functions, and is it the Army's plan to do so?
    Secretary Bolton, General Thompson, and Ms. Condon. The functions 
identified in your question (i.e., developing scopes of work, preparing 
independent government cost estimate, analyzing the performance of 
contractor costs, and measuring contractor performance) are normally 
not inherently governmental functions. If it is necessary to contract 
for these functions, safeguards are used to address any potential 
organizational conflicts of interest. We recognize that in certain 
circumstances these tasks may, however, approach being inherently 
governmental because of the nature of the function, the manner in which 
the contractor performs the contract, or the manner in which the 
Government administers contractor performance. This analysis is best 
performed by the requiring activity since they have knowledge of how 
the contract will be performed and administered.
    Since February 23, 2006, the Secretary of the Army has required 
senior leaders to be responsible for the review of contract 
requirements. Since February 2, 2007, the Secretary of the Army has 
encouraged in-sourcing these kinds of tasks where appropriate, 
especially when necessary to maintain proper command and control of 
Army core competencies. The Secretary of the Army further clarified on 
September 4, 2007, that we must transform to meet enduring requirements 
in our core competencies with military and civilian employees, and only 
use contractors for surge and specialized needs.
    Finally, effective January 2008, the Department of Defense (DOD) 
Federal Acquisition Regulation (FAR) Supplement was amended to address 
procedures for the preparation of the written determination required by 
FAR 7.503(e), that none of the functions to be performed by contract 
are inherently governmental. The new rule requires DOD personnel to 
prepare the determination using DOD Instruction 1100.22, Guidance for 
Determining Workforce Mix, and to also include a determination that 
none of the functions to be performed are exempt from private sector 
performance, as addressed in DOD Instruction 1100.22. Determining the 
length of time needed to rebalance the mix between contractors 
performing these tasks and an organic workforce requires an assessment 
of the scope of such tasks performed by contractors in comparison to 
existing in-house capability. The Army is starting to use a contractor 
inventory similar to that which would be required by the pending 
National Defense Authorization Bill for Fiscal Year 2008 to support 
this ongoing analysis.

    [Whereupon, at 4:25 p.m., the subcommittee adjourned.]

                                 
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