- DEPARTMENT OF DEFENSE CONTRACTING IN IRAQ AND AFGHANISTAN

[Senate Hearing 110-534]
[From the U.S. Government Publishing Office]

S. Hrg. 110-534

DEPARTMENT OF DEFENSE CONTRACTING IN IRAQ AND AFGHANISTAN

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

HEARING

before the

SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT

of the

COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

__________

APRIL 2, 2008

__________

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

Department of Defense Contracting in Iraq and Afghanistan

april 2, 2008

Page

Finley, Hon. James I., Deputy Under Secretary of Defense for
Acquisition and Technology..................................... 4
Bell, Hon. P. Jackson, Deputy Under Secretary of Defense for
Logistics and Materiel Readiness............................... 10
Thompson, LTG N. Ross, III, USA, Military Deputy to the Assistant
Secretary of the Army for Acquisition, Logistics, and
Technology; Accompanied by Jeffrey P. Parsons, Executive
Director, Army Contracting Command............................. 18

(iii)

DEPARTMENT OF DEFENSE CONTRACTING IN IRAQ AND AFGHANISTAN

----------

WEDNESDAY, APRIL 2, 2008

U.S. Senate,
Subcommittee on Readiness
and Management Support,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:35 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, and Thune.
Committee staff members present: Richard D. DeBobes, staff
director; and Travis E. Smith, special assistant.
Majority staff member present: Peter K. Levine, general
counsel.
Minority staff members present: Pablo E. Carrillo, minority
investigative counsel; David M. Morriss, minority counsel; and
Christopher J. Paul, professional staff member.
Staff assistants present: Fletcher L. Cork, Ali Z. Pasha,
and Benjamin L. Rubin.
Committee members' assistants present: Bonni Berge,
assistant to Senator Akaka; Jon Davey, assistant to Senator
Bayh; Stephen C. Hedger, assistant to Senator McCaskill; and
Jason Van Beek, assistant to Senator Thune.

OPENING STATEMENT OF SENATOR DANIEL K. AKAKA, CHAIRMAN

Senator Akaka. The Subcommittee on Readiness and Management
Support will come to order.
This subcommittee meets today to hear testimony regarding
the steps taken by the Department of Defense (DOD) to implement
the recommendations of the Gansler Commission on Army
Expeditionary Contracting.
This is the subcommittee's second hearing on this topic. At
our first hearing, last December, our Army witnesses pledged to
work quickly to implement the Gansler Commission's
recommendations. At that time, the Assistant Secretary of the
Army for Acquisition, Technology, and Logistics testified,
``The 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 has
approved a two-star-level Army Contracting Command (ACC)
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. We are currently addressing the need to expand,
train, structure, and empower our contracting personnel to
support a full range of military operations.''
I have a particular concern about the status of our
acquisition workforce. I share the view of the Gansler
Commission that the root cause of our contracting problems in
Iraq and Afghanistan is ``a culture that does not sufficiently
value or recognize the importance of contracting, contract
management, and contractors.'' I also agree with the Gansler
Commission's conclusion that the Army has ``excellent,
dedicated people, but they are understaffed, overworked,
undertrained, undersupported, and, most important,
undervalued.''
It is vitally important that we work together to address
these problems by implementing the Gansler Commission's
recommendations for improving the size, status, and training of
the acquisition workforce, including the recommendations that
we add 10 new general officers for contracting positions and
2,000 new contracting personnel to meet the needs of the Army
alone. I look forward to working with the DOD, and the
Department of the Army, in particular, to get this done.
Senator Thune, you have a statement, I know, and you may
proceed.
Senator Thune. Thank you, Mr. Chairman.

STATEMENT OF SENATOR JOHN THUNE

Senator Thune. I want to thank you for holding the hearing
today, and I want to thank our witnesses for joining us today,
as well.
With the recent efforts of the Gansler Commission, the Army
Contracting Task Force, the DOD's Task Force in Contracting,
Contract Management, and Expeditionary Operations, continuous
work by the GAO and others, we finally seem to be getting our
arms around how much of a problem our eviscerated acquisition
workforce is, and what kinds of things need to be done to get
back on track, particularly with regard to contingency
contracting. I hope that with relevant legislation we enacted
in our authorization bill last year, this hearing, and followup
efforts by this committee, we help the Army and the DOD stay on
track.
From today's hearing, I'd like to get a particularly good
understanding of what challenges lie ahead for the Army and DOD
in trying to implement our legislation regarding the
acquisition workforce and the recommendations of the Gansler
Commission. Where the Army or the Department disagree on
implementing any particular recommendation, I ask the witnesses
to comment on why they disagree with the Gansler Commission's
call for a particular solution; what alternative they propose
that responds to the Gansler Commission's underlying concerns;
if they agree with those concerns; and where they are in
implementing that alternative.
In this regard, I'd like to focus on the recommendation to
give the Army more general officer slots to address structural
deficiencies with the workforce and the lack of contingency
contracting capability. Would the Army benefit from more time
to study where those additional billets should come from?
As I mentioned in our December hearing, support of Army
leadership is going to be important here. So, if the Army or
the Secretary has ideas on an interim solution, I'd like to
hear about that.
I also look forward to discussing the Department's position
on the use of private security contractors (PSCs) in theater,
and where the Department is on implementing the legislation we
enacted last year to help improve the Department's ability to
manage this important component of our ability to assert our
national security interests abroad.
Once again, I want to thank our witnesses for their time
today. I look forward to their testimony.
Thank you, Mr. Chairman.
Senator Akaka. Thank you very much, Senator Thune.
Senator McCaskill.
Senator McCaskill. Thank you, Mr. Chairman.
I do have to preside at 3:30, so I don't know if that's
good news or bad news for everyone who's here today. I won't
have as much time as I would like to go into some of the issues
I'd like to talk about today.
I will take just a moment, before your testimony, to
reiterate how we're looking forward to the contracting
commission that has become law and that will become operational
within a few months--Senator Webb and Senator Levin and I are
working to identify the appointees that will come from our side
of the aisle from Congress. I know that the minority side is
working on their representatives for the contracting
commission. But I want to reiterate, we have a May 28 deadline
for the appointment that must come from a recommendation of the
DOD and the Secretary of State to the President. I want to make
sure that I go on record today saying that I have figured out
that government doesn't exactly do things quickly, and I'm a
little worried that May 28 is going to be here in 10 minutes
and we will not have the appointments from the administration.
I know Secretary Bell has indicated that he is anxious to
cooperate, and that DOD is anxious to cooperate with the
contracting commission. So many of the issues we're going to
talk about today, we will have an opportunity to really get
into with the contracting commission, and I think it is a great
opportunity for us, in a bipartisan way--not a ``gotcha''
mentality, but a bipartisan way--to address the overarching
problems of acquisition and contract management that have
become so very large as we've looked at this contingency
operation.
I thank you, Mr. Chairman, for giving me a few moments to
say that.
Senator Akaka. Thank you very much, Senator.
We have on our panel today Honorable James I. Finley,
Deputy Under Secretary of Defense for Acquisition and
Technology; Honorable P. Jackson Bell, Deputy Under Secretary
of Defense for Logistics and Materiel Readiness; Lieutenant
General N. Ross Thompson III, USA, Military Deputy to the
Assistant Secretary of the Army for Acquisition, Logistics, and
Technology; and Jeffrey P. Parsons, the Executive Director,
Army Contracting Command.
Secretary Finley, will you please begin?

STATEMENT OF HON. JAMES I. FINLEY, DEPUTY UNDER SECRETARY OF
DEFENSE FOR ACQUISITION AND TECHNOLOGY

Mr. Finley. Thank you, and good afternoon.
Senator Akaka. Good afternoon.
Mr. Finley. Chairman Akaka, Senator Thune, and Senator
McCaskill, I'm very pleased to be here today to address the DOD
contracting in Iraq and Afghanistan.
I am fully committed to acquisition excellence and the
restoration of the confidence in our leadership for the DOD
acquisition system, which includes contracting. Thank you for
the opportunity to participate in today's hearing.
The Department has stood up a task force to integrate the
many activities associated with contracting and contract
management for expeditionary operations. The task force is
addressing the Commission recommendations from the report on
Army Acquisition and Program Management in Expeditionary
Operations, and also the associated legislative, regulatory,
and policy recommendations, and also the steps to be taken by
the relevant requirements of section 849 of the National
Defense Authorization Act (NDAA) of 2008, and the acquisition
requirements in section 807 and section 852.
Membership of the task force is crosscutting. The task
force includes the Joint Staff, all the Services, the Defense
Contract Management Agency (DCMA), the Joint Contingency
Contracting Office for Iraq and Afghanistan, the Defense
Acquisition University, and various other elements of the
Office of Secretary of Defense. We are assessing joint
approaches to, one, provide command, control, and acquisition
authority that are in alignment with checks and balances; two,
provide scalable solutions for contract management in support
of large and small expeditionary operations; three, provide
training for the way we fight, factoring in the lessons learned
for our acquisition and nonacquisition officers; four, assess
the appropriate size and competency requirements of the
contracting workforce; and five, take steps to shape and
leverage the DOD acquisition workforce development fund for
expeditionary operations.
The Commission report on Army Acquisition and Program
Management in Expeditionary Operations identified 40
recommendations. Of the 40, 22 recommendations were directed to
the Army. Lieutenant General Thompson and Mr. Parsons will
address those 22. My focus will be on the balance, 18 DOD-level
recommendations.
The Department is addressing the stature, quantity, and
career development of contracting personnel for all Services.
The Department has reviewed pertinent personnel directives and
issued updated guidance to support increased civilian
deployment capability.
Two medals for civilian employees of the DOD have been
established. First, the Secretary of Defense Medal for the
Defense of Freedom, established September 27, 2001, which I
have illustrated here in front of me today, and second, the
Secretary of Defense Medal for the Global War on Terror,
established March 12, 2003. It's to my left here in front of
me, as well. I'll be happy, after the hearing, to show you the
medals and explain more details about the medals.
The Department is assessing the appropriate number of
general and flag officers, senior executives for contracting
positions. In addition, the Department is conducting a
competency assessment of the contracting workforce. The results
of this assessment, along with an analysis of demographics and
the workload throughput, will enable us to identify the
appropriate need.
This effort was initiated last year for the entire DOD
contracting career field, and is planned for completion this
summer.
The Joint Contingency Contract Use Support Office, a
concept implemented for Iraq and Afghanistan about 2 years ago,
has provided lessons learned for our training needs for
expeditionary contracting. The global war on terror is far more
different than the Cold War era, especially for expeditionary
contracting. We are making progress to train the way we fight.
For example, the expeditionary contracting curriculum has been
redesigned to support journeyman-level personnel. The Community
of Practice Web Portal has been redesigned to streamline
collection and analysis. An advanced expeditionary contracting
training course has been developed for senior-level contracting
personnel. Standardization and certification for an
expeditionary contracting officer has been coordinated with all
the Services to better understand the joint environment. Five
programs of instruction are being developed for expeditionary
acquisition for our Joint and Service staff schools,
formalizing the training for the acquisition and nonacquisition
career fields. Also, the Joint Contingency Contracting
Handbook, which I have several examples here to share with you,
were developed last year, and thousands of copies have been
distributed.
We are assessing the possibility of recommending specific
supportive legislation actions, as well as regulatory and
policy assistance. We will provide additional information when
we submit our report to Congress by May 28, 2008.
The DOD Acquisition Workforce Development Fund will help
position the Department to more strategically address our
acquisition workforce needs. Although the past 5 years have
indicated top-line workforce stability, in terms of personnel,
the workload has increased. We have a far different concept of
operations with the global war on terror versus the Cold War.
The preparation and planning phase to leverage this fund for
expeditionary operations has started. Proposals from the
components have been received and are being mapped into three
areas of focus: one, recruitment and hiring; two, training and
development; and, three, recognition and retention. Reviews
with civilian and military leadership have started and are
ongoing.
In summary, our objective is to train the way we fight,
participate in exercises with expeditionary contracting
personnel, and continually integrate the lessons learned in
this new era of the global war on terror. We will improve with
joint scalability, integration, and synchronization of
expeditionary contracting and program management. Alignment of
checks and balances for decisionmaking authorities for
expeditionary operations will be improved. Utilization of the
Acquisition Workforce Development Fund as a resource will be
done and will help facilitate needed change. Measurable
progress has been made. Much more remains to be done. A plan
for that work has been established.
Chairman Akaka and members of the subcommittee, I will be
pleased to address any questions you may have.
Thank you.
[The prepared statement of Mr. Finley follows:]

Prepared Statement by Hon. James I. Finley

Chairman Akaka, Senator Thune, and members of the subcommittee, I
am pleased to come before you today to address the Department of
Defense (DOD) contracting in Iraq and Afghanistan. I am pleased that
Congress has focused on contracting. I am fully committed to
acquisition excellence and the restoration of the confidence in our
leadership in our acquisition system that includes contracting. I
pledge to work together with you and Congress, as stewards of our
taxpayer dollars, to provide the capability needed for our national
security. Thank you for the opportunity to appear before you to
participate in today's hearing.
I will focus on the three areas outlined in your request for my
testimony, summarized as follows:

(1) The steps the DOD is taking to implement the
recommendations of the Commission on Army Acquisition and
Program Management in Expeditionary Operations, which released
its final report, ``Urgent Reform Required: Army Expeditionary
Contracting'' on October 31, 2007.
(2) The Department's recommendations on legislation that may
be needed to implement those recommendations; and
(3) The steps that the Department is taking to implement
relevant requirements of the National Defense Authorization Act
(NDAA) for Fiscal Year 2008, including the acquisition
workforce requirements in sections 807 and 852 of that Act.

In response to all of the above areas of interest, and to implement
the requirements of section 849 of the NDAA for Fiscal Year 2008, we
have stood up The Task Force on Contracting and Contract Management in
Expeditionary Operations to address the specific Commission
recommendations and to integrate with the many other relevant areas
that are being addressed within the DOD. Membership of this Task Force
is cross cutting to include the Services, the Defense Contract
Management Agency (DCMA), the Joint Staff, the Joint Contingency
Contracting cell for Iraq/Afghanistan and various elements of the
Office of the Secretary of Defense. The Task Force meets weekly for
progress tracking purposes, meets periodically with the Services and
DCMA to ensure a coordinated and consistent Department approach, and
meets about once a month with Dr. Gansler to discuss any points of
clarification regarding the Commission's recommendations.
Section 849 of the NDAA for Fiscal Year 2008 directed the Secretary
of Defense, in consultation with the Joint Chiefs of Staff, to evaluate
the Commission's recommendations to determine the extent to which such
recommendations are applicable to the other Armed Forces. In addition,
section 849 requires the Secretary, not later than 120 days after
enactment, to provide a report to the congressional defense committees
indicating the conclusions of the evaluation and a description of the
plans for implementing the Commission's recommendations for Armed
Forces other than the Army. The evaluation required by section 849 is
underway, and the report to the congressional committees is on schedule
for submission on May 28, 2008.
I am fully committed to address the recommendations of the report
of the Commission on Army Acquisition and Program Management in
Expeditionary Operations, summarized as follows:

(1) Increase the stature, quantity, and career development of
military and civilian contracting personnel (especially for
expeditionary operations);
(2) Restructure organization and restore responsibility to
facilitate contracting and contract management in expeditionary
and continental United States operations;
(3) Provide training and tools for overall contracting
activities in expeditionary operations; and
(4) Provide legislative, regulatory, and policy assistance to
enable contracting effectiveness in expeditionary operations.
1. steps to implement the commission recommendations
The Commission identified 40 recommendations for action. Of the 40
recommendations, 22 are directed to the Army specifically, and you will
hear from Lieutenant General Thompson and Mr. Parsons about the Army
response to those recommendations. Eighteen of the 40 recommendations
are directed to the Department for consideration and implementation. I
will focus on those 18 DOD-level recommendations.
The Task Force, at this time, is not in agreement with 2 of the 18
Commission recommendations at the DOD level, summarized as follows. The
Commission recommended that the DCMA should be responsible for all
base, post, camp and station contracting, and that it should be
resourced to accomplish that mission. The Task Force is developing
alternative approaches to achieve the Commission's goal of enhanced
post-award contract management during routine times as well as during
times of contingency and war. The alternatives under consideration
address the Department's concern that the Services need to be able to
deploy in operations of all sizes; scalability of operations is
important. Through our monthly discussions with Dr. Gansler, we believe
he agrees we are on a path to achieving the Commission's intent. In our
assessments of the future role and structure of the DCMA we are
striving to ensure the most efficient, effective contract management
support for future contingencies. The Task Force believes the
Department should be positioned to be able to respond to the full range
of contingencies from those requiring very little contracted effort to
those requiring a great deal. We must have scalable processes. The Army
and Marine Corps are making the changes they believe will enable this
approach. The Marine Corps has completely restructured and updated its
approach to training in support of contingency operations.
We have issues today in service contract administration, and we are
working to correct them in our Improvement Plan for Contract Management
in response to the GAO High Risk Series. In addition, under the section
813 Panel on Contracting Integrity, subcommittees on Contracting
Integrity in a Contingent Environment and on Contract Surveillance have
identified their initial actions for 2008 and are on track to
accomplish them. These actions include enhanced training as well as
leveraging best practices and lessons learned. In addition, we have
already incorporated into the Joint Contingency Contracting Handbook
guidance on how to run and transition a contracting office in a
contingent environment. A newer subcommittee on Procurement Fraud
Indicators is assessing the need for a Procurement Fraud Indicators
handbook for acquisition personnel similar to the Inspector General
Procurement Fraud Indicators handbook for auditors; reviewing best
practices from existing training courses to determine the potential for
a training module for insertion into Defense Acquisition University
(DAU) training; and pursuing the feasibility of developing a database
of procurement fraud indicators available on an acquisition website. We
are ensuring that we enhance our overall contract management
capabilities, as well as our ability to step up to the contract
management needs of contingency environments.
The Commission recommended increasing the stature, quantity, and
career development of contracting personnel. We have reviewed the
civilian personnel directives that pertain to civilian personnel
involvement in military operations, and have issued a memorandum dated
February 12, 2008, ``Building Increased Civilian Deployment Capacity''
to provide guidance and interim policy to promote opportunities for DOD
civilians to contribute their talent to DOD's mission. This memorandum
will be reflected in an update to DOD Instruction 1400.32 ``DOD
Civilian workforce Contingency and Emergency Planning Guidelines and
Procedures'' August 2008. In addition, the Department has created two
new medals for civilian contributions to the global war on terror. One
was established after September 11, 2001, and the other is so new that
it was awarded for the first time on February 26, 2008.
The Department is actively assessing and developing its position
regarding the appropriate numbers of General and Flag Officers, and
Senior Executive Service authorizations, for contracting positions. Our
report to the congressional committees in response to section 849 of
the NDAA for Fiscal Year 2008 will contain additional information on
this subject.
The Commission provided recommendations pertaining to
organizational structure and responsibility to facilitate contracting
and contract management. I just discussed our ongoing assessments
regarding the future role of DCMA in order to ensure effective and
efficient contract management support for future contingency
operations. This planning is taking place in conjunction with a
subcommittee formed under the section 813 Panel on Contracting
Integrity with a specific focus on contract surveillance. In addition,
the Department is considering the most effective approach to achieve an
integrated, joint approach to contract and program management support
for future contingencies. This effort was already underway in response
to section 854 of the NDAA for Fiscal Year 2007. The preliminary
concept of a Joint Contingency Contracting Support Office was
previously reported to Congress last year in an interim report required
by section 854. This initiative responds to congressional mandates for
the development of capabilities for requirements definition,
contingency program management, and contingency contract support. Our
goal is to achieve the integration and synchronization of contract
support across combatant commands and United States Government agencies
to support effective program management, and to consolidate and
incorporate lessons learned.
The Commission provided recommendations to provide training and
tools for overall contracting activities in expeditionary operations.
We have made significant progress, summarized as follows:

1. DAU has redesigned the contingency contracting curriculum
to improve training supporting journeyman level contingency
contracting operations. This will enable experienced
contingency contracting officers to be deployable worldwide and
be effective immediately upon arrival to support the mission.
The redesigned curriculum is synchronized with the Joint
Contingency Contract Handbook. It includes interactive
simulations, hands-on practical work, and robust capstone
projects; we emphasize cultural awareness and ethics training;
and bring in subject matter experts to provide their
perspective on contracting in theater.
2. DAU is redesigning its Contingency Contracting Community
of Practice web-portal. The redesign will streamline the
collection and analysis of after-action reports.
3. An advanced Contingency Contracting Course is also being
developed by DAU. This course will provide ``just in time''
training to senior level contracting personnel deploying to a
management position.

DAU has collaborated closely with all the Services to standardize
the required training a contingency contracting officer must complete
to become fully qualified/certified. This will help ensure commanders
in the field get fully trained contingency contracting officers who
understand the joint environment. The Army has determined the majority
of their additional training requirements will be provided by the U.S.
Army Logistics Management College located in Fort Lee, VA, and
Huntsville, AL.
As contractors on the battlefield are a reality for future
expeditionary operations, operators outside the acquisition community
must be trained on the role and importance of contracting, Contracting
Officer's Representatives (CORs) and contractors in expeditionary
operations. DOD actions to address these issues pre-date the
Commission's Report.
As a result of the NDAA for Fiscal Year 2007, DOD assessed
noncontracting officer training courses and existing training
curriculum at DOD and Service schools at all levels (basic,
intermediate, and senior). Based on this assessment, the Department is
developing a broad program of instruction for operational military
leaders, both officer and enlisted, across all grades, on management of
contractors deploying with forces.
In addition, we are developing programs of instruction on
contingency acquisition for our Military Departments' Staff Colleges
and Senior Military Service and Joint Staff Schools to train, more
formally, our senior planners and leaders on roles and responsibilities
of planning and managing contracts and contractor personnel in forward
areas. This training will focus all leaders on determining
requirements, translating those requirements into statements of work
and then overseeing work.
In a parallel effort, the Army has instituted junior officer
training in the proper use of contractors who accompany the force in
support of Army contingency operations. This training covers the role
of contractors in support of Army contingency operations, describes how
contractors are integrated into Army operations, and explains user
responsibilities for requesting and overseeing contract support. Thus,
through this emphasis on oversight in training, both military leaders
and junior officers will be educated on the important role of
contracting, Contracting Officers, and CORs.
With regard to increasing the number of contracting personnel, we
are conducting a competency assessment for the entire DOD Contracting
Career Field. We anticipate completion of the assessment this summer.
Once we have completed the competency assessment, along with an
analysis of our demographics and workload throughput, we will be in a
position to provide the appropriate number of additional contracting
personnel needed by the Department.
The Commission recommended establishing an Expeditionary
Contracting Manual to support the expedited processes and tempo
necessary for procuring the support needed by our warfighters in the
theater of operations. The Department has developed and distributed
thousands of copies of the Joint Contingency Contracting Handbook.
Feedback from deployed users has been outstanding--we receive requests
for more every day! The handbook provides a consolidated source of
information for our contingency contracting officers, and provides the
essential information, tools, and training to meet the challenges they
will face, regardless of mission or environment.
This February, DAU delivered its first course to incorporate the
handbook into formal training, and the feedback received from the
students indicates it was an overwhelming success!
In addition, the Department has developed a draft Expeditionary
Contracting Policy, which provides the foundation for the Joint
handbook. This draft policy is in coordination with all relevant
stakeholders, and is expected to be published in May 2008.
The Commission recommended an adequately resourced contingency
operation transfer fund. The Department is considering the
recommendation; however, the Department is also aware of congressional
oversight concerns that have precluded the funding of these accounts in
the past. The Commission also recommended that the Department ensure
that policy and practice support intelligent funding apportionment for
expeditionary operations. The next update of the Joint Contingency
Contracting Handbook will clarify the pertinent guidance.

2. the department's recommendations on any legislation that may be
needed to implement those recommendations
As the Department reviews the Commission's recommendations, and
appropriate implementation actions, we are assessing the possibility of
recommending specific supportive legislative actions. As required by
section 849 of the NDAA for Fiscal Year 2008, we will submit a report
to the congressional defense committees with the results of our
assessments by May 28, 2008, and will provide additional information at
that time.
3. dod steps to implement relevant requirements of the ndaa for fiscal
year 2008, including the acquisition workforce requirements in sections
807 and 852 of that act
The implementation steps we have taken for the relevant
requirements of section 807 and section 852 of the NDAA for Fiscal Year
2008 are summarized as follows:

Regarding section 807, ``Inventories and Reviews of Contracts
for Services,'' we are working across the Department
establishing guidelines for the military departments and
Defense agencies that will identify the targeted type of
services, and standardize the collection of data required to
create an inventory of the contracted services. This statute
amended 10 U.S.C. Sec. 2330a, ``Procurement of services:
tracking of purchases,'' by directing us to not only collect
greater granularity of data, but to share it with the public,
and then conduct reviews of the contracts listed in that
inventory. This is a large undertaking by the Department. We
need to work with Congress to ensure we meet your intent. The
inventory should be invaluable for shaping our contractor
support workforce.

Regarding section 852 of the NDAA for Fiscal Year 2008, the
Department has begun to take steps to shape the DOD Acquisition
Workforce Development Fund (the Fund) for targeted recruitment,
training and retention initiatives. The 852 initiatives could
significantly improve the Department's overall management of the
Defense acquisition workforce, including contract management,
contingency operations and position the Department to successfully
sustain and appropriately size the future acquisition workforce.
We have established partnerships within the Department and are
working collaboratively with the DOD Comptroller's office and the
Office of the Under Secretary for Personnel and Readiness. Additional
implementation details on Section 852 will be in the DOD civilian human
capital strategic plan to be delivered to Congress within the next few
months.
The purpose of the fund can help to ensure the Defense acquisition
workforce has the capacity, in both personnel and skills, to properly
perform its mission. This includes ensuring appropriate oversight of
contractor performance and that the Department receives the best value
when using public funds.
We have engaged the military Services and Defense components to
establish DOD enterprise initiatives. These efforts will position the
Department to strategically address our acquisition workforce
shortfalls.
I want to thank Congress for their support of the acquisition
workforce and the flexibilities provided for using the Fund.
summary
In summary, measureable progress has been accomplished. Much work
remains to be done. A plan for that work has been established with
measureable criteria.
We believe that contracting and contract management are vital
elements of acquisition excellence. Contracting and contract management
are an important military task for leadership and execution on a global
basis for all situations. The Acquisition Workforce Development Fund
can be utilized to help facilitate the strategy for the achievement of
acquisition excellence for Expeditionary Operations.
Mr. Chairman, I am pleased to address any questions that you may
have for me. Thank you.

Senator Akaka. Thank you, Secretary Finley.
Now we'll hear from Secretary Bell.

STATEMENT OF HON. P. JACKSON BELL, DEPUTY UNDER SECRETARY OF
DEFENSE FOR LOGISTICS AND MATERIEL READINESS

Mr. Bell. Thank you, Chairman Akaka and Ranking Member
Thune, and Senator McCaskill. Thanks again for this opportunity
today to discuss four topics of interest to your subcommittee:
the role of PSCs in Iraq and Afghanistan; the role of
contractors in detainee interrogations; the status of DOD
efforts to implement sections 861 and 862 of the 2008 NDAA; and
the status of efforts to address gaps in legal accountability
of PSCs in Iraq and Afghanistan.
I've submitted detailed written testimony addressing these
topics, which I will not be able to cover in my brief oral
testimony today, so I request that my written testimony be
incorporated into the record of this hearing.
Regarding PSCs: recently, questions have arisen about the
appropriateness of using PSCs in areas of military operations.
As described in more detail in my written testimony, DOD
policies governing the use of PSCs in contingency operations
are in compliance with existing laws and regulations. These
policies, collectively, restrict PSC authority and missions to
defensive operations; establish firm policies, rules, and
procedures governing their conduct and their operations;
provide for clear government oversight to ensure that they're
not performing either inherently governmental functions or even
entering areas of high risk or areas of military operations;
and, finally, of course, firmly establish legal jurisdiction
over their conduct.
Notwithstanding media coverage regarding PSC operations in
Iraq, the frequency of serious incidents among DOD PSCs is
relatively low. During the period of August 2004 through
February 2008, a period of intense insurgency and sectarian
violence in Iraq, more than 19,000 DOD convoy operations were
recorded. Of those, less than three-quarters of 1 percent
involved the use of deadly force by a DOD PSC; and then, not
necessarily causing casualties.
The recent execution of a memorandum of agreement between
DOD and the Department of State (DOS) is having an even more
disciplining effect on PSC operations there. General Petraeus
recently reported to Secretary Gates that, ``There has been a
67 percent reduction in graduated-force incidents involving
contractors, and both the Government of Iraq and the Iraqi
people have taken notice of the changes made in the operating
procedures and in the attitudes of PSCs.''
Regarding contractor roles in detainee interrogations, as
we all know, detainee operations are a matter of great
importance to the U.S. Government, as much as they are a matter
of great sensitivity. My testimony today addresses only the
question of DOD policies regarding the use of contractors in
detainee interrogations.
This role of contractors is authorized and governed by a
number of DOD policy directives and instructions that
specifically establish a policy framework for the use and the
supervision of contractor personnel in detainee interrogations.
These are covered in detail in my written testimony.
Regarding the legal accountability of deployed contractors,
all DOD civilian employees and DOD contractors deployed outside
the United States in support of our military forces are legally
accountable for their conduct under the jurisdiction of both
the Uniform Code of Military Justice (UCMJ) and the Military
Extraterritorial Justice Act (MEJA), as well as other statutes.
Nonetheless, both DOD and DOS are on record about the need for
legislation to strengthen the legal accountability of other
U.S. Government contractor personnel deployed outside the
United States in support of other U.S. Government missions,
besides the DOD mission.
Regarding the status of efforts to implement sections 861
and 862, DOD is working actively now with the DOS and with the
U.S. Agency for International Development (USAID) to implement,
on schedule, the requirements of the 2008 NDAA. The Memorandum
of Understanding (MOU), required under section 861, is already
in draft form, and should be executed by July 1, with
implementation targeted within the required 120 days after the
MOU is executed.
Regarding section 862, work is nearing completion on an
expanded framework of regulations and reporting requirements
relating to U.S. Government PSCs working in Iraq and
Afghanistan.
In closing, and a personal note, I would ask that this
committee reconsider legislation passed in 2007, of the NDAA,
that mandates the downgrade of the position of the Deputy Under
Secretary of Defense for Logistics and Materiel Readiness, upon
my leaving the position. This position has oversight of all DOD
logistics functions, which, in 2006, represented about $162
billion of DOD's $537 billion budget.
Subsequent to this legislation, this position has assumed
additional ongoing responsibilities, including leadership of
DOD efforts to strengthen management of deployed contractors
and negotiating and overseeing implementation of agreements
with the DOS and USAID regarding the operations of all of our
contractors in Iraq and Afghanistan, including, particularly,
PSC operations in those countries.
In the future, additional work is going to be required to
expand this governance to other U.S. Government departments and
agencies. The downgrade of this position sends the wrong signal
about the importance of these areas of responsibility at the
very time of their increasing significance to DOD and in global
war on terror operations.
Hopefully, this brief oral testimony and my written
testimony will provide a useful baseline of information for
your questions as we get into a discussion.
Thank you.
[The prepared statement of Mr. Bell follows:]

Prepared Statement by Jack Bell

Chairman Akaka, Ranking Member Thune, and members of the committee:
thank you for the opportunity to appear before you today to discuss
four topics of interest to your subcommittee: the role of private
security contractors (PSCs) in Iraq and Afghanistan; the role of
private contractors in the interrogation of detainees in those
conflicts; the steps the Department of Defense (DOD) is taking to
implement sections 861 and 862 of the National Defense Authorization
Act (NDAA) for Fiscal Year 2008; and the status of efforts to address
gaps in the legal accountability of and jurisdiction over PSCs in Iraq
and Afghanistan.
Any discussion of the roles of contractors in performing private
security services and detainee interrogations should be based on
recognition of the historical background of and current policy
framework governing the use of contractors in these roles.

BACKGROUND

The use of civilian contractors in support of the armed forces is
not new. Historically, contractors have been used by the U.S.
Government and other governments to perform a variety of military
support roles, including private security, intelligence, and
interrogation. This practice has been so long established that
contractors are specifically recognized in both U.S. policy and
international agreements of longstanding relating to their status as
prisoners of war:

Article 50 of the U.S. Army General Order No. 100
(1863) states: ``Citizens who accompany an army for whatever
purpose . . . if captured, may be made prisoners of war. . .
.''
Article 13, Annex to the Hague Convention IV (1907)
states: ``Individuals who follow an army without directly
belonging to it, such as . . . contractors, who fall into
enemy's hands . . . are entitled to be treated as prisoners of
war. . . .''
Article 4 of the Geneva Convention Relative to the
Treatment of Prisoners of War (1949) states: ``Prisoners of war
. . . [include] persons who accompany the Armed Forces without
actually being members thereof, such as civilian members of
aircraft crews . . . supply contractors. . . .''

Through World War II and Korea, support from the private sector was
common, but normally performed in secure areas, since the battlefield
was usually demarcated between secure and nonsecure areas. Contractors
assumed key roles in the occupation phase of these conflicts--in the
securing of peace and the reconstitution or reform of state security
institutions.
As the Vietnam conflict unfolded, the nature of the battlefield
changed and the role of contractors expanded to provide construction,
reconstruction, intelligence, and security services in nonsecure areas.
Contractors were also key players in reconstruction, economic
development, and development of institutional governance capabilities
of the host nation.
Since Vietnam, DOD has become increasingly dependent on
contractors, both at home and when deployed, to perform critical
support functions that are integral to the success of military
operations, but not inherently governmental functions. Several factors
contribute to the increased DOD reliance on contractor support:

The shift to an All-Volunteer Military Force in the
1970s;
An effort to capture a ``peace dividend'' following
the collapse of the Soviet Union, which led to the significant
reduction of United States Government military and civilian
forces over the last 15 years.
Initiatives (e.g., including A-76) to transfer work
that could be done more cost-effectively by contractors than by
military forces or DOD civilians;
The increasing technical complexity of military
equipment and information technology hardware and software,
requiring maintenance by a narrow set of in-depth, sometimes
proprietary technical skills that are not cost effective for
the military force maintain a capability to support.
The shift from traditional equipment sustainment
programs to outsourced performance-based logistics programs, to
improve equipment readiness at lower costs.

As a result, the U.S. military force has been reduced from 2.1
million in 1989 to less than 1.4 million today, and the total U.S. Army
from 111 combat brigades to 76. As dependence on contractors has
increased, it is now common for contractors to provide a wide variety
of support services, and even to be embedded with our military units
performing critical technical support functions. For example, the
Government Accountability Office (GAO) noted in 2006 that a Stryker
brigade typically deploys with 75 technical support contractors, in
addition to those performing the highly technical battle damage repairs
at forward support facilities. Similarly an Apache Battalion deploys
with embedded contractors, whose numbers may vary due to mission
requirements to perform support missions for them in the field.
The history of DOD's (and its precedent organizations') use of
civilians accompanying military forces to forward areas is shown in the
table below.

CIVILIANS ACCOMPANYING THE FORCE HISTORICAL PERSPECTIVE \1\
----------------------------------------------------------------------------------------------------------------
Civilians/
War/Conflict Contractors Military Ratio
----------------------------------------------------------------------------------------------------------------
Revolution............................................. (est.) 1,500 9,000 1:6 (est.)
Mexican/American....................................... (est.) 6,000 33,000 1:6 (est.)
U.S. Civil War......................................... 200,000 1,000,000 1:5 (est.)
World War I............................................ 85,000 2,000,000 1:24
World War II........................................... 734,000 5,400,000 1:7
Korean Conflict........................................ 156,000 393,000 1:2.5
Vietnam Conflict....................................... 70,000 359,000 1:5
Operation Desert Shield/Storm.......................... 9,000 500,000 1:55
Balkans................................................ 20,000 20,000 1:1
Operation Iraqi Freedom \2\ ........................... 163,590 160,000 1:1
----------------------------------------------------------------------------------------------------------------
\1\ Source: Zamparelli, Steven J., ``Competitive Sourcing and Privatization: Contractors on the Battlefield:
What Have We Signed Up For?'' Air Force Journal of Logistics, Volume XXIII, Number 3, p. 12.
\2\ Data addresses only DOD contractors and does not address civilians or contractors supporting other U.S.
Government Agencies and Departments.

At the same time, military operational tempo has increased
significantly under the global war on terror and as a result of the
proliferation of regional conflicts that ensued with the end of the
stability engendered by the Cold War balance of power. From 1990 to
2000 the U.S. Army alone has deployed troops on 36 occasions, compared
to 10 deployments during the 40 year Cold War.
Consistent with applicable laws and regulations defining inherently
governmental functions, the structure of our military forces has been
adapted to this environment. DOD identified opportunities where
competitive sourcing of contractor support for our deployed forces
would allow DOD to concentrate its manpower to distinctly military
activities in support of our National Military Strategy. This focus is
reflected in the current DOD Directive (DODD) 1100.4, ``Guidance for
Manpower Management'' (February 12, 2005), Paragraph 3.2.4.3., which
states, ``During a conflict, military personnel shall be assigned only
to those tasks that directly contribute to the military effort. . . .''
``Military effort'' is generally defined as the inherently
governmental function of the military force role to engage in combat--
to identify, close with, and destroy enemy or terrorist forces.

PRIVATE SECURITY CONTRACTORS

Recently, questions have been raised about the ``appropriateness''
of using PSCs in areas of military operations. DOD's decisions to use
PSCs (including subcontractors) are in compliance with current U.S.
Government policy and regulations. Relevant policy direction and
guidance on this subject are found in the following:

Circular A-76 (amended in 2003);
The Federal Activities Inventory Reform Act of 1998;
and
The current Federal Acquisition Regulation (FAR),
including the recent final rule to add a new FAR Subpart 25.3,
which specifically governs the contracting for PSCs.

It is significant that the final rulemaking on Subpart 25.3
(Federal Register: February 28, 2008, Volume 73, Number 40, pages
10943-10959) explicitly recognizes that:

The United States Government has the authority to hire
security guards (i.e., PSCs) worldwide (page 10944);
The protection of property and persons is not an
inherently governmental function (page 10944); Also see FAR
7.503 (d)(19);
There is an important distinction between self-defense
and combat operations, and that individuals have an inherent
right of self defense (page 10943);
PSCs are not mercenaries and are not authorized to
engage in offensive operations (page 10944);
PSCs have been given a mission to protect other
assets/persons, and so it is important that the rule reflect
the broader authority of PSCs in regard to the use of deadly
force (page 10944);
The standard on the use of deadly force by PSCs should
be when it ``reasonably appears necessary,'' a standard in DODD
5210.56 that applies to the [defensive] use of deadly force by
military security personnel (page 10944);

DOD Instruction (DODI) 1100.22, ``Guidance for Determining
Workforce Mix'' (issued September 22, 2006, and updated April 6, 2007)
provides additional guidance on the strategic structuring of military,
civilian, and contractor forces. It states that, ``the DOD may
authorize deliberate action against another sovereign government or
nonstate actors on behalf of the United States (i.e., the authority to
plan, prepare and execute operations to actively seek out, close with,
and destroy enemy forces, including the use of firepower, and other
destructive and disruptive capabilities on the battlefield. Combat
authorized by the U.S. Government is IG [inherently governmental]. . .
. (Paragraph E2.1.3.). PSCs are not authorized to participate in combat
operations.
Other sections of DODI 1100.22 describe security operations under
conditions that could make them inherently governmental or not
inherently governmental, as follows:

``Security provided for the protection of resources
(people, information, equipment, supplies, et cetera) in
uncontrolled or unpredictable high threat environments inside
the continental United States or outside the continental United
States entails a wide range of capabilities, some of which are
inherently governmental and others of which are commercial.
Security is IG [inherently governmental] if it involves
unpredictable international or uncontrolled, high threat
situations where [military] success depends on how operations
are handled and there is a potential of binding the United
States to a course of action when alternative courses of action
exist.'' (Paragraph E2.1.4.1.). PSC operations and missions are
not of a scale to impact the overall success of the military
mission or to bind the United States to any course of action
other than the one selected by it.
``Security forces that operate as part of a larger,
totally integrated and cohesive Armed Force typically perform
operations that require deadly force and substantial
discretion.'' (Paragraph E2.1.4.1.2.). However, DOD PSCs do not
operate as an integral part of a larger military operation, and
their operations are governed by strict Rules on the Use of
Force (RUF) and escalation procedures on the use of force.
``Security operations could entail defense against a
military or paramilitary organization whose capabilities are so
sophisticated that only military forces could provide an
adequate defense. This includes situations where there is such
a likelihood of hostile fire, bombings, or chemical attacks by
groups using sophisticated weapons and devices that, in the
judgment of the military commander, the operation could evolve
into combat.'' (Paragraph E2.1.4.1.3.). PSCs carry out strictly
defensive security missions, with emphasis on attempting to
disengage and leave the area as soon as possible.
``Security operations that involve more than a
response to hostile attacks typically entail substantial
discretion and are IG.'' (Paragraph E2.1.4.1.4). Policies
governing PSC operations emphasize that their security mission
is strictly defensive in response to threatened hostile
attacks.
``A decision is not IG if it can be limited or guided
by existing policies, procedures, directions, orders, or other
guidance that identify specific ranges of acceptable decisions
or conduct and subject the discretionary authority to final
approval or regular oversight by government officials.''
(Paragraph E2.1.4.1.5.). Again, PSCs operate under strictly
defensive RUF established by the military commander, not
combat-oriented Rules of Engagement.
``Contingency contractors may provide security
services for other than uniquely military functions provided
the geographic combatant commander:

``Clearly articulates rules for the use of
deadly force that preclude ceding governmental control
and authority of IG functions to private sector
contractors. . . .;
``Sets clear limits on the use of force . . .;
As indicated above, PSCs operate under clearly
articulated policies and rules established by the
geographic combatant commander and the local area
commander (e.g., General Petraeus).
Department of State and DOD are not the only
Government agencies to employ PSCs with the right to
use deadly force. For example, 10 CFR 73.50, permits
contract security personnel protection nuclear material
to use deadly force. Also, the U.S. Marshal Service
employs PSCs to guard prisoners being transported
between locations, armed and with the authority to use
deadly force.

In summary, DOD's current policies are in compliance with these
regulations and policies. Specifically:

The mission of PSCs is strictly defensive--protecting
persons, facilities, places or supplies, depending on the
specific contract under which they operate. They are
specifically prohibited from engaging in combat (offensive)
operations.
PSCs do not operate as part of a larger, totally
integrated and cohesive military force, where their actions
could affect the success of the military mission could be
adversely affected, or could bind the U.S. to a course of
action where alternative courses of action exist.
All DOD PSCs in Iraq and Afghanistan are contractually
bound to follow the policies and rules established by the U.S.
Central Command (CENTCOM), MNF-I, and Commander, Joint Task
Force 76 commanders. These rules include specific language on
RUF, which are entirely defensive in nature. These rules call
for emphasis on avoidance of conflict and de-escalation of the
use of force where possible. When force is required, PSCs are
trained and instructed to use graduated force response-
sequential actions which begin with nonlethal force response
measures to ward off an attack such as firing flares, shining
bright lights, or blowing horns. Only when these actions are
ignored, as required by the situation, do they escalate their
response, such as firing into the air or shooting into the
engine block of an approaching vehicle. Use of deadly force
aimed fire is authorized only as a last resort to kill or
disable the individual or individuals posing the threat, while
minimizing the possibility of casualties among innocent
persons.
All U.S. Government PSC operations in Iraq are under
the oversight of the battle space commander to the area
battlespace commander, who can redirect or terminate a private
security operation that would enter an area of combat
operations, or have a high risk of either being attacked or of
risking causing casualties among innocent civilians. Final
authority for U.S. Embassy moves rests with the Chief of
Mission, but he will generally honor the battlespace
commander's recommendation. The battlespace commander also has
the authority to take control of any battlefield situation,
including one in which a PSC is being attacked or is involved
in an incident. Similar controls will be put in place shortly
for Afghanistan under section 862 of the 2008 NDAA.

As of the end of the first quarter, fiscal year 2008 (December 31,
2007), CENTCOM reported that there were approximately 6,467 DOD-funded
armed PSCs in Iraq and approximately 2,745 DOD-funded armed PSCs in
Afghanistan. The table below illustrates the distribution by
nationality and delineates armed versus unarmed PSCs in Iraq and
Afghanistan.

DOD PRIVATE SECURITY CONTRACTORS IN IRAQ AND AFGHANISTAN AS OF 31 DECEMBER, 2007
----------------------------------------------------------------------------------------------------------------
Local/Host
Total U.S. Citizens Third Country Country
National National
----------------------------------------------------------------------------------------------------------------
Total DOD PSCs in Iraq.......................... 9,952 830 7,590 1,532
Armed PSCs in Iraq.............................. 6,467 429 5,318 720
================================================================================================================
Total DOD PSCs in Afghanistan................... 2,998 19 30 2,949
Armed PSCs in Afghanistan....................... 2,745 16 30 2,699
----------------------------------------------------------------------------------------------------------------

These PSCs are employed in accordance with the guidance outlined
above as well as paragraph 6.3.5 of DOD Instruction 3020.41,
``Contractor Personnel Authorized to Accompany the U.S. Armed Forces,''
October 3, 2005. This paragraph provides that contracts shall be used
cautiously in areas where major combat operations are ongoing or
imminent. In accordance with this paragraph, the combatant commander
weighs the following factors when considering specific security
contracts: where the contract security personnel will operate; the
anticipated threat; what property or personnel is to be protected; the
manner in which the contractor will be operating in areas of increased
risk, including command and control, the sharing of threat information,
and communication with forces; and the training and qualifications of
the contract security personnel.
In a recent audit of PSCs in Iraq, GAO noted significant
improvements in PSC coordination and oversight and in the tracking and
reporting of incidents when they happen. Notwithstanding media coverage
regarding incidents involving PSCs, the frequency of serious incidents
among DOD PSCs is low. The period of August 2004 through February 2008
covers a period of rampant insurgency and sectarian violence in Iraq
affecting U.S. military forces. During that time, 19,268 DOD contractor
convoy operations were recorded. Of those, only 151 (or less than
eight-tenths of 1 percent) involved the discharge of a firearm by a
PSC, and not all of those involved aimed fire at an enemy combatant.
This was in spite of the fact that during that time, 1,441 hostile
attacks were made against those convoys. These statistics reflect a
high degree of discipline and effective management of DOD PSCs
operating within a strict policy framework.
The recent execution of the Memorandum of Agreement between DOD and
the State Department is having an even more disciplined effect on PSC
operations in Iraq. General Petraeus recently reported to Secretary
Gates that, ``There has been a 67 percent reduction in graduated force
incidents involving contractors, and both the Government of Iraq and
the Iraqi people have taken notice of the changes made in the operating
procedures and attitudes of PSCs.''
In recent testimony, I have discussed the potential consequences of
any policy decision to replace PSCs in Iraq and Afghanistan with
military forces. Using Congressional Budget Office methodology from
their 2005 contractor study on Logistics Support for Deployed Military
Forces, it would require the manpower equivalent of nine brigades of
manpower to support that role. Such a requirement would be a major
challenge for DOD to resource.

CONTRACTOR ROLE IN DETAINEE INTERROGATIONS

Detainee operations are a matter of great importance to the U.S.
Government, as much as they are a matter of sensitivity. This testimony
addresses only the question of the role of DOD contractor personnel in
detainee interrogations.
The role of contractors in detainee operations is governed by a
number of DOD policy directives and instructions:

DODD 2310.01E (September 5, 2006) specifies that,

``The Under Secretary of Defense for
Intelligence shall exercise primary responsibility for
developing policy pertaining to DOD intelligence
interrogations, detainee debriefings, and tactical
questioning . . . .'' (Paragraph 5.4.1.).
``All DOD contracts pursuant to which
contractor employees interact with detainees include a
requirement that such contractor employees receive
training regarding the international obligations and
laws of the United States applicable to detainee
operations.'' (Paragraph 5.3.1.)
``The Under Secretary of Defense for
Acquisition, Technology, and Logistics shall ensure
contractor employees accompanying DOD components in
conducting, participating in, or supporting detainee
operations complete training and receive information on
the law, regulations, and policies applicable to
detention operations, and the requirements to report
possible, suspected, or alleged violations that arise
in the context of detention operations. . . .''
(Paragraph 5.3.2.)

DODD 3115.09 (November 3, 2005) states that,

``The Under Secretary of Defense for
Intelligence shall exercise primary responsibility for
DOD intelligence interrogations, detainee debriefings,
and tactical questioning and serve as the advisor to
the Secretary and Deputy Secretary of Defense regarding
DOD intelligence interrogations policy.'' (Paragraph
4.1 and 4.1.1.)
``A trained and certified DOD interrogator
shall monitor all interrogations, debriefings, and
other questioning conducted by non-DOD or non-U.S.
Government agencies or personnel.'' (Paragraph
3.4.4.3.)

DODI 1100.22 (September 7, 2006) states that:

``Direction and control of intelligence
interrogations are IG functions. This includes the
approval, supervision, and oversight of interrogations.
However, in areas where adequate security is available
and is expected to continue, properly trained and
cleared contractors may be used to draft interrogation
plans for government approval and conduct government-
approved interrogations consistent with DODD 3115.09,
if they are properly supervised and closely monitored
throughout the interrogation process by sufficient
numbers of properly trained government officials.''
(Paragraph E2.1.6.2.).

STATUS OF LEGAL ACCOUNTABILITY JURISDICTION OVER DEPLOYED CONTRACTORS

All DOD contractor personnel, regardless of nationality, are
legally accountable for their conduct in complying with the DOD
policies and regulations, as well as with the laws of the United States
and applicable laws of the host country. This legal accountability
proceeds from a number of statutes including:

The Uniform Code of Military Justice, extended by
section 552 of the NDAA for Fiscal Year 2007 to cover all
contractors located outside the United States accompanying the
military forces in the field in contingency operations against
a hostile force.
The Military Extraterritorial Justice Act provides
Federal criminal jurisdiction over felony-level crimes
committed by DOD civilian employees and contractors (except
host country nationals) accompanying the Armed Forces outside
the United States.
Other statutes address legal accountability of U.S.
citizens alleged to have committed specific crimes against
other U.S. citizens and other criminal acts overseas.
Coalition Provisional Authority Order #17 is a law
signed into effect prior to the transfer of authority to the
Government of Iraq in 2004 and is scheduled to expire with the
conclusion of the U.N. Security Council mandate of the
Multinational Force-Iraq (MNF-I), currently set for December
31, 2008,. It provides non-Iraqi contractor personnel working
on behalf of coalition forces (as well as those working for
foreign diplomatic or consular missions, or foreign
humanitarian aid, reconstruction or development projects)
immunity from Iraqi legal process for acts committed pursuant
to the terms and conditions of their contract. Assuming no
further action by the U.N. Security Council, any continuing
immunity after December 31, 2008, for individuals not covered
through other means, will have to be provided for in
negotiations between foreign governments and the Government of
Iraq. Otherwise, such contractors may be subject to Iraqi laws
and its criminal justice system.

While DOD civilian employees and DOD contractors are considered to
be legally accountable for their actions, both DOD and the State
Department are on record about the need for legislation to strengthen
the legal accountability of other U.S. Government contractor personnel
deployed outside the United States.

STATUS OF EFFORTS TO IMPLEMENT SECTIONS 861 AND 862 OF THE 2008 NDAA

DOD has launched a number of significant initiatives to strengthen
the management of DOD contractors accompanying deployed military
forces. Also, we are currently implementing a Memorandum of Agreement
with the State Department signed on December 5, 2007, to strengthen the
coordination of DOD and State PSC operations in Iraq. We are now
working actively with the State Department and the U.S. Agency for
International Development (USAID) to address the requirements of
sections 861 and 862 of the NDAA for Fiscal Year 2008. Sections 861
requires the establishment of a Memorandum of Understanding (MOU) among
DOD, the State Department, and USAID, to cover all contracts being
implemented in Iraq and Afghanistan, and all contractors and contractor
personnel there. In addition, Section 861 requires the establishment of
a comprehensive data base of contract and contractor personnel data,
available on an online basis to appropriate legislative branch
committees and the GAO.
Progress is well underway regarding the drafting of an MOU
responsive to the requirements of section 861, and there should be no
problem in executing such an MOU by the deadline on July 1, 2008. The
more difficult challenge will be the establishment of the data bases
required under section 861 to provide the multi-disciplinary data bank
required to be put in place. Efforts have already been launched to
define the software and system requirements to support this
requirement, with a view towards compliance with the requirement to
implement the provisions of the MOU within 120 days of its execution.
Similarly, work is underway to implement the provisions of section
862 of the NDAA for Fiscal Year 2008. In this section, Congress has
acknowledged the use of PSCs, and has prescribed specific requirements
for their oversight in a declared combat operation. It requires the
Secretary of Defense, in coordination with the Secretary of State, to
prescribe regulations governing the policies, procedures, and
operational control of PSCs under contract to DOD, the State
Department, and USAID for work in Iraq and Afghanistan. In several
ways, these regulations will be much broader than the currently
effective MOA between DOD and the State Department relating to the
coordination of PSC operations in Iraq. Nonetheless, major elements of
the MOA will form the core of the regulations currently being drafted
to comply with section 862.
In closing, I would like to highlight the fact that the DOD, the
GAO, the Office of Management and Budget, the Congressional Budget
Office, and the Congressional Research Service have continuously
reviewed the expanded use of PSCs, the potential for their performance
of inherently governmental functions, and the appropriateness and
manner in which they are employed.
Hopefully, this testimony provides a documentary baseline of the
four topics I was asked to address at this hearing. I will be happy to
answer any questions you have regarding the policy framework regarding
contractors in these areas of concern and interest. Thank you.

Senator Akaka. Thank you very much, Secretary Bell.
General Thompson?

STATEMENT OF LTG N. ROSS THOMPSON III, USA, MILITARY DEPUTY TO
THE ASSISTANT SECRETARY OF THE ARMY FOR ACQUISITION, LOGISTICS,
AND TECHNOLOGY; ACCOMPANIED BY JEFFREY P. PARSONS, EXECUTIVE
DIRECTOR, ARMY CONTRACTING COMMAND

General Thompson. Chairman Akaka, Senator Thune, Senator
McCaskill, thank you for the opportunity to appear before you
again today on the Army's contracting operations in Iraq and
Afghanistan.
Since our last report to you, and in keeping with the
recommendations of the Gansler Commission, Secretary of the
Army Pete Geren directed the realignment of the Army
Contracting Agency to the Army Materiel Command and the
establishment of the Army Contracting Command Provisional. We
stood up this organization on March 13 of this year. With me
today is Jeff Parsons, our first Executive Director of the new
Army Contracting Command Provisional. We have a joint written
statement that I respectfully request also be made a part of
the record for today's hearing.
I would like to take this opportunity to thank the
committee and the committee leadership for your unwavering
support to the men and women in uniform.
Mr. Chairman, the Secretary of the Army created the Special
Commission on Contracting, led by Dr. Jacques Gansler, to look
at the long-term strategic view of the Army's acquisition and
contracting system in support of expeditionary operations. The
Army Contracting Task Force, which I co-chaired with Ms. Condon
of the Army Materiel Command, was formed to review current
contracting operations and take immediate actions, where
necessary.
The Gansler Commission's four key recommendations for
improvement are consistent with the Army Contracting Task
Force's findings. The Army is making steady progress in
addressing the structural weaknesses and the shortcomings
identified, and we continue to work very closely with the
Office of the Secretary of Defense (OSD) and our sister
Services on the way forward. It is clear that achieving our
objective will require resources, time, and a sustained
leadership focus. Our written statement outlines the major
actions that we've taken to date, which include accelerating
plans to set up the contracting structure recommended by the
Commission and increasing the size of the contracting workforce
in the Army.
As a result of the ongoing operations in southwest Asia,
the Army has increased its focus on contingency contracting. Up
until a year ago, we didn't have a defined structure to support
expeditionary operations or to support the modular Army. We
have now established a contingency contracting structure that
consists of contracting support brigades, contingency
contracting battalions, and four-person contingency contracting
teams. We are beginning to fill those with trained military
contracting officers and noncommissioned officers (NCOs): the 4
brigades, the 6 battalions, and the 121 teams that we've
already established. Since we last met, we've looked at the
size of that structure, and we plan on expanding that by adding
3 brigades, 5 battalions, and 51 teams to the work that we had
already done.
A critically important issue is the size, the structure,
and the training of both the military and the civilian
contracting workforce. The acquisition workforce has declined
significantly in the last decade, but the workload and the
number of dollars associated with that workload have increased
significantly. The Army has never fought in an extended
conflict that required such reliance on contractor support.
We are addressing the need to expand, train, structure, and
empower our contracting personnel to support the full range of
military operations. We are developing a detailed contracting
campaign plan to implement the necessary changes to
contracting, and looking at changes in doctrine, organization,
training, materiel, and leadership.
This is going to require the Army, OSD, administration, and
Congress to work together to make the systemic fixes needed for
contracting to be a government core competency.
Mr. Chairman, this concludes my opening remarks, and Mr.
Parsons's, and I look forward to your questions.
[The joint prepared statement of General Thompson and Mr.
Parsons follows:]

Joint Prepared Statement by LTG N. Ross Thompson III, USA, and Jeffery
P. Parsons

INTRODUCTION

Thank you for this opportunity to report to you again 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 future combat operations. In this
statement, we address the: (1) work of the Army Contracting Task Force;
(2) the steps that the Army is taking to implement the recommendations
of the Commission on Army Acquisition and Program Management in
Expeditionary Operations, which released its final report, ``Urgent
Reform Required: Army Expeditionary Contracting,'' on October 31, 2007;
and (3) the steps that the Army is taking to implement relevant
requirements of the National Defense Authorization Act (NDAA) for
Fiscal Year 2008, including the acquisition workforce requirements in
sections 807 and 852 of that Act.
We are grateful for the wisdom, guidance, and strong support that
you and other Members of Congress have shown for our efforts. Our goal
is to be good stewards of the resources provided by Congress and to
free human and financial resources for higher priority operational
needs.
As background, Secretary of the Army Pete Geren chartered the
Commission on Army Acquisition and Program Management in Expeditionary
Operations chaired by Dr. Jacques Gansler, the former Under Secretary
of Defense for Acquisition, Technology, and Logistics. The Gansler
Commission provided an independent, long-term, strategic assessment of
the Army's acquisition and contracting system--and its ability to
support expeditionary operations and sustained high operational demand
in an era of persistent conflict. To complement the work of the
Commission, the Army Contracting Task Force was established to review
current contracting operations and take immediate action where
appropriate. The recommendations of the Commission were consistent with
the findings of the Task Force. We are currently addressing structural
weaknesses and shortcomings identified, with a view to improving both
current and future expeditionary contracting operations. We are
committed to finishing the development and then implementing an Army-
wide contracting campaign plan to improve doctrine, organization,
training, leadership, materiel, personnel, and facilities. Achieving
this objective will require resources, time, and sustained leadership
focus. The contracting campaign plan will continue the initiatives
already underway in the Army.
Since our last report to you, Secretary Geren has directed the
realignment of the U.S. Army Contracting Agency to the U.S. Army
Materiel Command (AMC) and the establishment of the U.S. Army
Contracting Command (ACC) (Provisional) under AMC. The ACC
(Provisional) stand-up ceremony on March 13, 2008 is in keeping with
the Gansler Commission's second recommendation--to restructure Army
contracting organizations and restore responsibility to better
facilitate contracting and contract management in expeditionary and
U.S.-based operations. The ACC, whose first Executive Director, Jeff
Parsons, will testify before this committee, is a two-star level
command with two one-star level subordinate commands--an Expeditionary
Contracting Command and an Installation Contracting Command.
Before we continue, we would also like to publicly thank Deputy
Secretary of Defense Gordon England for presenting on February 26,
2008, the first Armed Forces Civilian Service Medals (AFCSM) for
service in Iraq. As a result of the Gansler Commission's
recommendations on contracting effectiveness, the Department of Defense
(DOD) reviewed its regulations/policy with regard to the AFCSM and
agreed to make this honor available for DOD civilians involved in
direct support of expeditionary operations. This was a policy change
and no legislation was required.

GANSLER COMMISSION IMPLEMENTATION UPDATE

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.
Secretary Geren directed the establishment of an Army Contracting
Campaign Plan under the acting Under Secretary of the Army to ensure
that the Gansler Commission's findings and recommendations are
implemented as quickly as possible without the loss of any momentum. We
are making steady progress in this area.
With regard to the first recommendation to increase the stature,
quantity, and career development of the Army's contracting personnel,
we have a number of initiatives underway. We now have 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--by planning and
coordinating contracting operations in a theater. These brigades
oversee Contingency Contracting Battalions and teams--Active, Reserve,
and National Guard--in executing the ASCC's contracting support plan.
The contracting brigades, battalions, and teams are being activated and
will eventually total 7 brigades, 11 battalions, 18 senior contingency
contracting teams, and 153 contingency contracting teams. These
brigades, battalions, and teams will coordinate and integrate their
plans with Army Field Support Brigades. These two new brigade designs
support the Army modular force in the development of a single, fully
integrated planning cell to provide quick response, command, and
control of acquisition, logistics, and technology activities needed to
support and enable the full spectrum of operations.
The Army plans to grow our military contracting structure in the
Active Force as well as our civilian contracting workforce. We realize
the need for members of the military to begin their acquisition careers
earlier. Plans are underway to move the accession point for military
officers 2 to 3 years earlier, immediately following their Branch
qualification at the Captain level (normally at the 4- to 5-year mark
in their development). For noncommissioned officers, the accession
point will occur upon achieving the rank of staff sergeant. We have
implemented a policy stating that military members will not deploy
during their first year in contracting. This will help ensure the
requisite training is accomplished prior to deploying on an
expeditionary contracting mission. Lastly, the Army is formally
interviewing units as they return from theater to capture
``expeditionary contracting'' lessons learned and incorporate the
findings into doctrine, training guides, and user handbooks.
With regard to the second recommendation to restructure
organization and restore responsibility, as stated in our introduction,
we established the ACC on March 13, 2008. This new command will
leverage contracting assets across AMC and will better prepare us to
support expeditionary operations. The one-star Expeditionary
Contracting Command will be a deployable Headquarters, enabling the
proper oversight and structure for extended conflicts. In addition,
regarding the recommendation to establish a Chief of Contracting for
the U.S. Army Corps of Engineers (USACE) headed by a one-star and
supported by a deputy from the Senior Executive Service, the USACE is
developing a concept plan, and we are working with them to complete,
publish, and implement this plan.
Concerning recommendation three to provide training and tools, the
Army is assessing opportunities to improve contingency contracting
training at our Combined Training Centers. In addition, we are
expanding the mission of the Battle Command Training Program by
including acquisition professionals to train brigade, division, and
corps organizations. We are also evaluating ways to incorporate
contractor training into all military exercises. At present, 12
professional military education courses have new or enhanced
operational contract support subject matter, and we have put in place
an intensive training and management program for our Contracting Office
Representatives (CORs). In addition, all Army CORs must complete the
Defense Acquisition University's on-line continuous learning module,
``COR with a Mission Focus,'' prior to appointment. For example, since
October 1, 2007, 190 CORs have been trained in Kuwait. All contracts
awarded now by the Kuwait Contracting Office have a trained COR
performing surveillance.
To improve our contingency contracting training and doctrine, we
have taken several actions. We are taking a set of concrete steps which
include: (1) working with the Joint community on the final draft of
Joint Publication 4-10, Operational Contract Support, (2) distributing
the recently released Joint Contingency Contracting Handbook, (3)
developing Field Manual 4-10, Commanders Guide to Contracting and
Contractor Management and Field Manual Interim 4-93.42, Contract
Support Brigade; (4) accelerating efforts to enhance leader education
in contracting and contractor management; (5) re-examining the training
curriculum and timing for all newly accessed acquisition officers and
civilians; and (6) re-examining the accession point for contracting
officers and noncommissioned officers into the Army Acquisition Corps.
In addition, we are evaluating solutions to develop and field a Virtual
Contracting Enterprise to provide electronic, web-based tools to enable
total visibility and analysis of the full scope of our entire
contracting mission.
The Department is actively assessing and developing its position
regarding the appropriate numbers of General and Flag Officers and
Senior Executive Service authorizations for contracting positions. Our
report to the congressional committees in response to section 849 of
the NDAA for Fiscal Year 2008 will contain additional information on
this subject.
As the Department reviews the Commission's recommendations and
appropriate implementation actions we are assessing the possibility of
recommending specific supportive legislative actions. As required by
section 849 of the NDAA for Fiscal Year 2008, we will submit a report
to the congressional defense committees with the results of our
assessments by May 28, 2008, and will provide additional information at
that time.

ARMY CONTRACTING TASK FORCE UPDATE

The Task Force was directed to implement reforms and corrections
immediately to correct deficiencies specifically identified in Kuwait,
which have already resulted in significant improvements in contracting
operations. Several new leaders are now in place, along with new
internal control processes for effective checks and balances.
A systematic review of Kuwait contract files from fiscal year 2003
to fiscal year 2006 was directed to identify issues that weren't
already being addressed by an ongoing investigation by either the U.S.
Army Audit Agency (AAA) or the U.S. Army Criminal Investigation Command
(CID). A 10-person military team deployed to Kuwait and completed a
review of 339 contracts under $25,000. The team found poor contract
documentation, referred several contracts to AAA and CID for additional
analysis, and documented ``lessons learned'' for future expeditionary
contracting support.
The review of contracting actions over $25,000 is almost complete
at the U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command in Warren, MI. Roughly 90 boxes of contract
files were sent there from Kuwait. The review of 319 contracts is
complete. Several of these contracts have been referred to AAA and CID
for further analysis. The team specifically recommended improvements in
the areas of source selection procedures, lease versus buy analyses,
performance-based contracting research, and solicitation and contract
review processes. The TACOM team is also reviewing financial data to
ensure appropriate disbursements and accounting of payments.
Work continues with the orderly transfer of existing and future
major contract actions from Kuwait to the U.S. Army Sustainment Command
(ASC) at Rock Island, IL, a subordinate command under AMC. ASC
established a dedicated 12-member team, supported by legal
professionals, charged to assist in resolving a number of claim
actions, definitizing unpriced actions, and negotiating new contracts
for requirements in ways that will result in significant cost avoidance
or savings. The leasing of nontactical vehicles was renegotiated with
an estimated savings of $36.6 million over a 3-year period.
Several other initiatives designed to enhance contracting support
for contingency operations are underway. The Army established a team to
examine our contingency contracting force design and determined the
need to add 3 additional contracting support brigades, 5 additional
contingency contracting battalions, 3 additional senior contingency
contracting teams, and 48 additional contingency contracting teams.
These were included in the totals on page four.
The Army Contracting Task Force final report was completed on March
17, 2008, and has been presented to the Secretary of the Army for his
review and consideration. The details in the report will be included in
the Section 849 of the NDAA for Fiscal Year 2008 report to Congress.

ACQUISITION WORKFORCE

We would like to discuss the steps the Army is taking to implement
sections 807 and 852 of the NDAA for Fiscal Year 2008, and briefly
highlight section 851. The Army has implemented a contractor inventory
system as referenced in section 807. In 2002, the DOD Business
Initiative Council approved the Army as the DOD pilot to test a
contractor manpower and cost reporting process, designed to provide
better visibility over the labor and costs associated with the contract
workforce and the missions supported by that workforce. The Contractor
Manpower Reporting system was implemented in March 2005. With this
process already in place, we will work closely with DOD to define,
refine, and implement the contractor inventory requirements of section
807.
The Army is actively engaged in helping to shape DOD's response to
the NDAA for Fiscal Year 2008, section 851 which requires a separate
section on the Defense acquisition workforce in the DOD Human Capital
Strategic Plan. This plan is directly linked to implementation of NDAA
for Fiscal Year 2008 section 852. In supporting this effort, the Army
is taking aggressive action to review its existing workforce
development programs and define opportunities to improve the Army's
acquisition workforce. Section 852 requires that DOD address
acquisition workforce needs in three separate areas: recruitment,
training, and retention.
A joint acquisition workforce group composed of the military
Services and Defense agencies have met to facilitate the
prioritization. These joint meetings have facilitated the
prioritization and funding strategy in order to determine best value
investment for the DOD acquisition workforce. Although some of the
initiatives represent Service-specific programs, pilots, or
opportunities, the proposed initiatives in many cases represent best
practices from among the Services and those that have potential for
enterprise across DOD. The details and merits of these and other
initiatives will be presented to the Service Acquisition Executives in
the near future as we move to final recommendations and decisions on
how best to execute the Defense Acquisition Workforce Development Fund.
Over the next few weeks, we will jointly discuss and analyze all
Section 852 initiatives to determine the best enterprise solutions for
our recruitment, training, and retention challenges. This has been a
very robust process, and when the funding is provided, DOD and the
Services will be poised to implement the highest priority solutions in
a way that optimizes DOD results. The Army appreciates the
opportunities that section 852 will provide our workforce. These
programs will help ensure a well-trained and educated workforce,
focused on providing the soldier with world-class capabilities.

CONCLUSION

As stewards of American taxpayers' dollars, the Army is improving
its structure and capacity to manage contracts to better support
expeditionary operations and improve overall contractor performance.
Expeditionary military operations in Iraq and Afghanistan have
placed extraordinary demands on our contracting system and the people
who make it work. As stated before, the vast majority of our military
and civilian contracting personnel perform well in tough, austere
conditions. We know that the success of our warfighters and those who
lead them is linked directly to the success of our contracting
workforce, and we are working hard to ensure that contracting is a core
competency within the Army. We are also working hard to change the
culture in the Army to one that recognizes the critical and complex
role of contracting as a core competency. The Army's focus on
contracting is not just for contracting professionals. Warfighters set
requirements and help manage contract execution, and they must be
totally involved in their part of the contracting process.
The commitment of our contracting professionals and to our
contracting professionals must be 100 percent. They must stay focused
on supporting the warfighter, and inspire the confidence of the
American people. This will not be easy; it will take time, but getting
it done is essential. We cannot and will not fail--our warfighters and
our taxpayers deserve no less.

Senator Akaka. Thank you very much, General.
Now I'd like to give my opening time to Senator McCaskill
for your questions.
Senator McCaskill. Thank you very much. I really appreciate
it.
Obviously, we have serious challenges, and I do appreciate
the testimony of all of you today. I think everyone is working
hard to implement the Gansler recommendations and the
contracting task force recommendations, and I do think some
progress is being made. But, obviously, in the management of
acquisitions and the ongoing management of contracts, we still
have great challenges.
I have reviewed a very lengthy article that was written in
the New York Times on March 27, and, I have to tell you, I feel
sick to my stomach about a munitions contract that we entered
into with a 22-year-old man with a record of carrying a fake
identification (ID) so he could drink, and became the head of
his company when he was 18 years old. We've done $200 million a
year in business with him, and this stuff is coming from old
Communist-bloc countries, and a lot of this ammunition is, in
fact, 40 years old and unreliable, and it's not been tested.
Have any of you read this article? Are you familiar with this
AEY case? [No response.]
It's just mind-boggling to me how somebody like this gets
this contract, and how we have a contract to supply munitions
that doesn't require the same kind of standards that we would
require for our military or from the North Atlantic Treaty
Organization. Whoever would like to tackle that, as to how we
entered into a $200-million-a-year contract for munitions to
supply the Afghan Army that is working on our behalf, and paid
with taxpayer dollars, and to the Iraqis, without any kind of
minimum standards or testing; I just have to figure out how
that happened.
General Thompson. Ma'am, we have looked at that article,
and the examination of that contractor and that contractor
performance way predated the article. There's been about a 7-
month look at that contractor and his performance.
There is an ongoing investigation. That contractor was
suspended from contractor work with the U.S. Government. That
suspension happened about the day the article was published,
but the investigation that led to that formal suspension
action, which is a very deliberate process, had been ongoing
for months.
The contract was properly let. It followed all the proper
procedures. The DCMA evaluated that contractor for past
performance and financial solvency before the contract was let.
The requirement in that contract was for commercial ammunition
in order to be used by the Afghan forces, and the requirement
did not have the same specifications that we have for our
military ammunition. They did meet the commercial standards.
The basis for the contractor suspension is what's under
investigation right now, because it appears that he did make a
false claim that the ammunition that he provided came from a
certain source, when, in fact, it was Chinese-manufactured
ammunition. So what you have here is a case, I think, of a
contractor that was not performing, and is not performing.
Therefore, we are taking the proper procedures in order to
remedy that.
Senator McCaskill. I'm curious why, if you say proper
procedures were employed, who made the decision that there was
no quality assurance standards to cover packaging, storage,
testing, or transport? That wasn't an important part to the
contract? Who would have made that decision?
Mr. Parsons. Ma'am, I'm very familiar with the contract on
that, as well. As General Thompson said, when that ammunition
was purchased, it's considered what they call ``nonstandard
ammunition,'' so we don't buy that to the same standards that
we do our military ammunition.
Senator McCaskill. But, why? Who makes that decision, that
you don't buy it to the same standards? That's what I want to
find out. Who makes the decision that the ammunition that we
are sending to the Afghan Army to fight terrorists for us in a
dangerous situation doesn't have to have the same standards as
our American military?
Mr. Parsons. You raise a good point, and that is one of the
things that we are addressing with the Joint Munitions Command
now, which was responsible for that requirement, to go back and
understand, why is it that the requirements for that ammunition
did not meet the same standards that we use for our own U.S.
ammunition? A lot of this ammunition is bought from former
Soviet-bloc countries. It's, like I said, nonstandard
ammunition. It's used in AK-47s and those types of weapons.
But, you raise a very good point. We're taking a very hard look
at a lot of our foreign military sales (FMS) procurements,
where we're buying nonstandard equipment, and to address your
exact position there, that we ought to be looking at the
requirements and what we are buying.
Senator McCaskill. I want to try to figure out who's
responsible, because somebody needs to be held accountable for
this situation. The past performance was rated as
``excellent.'' This is a 22-year-old that had no prior
contracting experience. Now, who decided that their past
performance was ``excellent,'' and on the basis of what? Does
anyone know?
General Thompson. Ma'am, when we let a contract with
somebody, we use the DCMA to evaluate both past performance and
the financial solvency, and that was the process that was used
in this particular case.
Senator McCaskill. I'm going to follow up on this, but I
want to drill down on this, and I want to figure out where in
the--when you sit here and you want things to get better, it's
very hard to pinpoint who is the person that's responsible for
these mistakes. This contract was a terrible mistake. I assume
half of what I read in the newspaper is wrong, and the other
half may be slanted, but if you just sweep away a lot of the
factual information that's in this article, and look at it,
this contract was a mistake, and somebody has to be responsible
for this mistake. It's not good enough to say, ``Well, the fact
that he was only 22, and he was providing hundreds of millions
of dollars worth of munitions,'' and he was dealing with
somebody in one country that we had to be called by their
embassy to say the guy had been in black-market munitions.
General Thompson. Ma'am, like Mr. Parsons and I both have
said, we are looking at all the circumstances surrounding that
contract and that contractor, not just this individual
contract, but any other contracts that individual's had. When
we get all the facts out on the table, then we'll be able to
determine what mistakes were made, and by whom.
I, like you--there's always another side of a story, and
I'm not defending this contractor, in any way, shape, or form.
I'm just saying, I want to get all the facts on the table.
What's reported in the press, either in this article or others,
is not necessarily all the facts, and we are determined to get
to the bottom of it, and get all the issues out on the table,
and then we will use the legal mechanisms that we have, and the
contracting policy venues that we have, and I assure you, we'll
make the proper decisions, and people will take appropriate
action, across the board, whether in the government or outside
the government.
Senator McCaskill. I will follow up with some more specific
questions about that arms contractor, because I do think that
there are some more specific questions that I hope you guys get
to the bottom of as it relates to that contract.
I'm not going to have time to go into my other two
questions, but I will just tell you, I will direct those
questions to you, too.
The first one is on Kellogg Brown and Root (KBR), the
policy that we've decided it's okay to allow a contractor to
use an offshore account to avoid Medicare and Social Security
and unemployment taxes. We have 10,000 Americans working for
KBR that have no Medicare payments being made, and they have no
unemployment compensation insurance, and they have no Social
Security payments being made. There's a post office box in the
Cayman Islands somewhere that's taking care of all that, so
that none of those responsibilities are met by KBR. I'm not
saying that what has happened is illegal, but I will ask for
you all to respond in writing as to whether you think this is a
good thing for us to be doing. If it's not, what help do you
need from us, in terms of laws, to make sure that it's illegal?
Because it's offensive.
Then the final thing is jurisdiction. Secretary Bell we
talked, in a previous hearing, about jurisdiction for criminal
acts by contractors. I know there has been some regulations,
the guidelines that came out in that regard since the last time
we spoke, but I want to make sure that anybody who's working
with taxpayer money in a foreign place is held accountable if
they're raping people or committing any other kinds of crimes.
We have to make sure that our laws apply to them, regardless of
whether they are actually physically in the United States or
not. So I will have some followup questions on that, also.
I apologize that I have to leave and won't be here for
another round of questions. Senator Akaka, I really appreciate
your giving me a chance to ask those questions before I have to
go preside.
Senator Akaka. Thank you, Senator McCaskill.
Senator Thune.
Senator Thune. Thank you, Mr. Chairman.
Mr. Parsons, I understand that one attractive aspect of the
ACC concept is the ability to surge expeditionary contracting
support capability to the field through the use of contracting
support brigades. Now, given the current shortage in the
acquisition workforce, where will ACC get the bodies, in terms
of workforce, to acquire this surge capability, and how many
total people in the workforce do you think the ACC will need,
at the end of the day, to provide that surge capability?
Mr. Parsons. Sir, you do raise a good point about the
ability to bring additional people into the workforce rapidly.
One of the things that we're doing, and especially General
Thompson has done already on the military side, is to look at
moving--General Thompson has directed that the accession point
for our officers and our NCOs into contracting be moved to the
left, so that we can start assessing more officers--junior
officers and NCOs into the contracting workforce, so that we
can get them into these contingency contracting teams and
battalions and brigades, to get the training that they need.
On the civilian side, we're working closely with a lot of
universities on establishing programs with them that will allow
us to hire new graduates into the civilian side of the
contracting workforce rather quickly.
Where we really are challenged is hiring experienced
contracting personnel. Across the Federal Government, there is
a huge demand for contracting subject-matter experts, whether
it's the homeland security, other sister Services--Air Force,
Navy--and we are very challenged in being able to try to hire
experienced personnel. So, our goal, while we're trying to
provide incentives, like entitlements for permanent change of
station to civilians to come join us that have experience,
we're really targeting the college graduates, to try to bring
them on quickly.
What this new contracting command will do for us, though,
is, now, by bringing 72 percent of all the contracting assets
across the Army into one command, we'll now be able to surge
across that command, looking for the type of expertise and
talent that we need to support an expeditionary operation.
So, these contracting support brigades, while they're
small, we will be able to tap into other parts of the ACC to
help facilitate them.
A good example of that right now is in Kuwait. We've been
challenged in being able to track trained civilians into
Kuwait. We have a new contracting support brigade commander
there, Colonel Bass, who has made a lot of improvements, and he
has added additional personnel to his staff. But, we've also
created what we call a ``reachback capability'' at one of our
major acquisition centers, and we're performing an awful lot of
the contracting now for Kuwait out of the contracting office in
Rock Island, where we had some subject-matter experts that can
perform that function.
So, we're looking across the current command to see how
best we can surge; but, the big challenge, as you point out,
will be bringing the new people onboard to staff this up.
Senator Thune. To the ACC, when do you expect to achieve
initial operating capability (IOC)? What exactly does that mean
to the Army Contracting Command?
Mr. Parsons. To date--as we said, we activated the new
command on March 13. It's a provisional status, so we are in
the process of building the command. We've requested the
additional resources we need that are--from the Army--that we
need for the command. I don't expect to be in an IOC, beyond
where we are today, with supporting installations and
supporting expeditionary contracting, until October 1 of this
year. That's when we will bring the rest of the pieces of this
command together and start bringing people onboard. I don't
expect that we'll be fully operational and capable until the
following year.
What we've given the Department is a 3-year plan to bring
both the military and the civilians onboard, and expect to have
them through their--what we call level-two certification
training within that 3-year period of time. That'll also give
us a year or 2 to start getting a lot of these people training.
But, there is no short-term fix. As I said, it's a 3-year
plan before we expect that we'll be fully operational.
Senator Thune. Secretary Bell, your written testimony lays
out the statutory and regulatory framework for the use of
private contractors and the distinction that prohibits private
contractors from carrying out inherently governmental
functions. There are those who have argued that the line
between what is an inherently governmental function, and what
is not, is not as clear as it should be. The distinction may be
particularly difficult to maintain in a high-risk environment,
where PSCs could reasonably be expected to face circumstances
requiring the use of deadly force to protect the people or
property covered by their contract.
In response to those who say that private security
contracts should be replaced by uniformed military forces, your
written statement indicates such a policy would require the
manpower equivalent of nine additional brigades of combat
troops. Do existing policy guidance and oversight by
battlefield commanders prevent PSCs from conducting inherently
governmental functions, even in high-risk environments, or is
this an area that needs more work?
Mr. Bell. I think, as you're pointing out, Senator Thune,
there are two aspects to effective management of contractors.
One is to have an adequate policy framework that sets the
boundaries for acceptable missions and acceptable conduct; the
other part is oversight of the activity in the field.
We believe that we have an adequate policy framework that
sufficiently demarks between the capabilities that are allowed
under the rules of law and the regulations, and those that are
permissible. There is a challenge, which we have been working
on, of implementing the effective supervision in the field.
We've been working on that, very focused, in the last 6 months,
and we've made significant improvements in internal DOD
management of operations in theater, as well as as a result of
the MOA with the DOS, that General Petraeus has referred to in
his letter to Secretary Gates.
Having said that, we believe that continuing emphasis on
this, particularly now that military commanders have UCMJ
authority over contractors in the field, is going to be another
step in improving the effective oversight, in terms of their
conduct and their permissible behavior.
It is an area that requires focus, and one that we are
continuing to emphasize in our work in CENTCOM, both in Iraq
and Afghanistan.
Senator Thune. What policies, regulations, and coordination
steps would ensure that PSCs working for a department or agency
outside the DOD do not negatively impact the DOD's combat
missions or counterinsurgency operations?
Mr. Bell. As I indicated, both in my written testimony and
my oral testimony, Senator Thune, we believe, and we're on
record, as is the DOS, that legislative action is required in
order to establish clear-cut accountability for contractors
supporting other U.S. Government missions outside the United
States. There are several suggestions about the approaches to
that.
Our concern is that, as we work through whatever the issues
are, there is a sense of urgency that that accountability needs
to be established. It is the opinion of our legal people that
that requires legislation in order to accomplish that.
In addition, as you may know, the current legislation on
the books, even under the 2008 NDAA, does not address the
capability of the DOD and the DOS to have oversight of other
U.S. Government agency PSC operations outside the United
States. We believe that it's a significant step forward to
extend this coverage for DOD, DOS, and USAID. But, a better
approach would be to expand that to all U.S. Government--those
regulations, those rules and procedures, to all U.S. Government
agencies.
The additional question to be addressed, at some point down
the road, is the activities of PSCs who are there working for
private sector companies. To the extent that we have a
sovereign state in place that has jurisdiction over those, they
have that authority over them. To the extent that we have a
Coalition Provisional Authority type of situation, at some
point in the future, where we're exercising sovereign powers,
there is the question of, how do you exercise the authority of
that? Again, the focus of the 2008 NDAA is strictly on
governance for DOD, DOS, and USAID.
Senator Thune. What would be the impact on DOD of a change
in the law that required uniformed military forces to perform
the roles currently conducted by PSCs in high-risk
environments, such as Iraq and Afghanistan?
Mr. Bell. As you indicated in your earlier comments,
Senator, using the Congressional Budget Office methodology for
the number of PSCs that we have, it would take the equivalent
of nine combat brigades worth of military personnel to perform
that function. We have approximately 9,000 armed security
contractors working for DOD alone in those two countries, and
that would be the equivalent requirement, which would require
not only the deployment of personnel, but, obviously, extensive
training the particular skill requirements for personal
security.
Senator Thune. Is it the DOD's intention to have all of the
articles of the UCMJ apply to civilians under their guidance,
or just a few?
Mr. Bell. Sir, it is not. General Petraeus and I have
discussed this at some length; his view is obviously to put the
greatest emphasis on criminal conduct. There are a number of
aspects of the UCMJ that have to do with things that
essentially do not relate to civilian personnel, and he plans
to take a very conservative, but firm, approach regarding
criminal conduct.
Senator Thune. I see my time's expired, Mr. Chairman.
Senator Akaka. Yes. We'll have a second round.
The Gansler Commission report recommended the establishment
of, ``A core set of 10 additional general officers for
contracting positions,'' 5 of them in the Army, and 5 of them
in joint positions.
Now, General Thompson, at our last hearing you testified
that you personally agree with this recommendation and, at that
time, said, ``I think you will see the Army reflect its support
of that in the very near term.'' Is the Army still on track to
establish the new general officer positions recommended by the
Gansler Commission?
General Thompson. Senator, the Army has evaluated that, and
we've passed our recommendation to OSD, and--both on the
general officers and also the other legislative recommendations
that were made in the Gansler Commission report. It's my
understanding that OSD is close to finishing, or has finished,
their evaluation, as well. I don't know where that is inside of
the administration. But, the Army did finish their evaluation
and gave their recommendations to OSD several weeks ago.
Senator Akaka. Secretary Finley, what is the position of
DOD on the need for 10 new general officer positions in the
contracting field, with particular attention to the 5 joint
positions?
Mr. Finley. Mr. Chairman, I believe we would depend on the
Army leadership to know their business better than us. What
we're looking at is, not only the Army, but we're looking at
the crosscutting requirements for leadership and the pipeline
of all the workforce that supports that leadership, including
the flag officer and the general officer population.
We have not made a determination whether or not five
general officer joint positions is the right number. We have
tasked the Air Force and the Navy for their positions on all of
the Gansler recommendations that address the Army, and we have
received those reports back from both Services, reflecting
their respective positions and recommendations.
We are in the process of digesting all that information. We
will be proceeding with some due diligence to understand their
positions and their recommendations. In parallel, we are still
conducting the competency model for contracting, which goes
from entry-level to flag-level personnel, which we expect to be
completed by this summer. But, by May 28, when we are required
to report back to Congress, we do expect to bring some closure
as to what our recommendations will be for the Army and joint
general officer/flag officers requirements.
Senator Akaka. Secretary Finley and General Thompson, do
you believe that legislation is needed to authorize these new
general officer positions, or can the Department establish the
new positions within its existing authorization?
General Thompson. Sir, from the standpoint of the current
legislation that authorizes a fixed number of general officers
in the Army, the position that I have taken in the acquisition
corps as to the recommendation is that this needs to be
additive to the current Army ceiling on general officers. For
us to be able to look at existing positions, which are all
critically important, senior-level positions, and downgrade
those positions to something less than a flag officer in order
to staff the contracting general officer, would not be helpful
to the Army. So, to the extent that there's a growth in the
total number of authorizations allowed to the Army, that would
have to be handled by legislation. But, again, that's something
that has to go both through the OSD and the Office of
Management and Budget administration review process; and our
commitment, internally with the DOD, is to have that process
completed by the time we turn in the report on the 28th.
Senator Akaka. Secretary Finley?
Mr. Finley. I believe that one of the debate issues is how
to best handle any changes in top line on the number of general
officers/flag officers. That discussion is ongoing in the
Department. We have raised those issues for discussion--not for
decision yet, but for discussion--for situation awareness of
our military and our civilian leadership.
I expect there are many different views. There are, I would
say, pragmatic matters where we are with general officers
today, in terms of the quotas that have been set, and where we
are in actuality against those quotas. There are also matters
of how many of our quotas are filled with joint billets, and
how they're consumed and allocated across the different parts
of the Services. All of this has to come together, from my
perspective, from a strategic point of view, as to how we have
to change the way we're going to fight the global war on
terror. Fundamentally, this gets into the roles, the missions,
the concept of operations, and what kind of a pipeline of
military personnel/civilian personnel will we have in
contracting management for the future, as we look ahead.
So, my perspective is, this is part of the debate. We have
not made decisions. There are people who believe we should come
forward and increase the top line. Other people believe we
should take it out of hide and start to reconfigure the way we
are organized, the way we are structured.
We are having that discussion, as General Thompson
reflected. I do believe we will bring this to some form of
conclusion before the report comes out on May 28.
Senator Akaka. The Gansler Commission report states that
``The number and expertise of the military contracting
professionals must be significantly increased,'' to address the
problems we have experienced in theater.
General Thompson, at the last hearing, you testified that
the Army endorsed 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. Are
those proposed increases still on track?
General Thompson. Sir, the military increase is on track.
The standup of the ACC, our internal process to look at all of
the actions that need to be taken, is in the form of a concept
plan. We have about 16 concept plans across the Army right now
that all address growth in the contracting structure or
adjustments to the contracting structure to some degree. We
have all of those 16 plans under review right now, but we still
think the number of the civilians that need to increase is
somewhere in the 800-to-1,000 range. Then the question's going
to be putting the money against them.
But, the critical thing, as Mr. Parsons indicated in his
answer to Senator Thune's question, is, you have to get started
on hiring the right people, and we need to begin that almost
right away. So, from my perspective, the quicker we get this
thing resourced, and the quicker we reach out to the colleges
and the universities and the population to begin to attract the
right people into this career field, the quicker we're going to
be able to address the long-term systemic issues. Because, like
anything else, it takes people, and it takes good people, if
you want to make systemic fixes.
Senator Akaka. Secretary Finley, I understand that the
military Services have resisted the recommendations to increase
the DCMA workforce by 600. Can you explain what action the
Department is taking to implement this recommendation?
Mr. Finley. Mr. Chairman, I believe what the Services have
resisted, including the Army, is the Gansler Commission
characterization that all post/base campaign contracting
efforts go under the auspices of DCMA. In DOD, we fundamentally
agree with that position, that we believe that's not an
appropriate move or recommendation. But, in discussions and
followup discussions--and we meet with Dr. Gansler about every
2 or 3 weeks; we meet with principals of the Commission almost
on a weekly basis--understanding the intent of that
recommendation, that DCMA would have global post/base campaign
responsibility would be an enormous change in the headcount for
DCMA, and we believe it is a fundamental role and mission of
the military to conduct that business.
At this point in our discussions between Dr. Gansler and
myself, the intent and where we are at in trying to evaluate
alternative approaches as to how to conduct expeditionary
operations between the military/civilian service, expeditionary
contracting activity, I believe we are very close in terms of
what we believe needs to be done.
So, I think that this is part of the process we're going
through to better understand the complications as to how we're
going to fight the fight, and train for the fight, in the era
of the global war on terror. It is very, very different. It
needs to be scalable for big operations, as well as small
operations. We're going through some alternative approaches,
sharing that with the Services, sharing that with the Joint
Staff, sharing that with the combatant commands, as to how does
this make sense? Because this is a cultural change as to how
we'll fight the fight. The headcount that would go along with
that, and where that would belong, has had pushback from
everybody.
In the Army's case, my personal opinion is, where they're
at and where they're headed, I fundamentally believe, is in the
right direction. But, the actual numbers, I believe, is still
up to them, not up to OSD. We will support them, if that's what
they believe has to be done to make the Army do its role and
mission. That would be my perspective, sir.
General Thompson. Senator, if I can add just a brief
comment to what Secretary Finley said, the current workforce
that does the contract management on the Army posts and camps,
we don't believe needs to transfer to DCMA. We are putting our
arms around the workforce that does that today, and
understanding how many people there are, and what functions
they perform.
We do think there is a role for DCMA. DCMA's role,
fundamentally, for the DOD, is a quality assurance role for
weapons-systems contracts in plants and factories. That is a
big mission shift for them to be the Service contract
management on posts, camps, and stations, but they do have a
core competency in quality assurance on contract management, so
there is a linkage between what DCMA can do and what the
Services do for themselves in the posts, camps, and stations.
The key issue, to me, really is having a trained workforce that
is prepared to go on deployments to be able to provide that
post, camp, and station contract management. Those are mostly a
civilian workforce, so we're working that with OSD and the
other Services, on what that proper balance is between DCMA and
the Services.
Senator Akaka. Thank you very much.
Mr. Parsons. Sir, I'd just like to add, real quickly, too,
that the concept plan that we had submitted as part of the ACC
does build in some additional resources to start performing
some of these quality assurance functions that we believe will
be needed to enhance our ability to do contractor management.
As General Thompson said, the piece that we're still wrestling
with is, do we need additional subject-matter experts at the
installations that will be trained in performing contract
management functions, whether it's food services,
transportation services, laundry services. So, that's the piece
that we're still working on. But, we have built into this
concept plan the actual requirement for quality assurance
representatives that will oversee and train, work with DCMA in
building up these contracting officer representatives.
Senator Akaka. Let me call on Senator Levin for any remarks
or questions, and he will be followed by Senator Thune.
Senator Levin.
Senator Levin. Thank you very much, Chairman Akaka.
I want to go to a question that I believe Senator Thune
raised, which is the question of the private security
contractors.
I guess, Secretary Bell, this question really is for you.
Do you believe that PSCs in Iraq perform security operations,
``in highly hazardous public areas where the risks are
uncertain''?
Mr. Bell. I'm sorry, is the question as to whether I
believe that's an inherently governmental function?
Senator Levin. No.
Mr. Bell. What is the question?
Senator Levin. I'll get to that in a moment. My question
is, do you believe the PSCs in Iraq perform security operations
in ``highly hazardous public areas where the risks are
uncertain''?
Mr. Bell. Actually, the way they are managed is that the
military commander has the discretion to make the decision as
to whether the areas in which they would operate would
represent either a high risk of enemy encounter or even
interfere with military operations. He has the authority to
redirect any convoy operation away from those areas that he
assumes to be high risk.
Senator Levin. He has the authority to do it. Is there a
statement in that direction, that they will not be performing
security operations in highly hazardous public areas where the
risks are uncertain?
Mr. Bell. There is direction for them, in terms of
approving the missions in advance, regarding where they're
allowed to go and during what times they're allowed to go
there. They are allowed, as any PSC operation, under military
authority, to defend themselves in the event that they are
attacked.
Senator Levin. Do the commanders have authority--do they
have discretion to permit the contractors to perform their
operations in highly hazardous public areas? Do they have the
authority to allow it?
Mr. Bell. I don't know that I can answer that question.
Senator Levin. Why not?
Mr. Bell. I believe that's a matter of command decision,
and that would be something you probably should ask General
Petraeus.
Senator Levin. I can ask General Petraeus, but my question
is the other side of the coin. Do they have authority, then, to
allow the contractors to operate in those hazardous public
areas?
Mr. Bell. I would assume, if they have the authority to
make the decision, they would have the authority to do that.
The direction in the policy is that they not do that. So, I
would assume the authority does not exist.
Senator Levin. The authority is the direction that they not
perform in highly hazardous areas, or is it simply a matter of
giving authority to the commander to prohibit them from
operating in those areas?
Mr. Bell. The commander has the authority to make that
decision.
Senator Levin. All right. I think you are obviously
familiar with what I'm driving at here, which is the DOD
manpower-mix criteria, which says that security operations that
are performed in highly hazardous public areas where the risks
are uncertain could require deadly force that is more likely to
be initiated by U.S. forces than occur in self-defense, as an
example of where there is a governmental function being
performed. It's clear you're familiar with the language that
I'm talking about.
Mr. Bell. I'm quite familiar, as I'm sure you are, sir.
This is a complex document. It's 56 pages of instructions. It
describes a number of generalized conditions under which
security functions would be inherently governmental, and it
describes other conditions under which it would not be
inherently governmental. Specifically, in paragraph 2.1.4.1.4,
it specifically describes the conditions under which the
military commander is authorized to have PSCs functioning in a
defensive role. The DOD's position is that we comply with those
requirements, as well as requirements elsewhere in regulations.
Senator Levin. Part of that paragraph, though, also reads,
does it not, that ``security operations that are performed in
highly hazardous public areas where the risks are uncertain''
is an example of a governmental function?
Mr. Bell. As I said, it's a complex document, and that's
the reason there's specific language in the document defining
the conditions under which it is not inherently governmental to
have PSCs perform those functions.
Senator Levin. I also, did I not, correctly read the part
where they give an example where it is inherently governmental?
Mr. Bell. I believe you did, sir.
Senator Levin. All right.
Now, what about interrogation of detainees. Is it true that
in the 2005 document about the use of contractors in
interrogating prisoners of war, terrorists, and criminals, that
``the handling of these people cannot be transferred to the
private sector to contractors who are beyond the reach of
controls otherwise applicable to government personnel''? Did I
accurately read from the 2005 document--before we get to 2006,
did I accurately read from the 2005 document?
Mr. Bell. Not having seen the 2005 document, my
understanding from your counsel is that you are reading that
accurately.
Senator Levin. All right. If I did read that accurately, is
it true that we did have contractors, prior to 2006, when they
were authorized to engage in detainee interrogation, that,
prior to that, they were not authorized to engage in detainee
interrogation?
Mr. Bell. I'm sorry, but I don't have qualified knowledge
of that.
Senator Levin. Is there anyone here that does? [No
response.]
Okay. Do you want to answer that, then, for the record?
Would you give us, Secretary Bell, an answer for the record?
[The information referred to follows:]

The Department of Defense (DOD) experienced a shortage of
interrogators during the onset of Operation Enduring Freedom, and the
shortage continued into Operation Iraqi Freedom. The Department
contracted for qualified, experienced civilian contractor employees to
address this shortfall while the Army aggressively sought to recruit
and train a larger government interrogator force. It appears that those
responsible for acquiring these contract interrogators in 2003 and 2004
were unaware of the DOD Manpower Mix Criteria that were in effect at
the time. These criteria provided: ``How enemy prisoners of war,
terrorists, and criminals are treated when captured, in transit,
confined, and interrogated during or in the aftermath of hostilities,
entails the discretionary exercise of government authority. Their
handling, as well as decisions concerning how they are to be treated,
cannot be transferred to the private sector to contractors who are
beyond the reach of controls otherwise applicable to government
personnel.''
The August 2004 Fay-Jones-Kearn investigation of intelligence and
detention activities at Abu Ghraib noted that there was a lack of Army
policy regarding the use of contract interrogators. In response to this
Fay-Jones-Kearn finding, Headquarters, Department of the Army, G-2,
published guidance on February 15, 2005, addressing contract
interrogator selection, employment criteria, training, validation, and
disqualification. The memo continues in force today.
In addition, DOD Directive 3115.09, which establishes DOD policy on
intelligence interrogations, is being updated to reflect current DOD
policy on the limited but necessary role that contract interrogators
may play under the proper supervision and close monitoring of
Government officials throughout the interrogation process.

Senator Levin. Before I arrived, Mr. Secretary, you made
the statement that section 862 of last year's NDAA, which is
the PSC provision, applies only to the DOD, DOS, and USAID, and
that the application to other government entities is needed.
862 does apply to all government agencies.
Mr. Bell. Good. Pleased to hear that.
Senator Levin. I'm pleased you're pleased. But, I think,
then, that we would expect that that's the way it will be
implemented, because there is no loophole, such as the one you
described.
Thank you. I'll go back and forth. I have a few more
questions, but if there's others that have questions, I've
taken more than my time, probably.
Senator Akaka. Thank you, Senator Levin.
Senator Thune.
Senator Thune. Secretary Bell, I want to come back to this
question of the legal framework that would govern a command
response to any suspected illegal activity and the March 10
guidelines that the Secretary of Defense issued to commanders
on the exercise of the UCMJ authority during those contingency
operations. Basically, the guidelines provide that, whenever an
offense allegedly committed by a civilian violates Federal
criminal law, the DOD has to notify the Department of Justice
(DOJ) and give it 14 days, unless extended, to decide whether
it's going to prosecute the case. In the interim, DOD has the
authority to investigate, make arrests, and continue to address
the immediate impact of the alleged criminal act.
As a threshold matter, what is the Department's opinion
about the applicability of the UCMJ to all civilian DOD
employees and contractors?
Mr. Bell. Our view is that all DOD contractors and
civilians who are accompanying military forces in the field--is
the way the legislation reads, which we interpret to be in
contingency operations--are subject to the UCMJ.
Senator Thune. I guess the followup question then is, does
that guidance reflect dissatisfaction or constitutional
concerns about applying the UCMJ to civilians?
Mr. Bell. Because the MEJA law is well-established, I
believe there is a preference to use that law, because it has
been tested in the courts. Obviously, the legislation relating
to the application of UCMJ is a new law that has not been
tested in the courts. So there is some natural preference to
give the DOJ the opportunity to prosecute under MEJA.
Senator Thune. So, the DOD, at least at this point, absent
that opportunity to test it in the courts, believes that MEJA
provides a sounder basis for bringing justice to DOD civilian
employees?
Mr. Bell. I don't believe that's the judgment, no, sir. I
believe that we have full confidence in the ability of UCMJ to
be applied equitably to contractors and DOD civilians. I think
the concern is whether there is some basis on which the
legislation might be constitutionally challenged, as opposed to
being applicable for enforcement.
Senator Thune. Okay. I guess the other question has to do
with the Federal Bureau of Investigation (FBI), which doesn't
currently have sufficient capability or an organizational
structure outside the States to support prosecutions in a way
that would effectively implement the DOD guidance. Does that--
given the lack of that capability by the FBI, except in, maybe,
what are very egregious cases--suggest that the DOJ is likely
going to decline to prosecute, and, in most cases, going to
cede prosecution of a given case to DOD?
Mr. Bell. As a practical matter, the difficulty, we
believe, in the DOJ taking the case, is that they actually have
to get the U.S. Attorneys office in the location of last
residence of the alleged criminal to agree to take the case to
prosecute it. That means that if the individual last left
Boise, ID, on his way to Iraq, where he committed a crime, that
the U.S. Attorney for the area in Boise, ID, would have to
agree to take the case/all other considerations, in terms of
his caseload, the availability of his people, his familiarity
with military operations, his familiarity with Iraq, would all
be considerations that might cause him or her to agree to take
the case, or not.
So, while we give them that preference, and we've limited
it to 14 days, by agreement with the DOJ, because if they make
a decision not to take that case, then we believe we should
proceed to a speedy investigation and indictment, if it's so
called for.
Senator Thune. Would that be the outcome that the DOD had
intended? It looks like it gives you the constitutional
protection of giving DOJ the right of first refusal to
prosecute, but ultimately, DOD is going to end up with most of
those cases, it would appear.
Mr. Bell. We're certainly prepared for that. In the
discussions I had when we discussed this in September, when I
was over in Iraq, we discussed with General Petraeus and his
staff judge advocate what some of the staffing implications
would be for both investigators, as well as attorneys and
paralegals, which they are prepared to support in moving ahead
with UCMJ.
Senator Thune. Mr. Parsons, the Army Contracting Task
Force, found among other things, that post-award contract
management was inadequate, and referred to, in particular, the
failure to appoint and train contracting officer
representatives. What actions will the ACC undertake to help
assure that, one, an adequate number of contracting officer
representatives will be retained to provide post-award contract
management support for expeditionary operations, and, two, that
those contract operating representatives will be sufficiently
trained to provide that support?
Mr. Parsons. Sir, we've already taken a number of actions.
As I mentioned earlier, the concept plan that we have
submitted--for the ACC--actually establishes what we call
``quality assurance representative'' positions. These
individuals are experts in quality control and quality
management. We are going to be assigning them the
responsibility of ensuring that contracting officer
representatives are, one, appointed for each contract; two, are
trained; and, three, are actually performing their duties. We
already have initiated this in Kuwait, where we've trained over
200 additional contracting officer representatives. Every
contract in Kuwait now has an assigned and trained contracting
officer representative. Now what we're doing is actually going
out and evaluating how well they're performing those duties.
So, we're going to take that model and start applying that
across the Department of the Army.
The other thing that we have been doing is working very
closely with the Combined Armed Support Command, which is part
of TRADOC, the Training Doctrine Command, and they are
developing additional contracting officer representative
courses that are now being taught to all the logistics officers
and logistics NCOs. Many of the pre-command courses now are
giving the contracting officer representative training in it,
as well.
General Thompson. Sir, if I can add to that, just a minute.
We have evaluated, not just the contracting courses, but also
the content for the nonacquisition personnel, to make sure they
recognize the importance of contracting. The operating part of
the Army, not the contracting workforce, has an inherent
responsibility--and this gets back to the Gansler Commission
recommendation, to recognize they have a role in contracting.
Their role is helping define that requirement. What do they
want? When do they want it? How much? Then, on the back end of
the contract, they have a significant role in appointing
contracting officer representatives. These are not professional
contracting individuals--military, civilian--these are the
Sergeant Thompsons or the Captain Thompsons or the Lieutenant
Thompsons out there, that are there to see that the product or
service that we contracted for is properly delivered and is the
right product or service.
So this is part of a culture change in the operating part
of the Army, that we need to get them to understand and accept,
and we are actively adjusting all the course content, all the
way up to the general officer level. The Chief of Staff of the
Army has me, personally, talking to the general officer classes
now about the importance of their role in contract requirements
and in contact management, and part of that is appointing the
right number and the right people to do the contracting officer
representative tasks.
Senator Thune. Mr. Finley, what will Acquisition,
Technology, and Logistics (AT&L) do, if anything, to support
what the Army's trying to do to develop this critical post-
award contract management capability?
Mr. Finley. Senator Thune, AT&L will be extremely
integrated and support not only the Army, but, from a best of
best practices, we will take all the good things that the Army
is doing, and we will factor that in with the efforts that are
already ongoing, which, to a large extent, have been
coordinated with the Army, the Air Force, and the Navy, but we
are resetting, restructuring, implementing new coursework for
all levels--acquisition, contracting, as well as
nonacquisition, noncontracting personnel--geared toward the
global war on terror environment that we're now in.
To a large extent, a lot of that work has been done. We
have the ability to have people tap in on the Internet, when
they're in theater, and come into our library of capabilities
and training. I believe we're on the right track.
We have a lot of work to do, though, to get this to the
next level of effectiveness to fight the fight, train the way
we fight, and get this expeditionary training done more as a
part of our normal way doing business in our training commands,
if you will, than make it the exception.
Senator Thune. You do see the need, though, to strengthen
that capability across the other Services as well.
Mr. Finley. Absolutely.
General Thompson. Sir, the Defense Acquisition University
that reports to Mr. Finley and Secretary Young has strengthened
their coursework, and they do have an online course for
contracting officer representative, and we continue to upgrade
the content of that course with the lessons learned. It's a
requirement for the Army Contracting Office Representatives
(CORs) to take that online course, and then we have the
additional training that we put them through now with the
direct help that they get with the quality assurance
representatives.
Senator Thune. Okay.
Thank you, Mr. Chairman.
Senator Akaka. Thank you, Senator Thune.
Section 852 of the NDAA for Fiscal Year 2008 established an
Acquisition Workforce Development Fund. Substantial amounts of
money are supposed to be transferred to that fund, beginning
this summer.
Secretary Finley, can you describe the steps that the
Department is taking to ensure that this money is spent in a
sound manner to address deficiencies in DOD's acquisition
workforce?
Mr. Finley. Yes, Mr. Chairman. We have solicited proposals
from all the components in DOD for their recommendations on how
to address this Acquisition Development Fund. Those proposals
have been received. We have over 80 proposals that we have
received, and we have binned those into the different
categories of training, retention, recruitment, hiring, and so
on.
The efforts are to see how we fund this. There's many ways
the Department can look to fund this--basically, what's been
authorized, but not appropriated. We have met with the
Comptroller's Office to provide us some alternatives on how to
implement some of the funding scenarios that have been
identified for going forward.
We have met with all the Services. We have integrated in
with the various other organizations in OSD to start and
communicate the fund, and the approach. We're taking a very
strategic approach on this. Again, the global war on terror is
very different than the Cold War. This is not a personnel
account that needs to be tapped into, it's more of a strategic
account for addressing some pockets of areas that we feel need
attention.
My personal concern on this is, this is a lot of money.
This needs the oversight and the checks and balances to assure
ourselves that we're spending the taxpayers' money wisely.
I'm not fast to spend, but I am fast with a sense of
urgency to determine where the proposals have come in, where
they best fit, where are the gaps in these proposals that have
come in, that we have missed the needs, if you will. That comes
about by having a discussion and reflection with the Services
and the Joint Staff and the members of OSD to say, ``Here's
what we have, here's where we're headed.'' This needs to be
reflected in our human-capital strategic-planning process for
DOD, as well as AT&L. It's receiving a very high level of
attention from me, personally.
Senator Akaka. General Thompson and Mr. Parsons, is the
Army taking steps to evaluate its need for this funding and the
way in which you could use it to address deficiencies in your
acquisition workforce?
General Thompson. Yes, sir, we definitely are. The working
group with the Services in the different staff elements of OSD
have been tightly linked in this. We are just a couple of weeks
away from taking the recommendations on those 80 proposals
forward to the service acquisition executives to make some
decisions. With me today is my senior person that does all of
the workforce planning and initiatives for the Army, and he
spent a significant amount of his time over the last couple of
months helping to develop those proposals and prioritize them
from the Army's perspective, leveraging what we already do. So,
like Secretary Finley said, we're looking, not to duplicate
what we already do, from the standpoint of recruitment,
training, and retention--we're looking at where are there gaps
today, and where are additional resources, and what do we get
with those additional resources?
Mr. Parsons. Sir, I'd just like to add--and it gets to the
point that Senator Thune raised earlier. In order to get this
contracting command the additional resources, we definitely are
going to need to take advantage of some of the programs that
are being considered in the area of recruitment and retention.
A lot of interest has been expressed about increasing the
number of interns, and looking at student loan repayment
opportunities. These are all things that the team is taking a
look at, in trying to prioritize and figure out how we
distribute that.
Senator Akaka. Secretary Finley, General Thompson, and Mr.
Parsons, a related provision to section 852, section 807 of the
NDAA for Fiscal Year 2008 requires DOD to develop inventories
and review functions currently performed by contractors. The
idea is that you can't effectively manage your workforce,
including your contractor workforce, unless you know what they
are and what they aren't doing. This provision is a counterpart
to the Federal Activities Inventory Reform Act, which already
requires similar inventories of functions performed by
government personnel.
Can you tell us what steps the Department is taking to
implement the requirements of Section 807?
Secretary Finley?
Mr. Finley. Yes, sir. Section 807, for us, represents a
major effort to implement. There are parts of section 807 that
have already been well underway, in terms of trying to
understand acquisition services and address acquisition
services, which is a substantial part of the overall budget.
We've already implemented policy in this respect, but it's the
implementation of this policy that's going to need to be
executed. I would see opportunities, for example, from the 852,
to leverage a fast start in the area of the 807, to get us
going.
The fundamental challenge, though, is that this kind of
activity--be it interns or other hiring of people--to jumpstart
some shortfalls, which is, I think, excellent for the short-
term, but for the longer-term, this has to be POM'd into our
planning for the DOD. That's where some of the planning
activity right now needs to come together, from the strategic
planning point of view, as to how we are, in fact, going to
make this happen. My personal recommendation is that we start
making this happen in the POM-10 cycle.
So, we envision that the 807 is a work in progress that
needs to be further defined, further understood. How will we
meet the requirements of this, from a strategic planning point
of view and going forward? So, we don't just shoot from the
hip, we don't have a knee-jerk reaction. We have addressed this
from an acquisition-of-services point of view over the past 18
months, and we have policy out there, but we are going to need
to do far more work now for implementation.
General Thompson. Sir, from an Army perspective, before
section 807 was made part of the law, the previous Army
Secretary really recognized the need to get our arms around the
total workforce, to include the contractors, and he required
much to the chagrin of many people that had to do the
reporting, for us to count noses on the contractor manpower
equivalents. We've been doing that for a number of years, and
have a pretty thorough process in place right now to do that.
We also are now looking at those things that are really
inherently governmental, and looking at the business-case
analysis and insourcing things that we are currently, in many
cases, using contractors for. If it's an enduring function and
it's inherently governmental, it should be a government
employee who's doing that.
Just on my own staff, I use one example where we have 11
different support contracts. We've now consolidated them into
one. The next step to that is taking about 50 of those contract
employees and insourcing the appropriate number to be
government civilians, Army civilians, because it's enduring
functions that we're having contractors perform. That kind of
activity is going on across the Army, and that's part of what I
use as an example when I educate the senior leaders, that they
need to be doing that in their organizations, as well.
Senator Akaka. Mr. Parsons?
Mr. Parsons. I'll just add to that, sir, that what we are
finding now with our contracting people, as a way of enforcing
that, is to make sure that all contract services have been
reviewed by a commander and determined to be necessary with
addressing these issues, like whether it's an enduring service.
So, our contracting folks will not execute a contract for
contract services unless approval has been in there by the
commander. So, we have a very disciplined process to where we
now start focusing on contract services and how we ought to be
executing it.
General Thompson. Inside the direct-report organizations
that come to me, all of those approvals for contract services
come to me to be signed off on. I assure you, I ask some very
hard questions.
Senator Akaka. Thank you.
Senator Levin.
Senator Levin. Thank you, Mr. Chairman.
A few weeks ago, the Boston Globe reported that KBR employs
about 10,000 Americans in Iraq through subsidiaries in the
Cayman Islands. These subsidiaries are shell corporations, they
have no function other than to taxes. A KBR spokesman
acknowledged that these subsidiaries were created to enable the
company to avoid paying Social Security and Medicare taxes, as
well as State unemployment taxes. I know that Senator McCaskill
raised this question, but I'd like to pursue it with you,
Secretary Finley, a little bit more thoroughly than she had an
opportunity to do.
Now, the tax savings are passed along to DOD, but the
workers of KBR suffer, and KBR gains a competitive advantage
over companies that pay their taxes. I don't think it's the
intent of the Internal Revenue Code that companies be able to
form shell corporations, wholly-owned subsidiaries and tax
havens, and then avoid paying Medicare taxes and Social
Security taxes. That cannot be the purpose of the Internal
Revenue Code.
The article in the Boston Globe reports that the DOD has
known about KBR's avoidance of taxes since at least 2004, when
the issue was flagged in DCAA audit reports.
So, Secretary Finley, let me start with you. Does it
concern you that 10,000 Americans working in Iraq are not going
to have unemployment benefits and will receive less money from
Social Security when they retire because of KBR's activities in
the Caymans?
Mr. Finley. Yes, sir.
Senator Levin. What is the Department doing about it?
Mr. Finley. I'm not familiar with the details, Senator
Levin. I would have to take the question for the record, and
would be more than happy to get back to you on the details of
what the DOD is doing.
[The information referred to follows:]

Senator Levin. Do you know whether the DOD has ever
consulted with the IRS on this subject?
Mr. Finley. No, sir, I do not.
Senator Levin. Now, there's a contract going on now, a
competition for LOGCAP IV, which is a follow-on to the contract
that KBR currently holds, and KBR is one of the companies
that's competing for the follow-on contract. Are you familiar
with the competition that's going on now for LOGCAP IV,
Secretary Finley?
Mr. Finley. I do not have a detailed familiarity with that
contract.
Senator Levin. Okay. By the way, General Thompson, are you
familiar with this issue?
General Thompson. On the LOGCAP IV?
Senator Levin. Yes.
General Thompson. I'll let Mr. Parsons address that.
Senator Levin. Okay, fine. Sure.
Mr. Parsons. Sir, the LOGCAP IV has been under re-
evaluation, based on the Government Accountability Office (GAO)
decision that the protests that were filed by the two
unsuccessful offers were sustainable. So, that process is
underway. The evaluation has been taking place for a number of
months. Beyond that, I can't really address the specifics on
this exact issue on the offshore and the impact on that
evaluation.
Senator Levin. Putting aside the impact on the evaluation
of a particular contract--and I can understand the reluctance
to get into the details of a competition--but, in general, are
you troubled, Mr. Parsons, by what I've described?
Does it trouble you, that we have 10,000 Americans working
in Iraq who lose their unemployment compensation while they're
there because the company that is operating in Iraq has created
a phony subsidiary in the Caymans, a total shell corporation,
paper corporation, with no purpose other than to avoid taxes?
Is that something which, at least on its surface, would trouble
you?
Mr. Parsons. Sir, I'm not real familiar with the issue. I
do know enough that there is nothing that prohibits it in law
or regulation. I'll have to defer to the DOD on this, because I
really believe it's a broader policy issue than at my level or
at the Army level.
Senator Levin. Do you know whether the IRS has ever been
consulted as to whether or not this is an appropriate way to
avoid taxes?
Mr. Parsons. I have no knowledge of that, sir.
Senator Levin. General, would you know anything about this
issue?
General Thompson. No, sir, I have no knowledge of that
either.
Senator Levin. Okay. Either Mr. Parsons, then, or Secretary
Finley, would you get back to the subcommittee with answers to
the questions?
[The information referred to follows:]

Mr. Finley. There is no general prohibition on the use of foreign
affiliates by defense contractors. Under section 3121, title 26,
U.S.C., which is part of the Internal Revenue Code, an American
employer, while not required, may elect to have the insurance system
established by title II of the Social Security Act extended to services
performed outside of the United States by a citizen or resident of the
United States who is an employee of the American employer's foreign
affiliate. By statute, the decision to extend coverage in such cases
rests with the American employer. We have not consulted the Internal
Revenue Service on this subject.
General Thompson. There is no prohibition on the use of foreign
subsidiaries by defense contractors. Under section 3121 of title 26,
U.S.C., commonly referred to as the Internal Revenue Code, a company is
not subject to Federal Insurance Contributions Act (FICA) taxes, if the
services are performed outside of the United States by a United States
citizen or resident who is an employee of a foreign company or
subsidiary. Payment of FICA taxes is a requirement of U.S. tax law,
rather than contract law or regulation. Accordingly, we do not consult
the Internal Revenue Service on this subject.

Senator Levin. I'm glad to hear that Secretary Finley's
troubled by it, because I think Americans in these families
that these workers are in would surely directly be troubled by
it. It's easy to say, ``DOD benefits, because their contract
can go for less; because they're not paying taxes that they
should be paying.'' That's an easy out for all the employees of
the DOD. Maybe the DOD ought to stop paying taxes on all of its
employees, or all contractors' employees, so that contractors
can bid lower, because they're not paying taxes on their
employees. We wouldn't tolerate that for 1 minute for a
contractor that's operating in the United States, and I'm not
sure we should. I don't think we should tolerate it for a
contractor who's hiring American citizens overseas.
So I guess, Secretary Finley, maybe I should put this
responsibility on you. I'm not sure whether you or Mr. Parsons
is the right person to give us an answer for the record, has
the Department consulted with the IRS on this issue? What's the
IRS's response been? Whether or not the Department is
considering including in its specifications for contracts
requirements that American employees working abroad have their
Medicare and their other payroll taxes deducted--would you get
back to us, Mr. Secretary?
Mr. Finley. Yes, sir. I'd be happy to.
[The information referred to follows:]

There is no prohibition on the use of foreign subsidiaries by
defense contractors. Under section 3121 of title 26, U.S.C., commonly
referred to as the Internal Revenue Code, a company is not subject to
Federal Insurance Contributions Act (FICA) taxes, if the services are
performed outside of the United States by a United States citizen or
resident who is an employee of a foreign company or subsidiary. Payment
of FICA taxes is a requirement of U.S. tax law, rather than contract
law or regulation. Accordingly, we do not consult the Internal Revenue
Service on this subject. The clauses and provisions in our contracts
relate to contract performance; we do not contractually require our
contractors to comply with unrelated laws and regulations. In addition
to payment of FICA taxes, related payroll taxes are also a requirement
of U.S. tax law. Any requirement for a foreign company or subsidiary to
pay FICA taxes and related payroll taxes must come from a change to the
tax law and not by incorporating a clause in our contracts.

Senator Levin. Thank you.
Thank you very much, Mr. Chairman.
Senator Akaka. Thank you, Senator Levin.
Senator Thune.
Senator Thune. Mr. Chairman, I don't have any further
questions. I appreciate our panel being here, and thank you.
Senator Akaka. Let me ask one question, here, before we
adjourn.
The Gansler Commission reported extensively on the
inadequacies of contract management in Iraq, explaining that
``After the contract is awarded, there are no resources trained
to monitor and ensure that the contract is performing and
providing the services needed by the warfighter.''
I understand that the Army is trying to address this
problem by shifting existing contract oversight resources to
Iraq. However, the Army and other DOD components have long had
a shortage of trained, experienced, and qualified personnel to
perform needed oversight on service contracts here in the
United States. For example, in March 2005, GAO reported that
the Army failed to even assign contract surveillance personnel
to 13 of 30 contracts reviewed. In October 2005, the DOD
Inspector General (IG) reported that only one-third of 23
contracts reviewed contained adequate contract surveillance
plans, and 14 had no surveillance plans at all. In 2006 and
2007, the IG reported that DOD failed to perform adequate
contract surveillance on 23 of 24 task orders awarded through
the Department of the Interior; 15 of 61 task orders awarded
through the Department of the Treasury; and 54 of 56 task
orders awarded to the General Services Administration.
Secretary Finley, General Thompson, and Mr. Parsons, what
steps are the DOD and Department of Army taking to address
shortcomings in the surveillance of service contracts and
ensure that you have the workforce you need to ensure that the
Department gets the performance that it pays for?
Mr. Finley?
Mr. Finley. Mr. Chairman, I'm not familiar with the
specific statistics that you have cited, but the efforts
underway involve a review of our contracting competencies for
all of the DOD. It's an effort that we started last year, and
it's an effort that we expect will be completed by this summer.
Within that construct, I would expect that the surveillance
plans and the effectiveness of our oversight in those
surveillance plans will be addressed from a contractual
contract management point of view.
So, I'll be happy to take the question for the record and
outline for you what work we have left to do.
[The information referred to follows:]

Since early 2007, the Army's acquisition policy for services valued
greater than $2,500 requires contracting officers to appoint certified
Contracting Officer's Representatives (CORs) in writing before contract
performance begins, identify properly trained CORs for all existing
service contracts, and ensure that a Government Quality Assurance
Surveillance Plan is prepared and implemented in service contracts. In
January 2007, the Army partnered with the Defense Acquisition
University to provide training in COR responsibilities. To date, they
have trained more than 6,500 Army personnel to be CORs. As documented
in the Army's response to the Gansler Commission Report, the Army has
realigned the Army Contracting Agency (ACA) under the Army Material
Command (AMC) and established the U.S. Army Contracting Command (ACC)
to centrally manage all contracting activities. The ACC will contain
subordinate elements designed to address those challenges identified in
the past and develop and lead way ahead solutions. The Expeditionary
Contracting Command (ECC), an ACC subordinate command, is designed to
provide effective and agile expeditionary contracting capability across
the full spectrum of military operations. The ECC will standardize
operations and provide oversight of contracting activities to ensure
contract compliance. Within the ECC, subordinate commanders are
responsible for making available various training necessary to ensure
mission readiness and success. The Installation Contracting Command
(ICC), another ACC subordinate command, will provide the pre- and post-
award contracting support to Army installations worldwide. The ICC will
provide hands-on contracting training and experience for Army
contingency contracting personnel, provide reach-back support to
deployed personnel and units, and examine and assess contract
management at the installation level. Section 813 of Public Law 109-364
directed the Secretary of Defense to establish a ``Panel on Contracting
Integrity.'' This Panel identified contract surveillance as an area of
vulnerability that could lead to fraud, waste, and abuse. CORs are a
critical element to manage this vulnerability. As such, the Panel
initiated several actions to improve contract surveillance, as detailed
in the Panel's 2007 Report to Congress. The Panel also recommended
policy changes. One would require contracting officers to designate
CORs prior to contract award, rather than prior to commencement of
contract performance. Another would reinforce the COR's
responsibilities and compel requiring activities to affirm that
performance of COR functions be addressed as part of their annual
performance assessment. Additionally, the Panel established a
Sufficient Contract Surveillance Work Group to develop a DOD standard
for COR functions, responsibilities, and certification.

Senator Akaka. General Thompson?
General Thompson. Sir, like Dr. Finley, I'm not familiar
with the specific examples cited in the GAO and the audit
reports, but, from a broader perspective, we do have an Army
policy now that we are enforcing that all service contracts
over $2,500 have an appointed COR. The example that Mr. Parsons
gave you earlier, about the shortfall that we found in Kuwait,
and now, in Kuwait, in particular, we've assigned a COR to
every contract, I do know that about 100 DCMA personnel have
been sent in the last couple of months to Iraq to increase the
contract management ability of the Joint Contracting Command in
Iraq, and there is an additional number of personnel--and I'm
not sure of the exact number--that will deploy over there once
we identify them and get them ready. So, this is something that
we are systemically addressing across the board.
Sir, if I could just take one opportunity--I made a
statement earlier, to a question that was asked by Senator
McCaskill about the AEY ammo contract and the role of DCMA.
DCMA did conduct a pre-award survey for that contract, but the
past-performance award was something that was done by the Army
Source Selection Authority. The actions of the Army Source
Selection Authority on that contract are part of what we're
reviewing. So, I just want to make sure that I made that
correction for the record, publicly, because I didn't want to
have a misstatement for the record.
Senator Akaka. Thank you very much. That certainly will be
recorded.
Mr. Parsons?
Mr. Parsons. Sir, I'd just like to amplify on the
contracting-officer-representative discussion, that in addition
to this additional training that we are providing CORs, we've
developed a new training course at the Combined Armed Support
Command to focus on preparing performance work statements for
service contracts. Part of that training now teaches the
individuals how to prepare a quality assurance surveillance
plan. We are instructing our contracting personnel that, for
every service contract that they issue, that that quality
assurance surveillance plan must be a part of the contract
surveillance in the post-award activity.
So, again, a lot of this is training the nonacquisition
people on their role in contractor management and contract
management; we're developing as many new courses as we can to
get them additional training and better educated.
Senator Akaka. Okay.
I thank you all very much for your part in this--your
testimony and your responses in this hearing on contracting in
Iraq and Afghanistan. I look forward to working with all of you
to continue to try to improve our programs, wherever they are.
It's a huge operation here, but we want to do the best we can
to help our military be the best that they can, as well.
With that, I thank you, again. This hearing is adjourned.
[Questions for the record with answers supplied follow:]

Questions Submitted by Senator Carl Levin

MANPOWER MIX CRITERIA

1. Senator Levin. Secretary Bell, the 2005 version of the
Department of Defense's (DOD) Manpower Mix Criteria defined the
confinement, interrogation, treatment, and actions relating to enemy
Prisoners of War (POWs), terrorists, and criminals as inherently
governmental functions. Paragraph E1.2.2.5 of the 2005 Manpower Mix
Criteria states:

``How enemy POWs, terrorists, and criminals are treated when
captured, in transit, confined, and interrogated during or in
the aftermath of hostilities entails the discretionary exercise
of government authority. Their handling as well as decisions
concerning how they are to be treated cannot be transferred to
the private sector to contractors who are beyond the reach of
controls otherwise applicable to government personnel.''

In 2006, this language was revised to add a new paragraph
authorizing contractor employees to conduct interrogations ``if they
are properly supervised and closely monitored throughout the
interrogation process by sufficient numbers of properly trained
government officials.''
Is it your understanding that DOD was in compliance with the 2005
version of the Manpower Mix Criteria at the time that it was in effect?
Mr. Bell. The DOD experienced a shortage of interrogators during
the onset of Operation Enduring Freedom, and the shortage continued
into Operation Iraqi Freedom. The Department contracted for qualified,
experienced civilian contractor employees to address this shortfall
while the Army aggressively sought to recruit and train a larger
Government interrogator force. It appears that those responsible for
acquiring these contract interrogators in 2003 and 2004 were unaware of
the DOD Manpower Mix Criteria that were in effect at the time. To
prevent this from happening again, DOD Directive 3115.09, which
establishes DOD policy on intelligence interrogations, is being updated
to reflect current DOD policy on the limited but necessary role
contract interrogators may play under the proper supervision and close
monitoring of Government officials throughout the interrogation
process.

2. Senator Levin. Secretary Bell, can you explain why the Manpower
Mix Criteria was modified to authorize contractor employees to conduct
interrogations?
Mr. Bell. In late 2005, the DOD intelligence components asked for
clarification on how contractors could be used to support DOD
interrogations. They believed that they could utilize contractor
personnel in a support role and still retain control of all inherently
governmental (IG) responsibilities. The Department concluded that there
were certain functions that could be performed by contractors provided
that the contractors were properly trained and cleared and the
Department retained final approval authority for all products produced
by the contractor and maintained constant oversight and control of all
services provided by the contractor.
Initially, the 2005 Manpower Mix Criteria stated that direction and
ultimate control of defense missions, functions, and operations, to
include intelligence and counterintelligence operations, and
interrogations were IG responsibilities. Paragraph E1.2.2.5 of the
Manpower Mix Criteria stated that ``how enemy POWs, terrorists, and
criminals are treated when captured, in transit, confined, and
interrogated during or in the aftermath of hostilities entails the
discretionary exercise of government authority. Their handling as well
as decisions concerning how they are to be treated cannot be
transferred to the private sector to contractors who are beyond the
reach of controls otherwise applicable to government personnel.''
In late 2005, this guidance was revised to specifically include
``civilian internees retained persons, other detainees.'' Paragraph
E2.1.8.2 of the Criteria still stated that ``direction and control of
intelligence interrogations, to include approval, supervision, and
oversight of interrogations are IG activities.'' Paragraph E2.1.8.2
also stated that ``performance of those aspects of an interrogation
that entail substantial discretion are IG.'' However, paragraph E2.1.8
revised the policy to state that ``responsibility for their handling as
well as decisions concerning how they are treated cannot be transferred
to the private sector to contractors who are beyond the reach of
controls otherwise applicable to government personnel.'' Paragraph
E2.1.8.2 also stated that ``in areas where adequate security is
available and is expected to continue, properly trained and cleared
contractors may be used to draft interrogation plans for government
approval and conduct government approved interrogations if properly
supervised and closely monitored throughout the interrogation process
by sufficient numbers of properly trained government officials as
prescribed in OUSD (Intelligence) approved procedures.''
These changes are consistent with the May 29, 2003, Office of
Management and Budget Circular No. A-76 (Revised). Section B.1.c of
Attachment A of the Circular states that an activity may be provided by
a contractor provided that ``the contractor does not have the authority
to decide a course of action, but is tasked to develop options or
implement a course of action with agency oversight.'' Section B.1.b. of
Attachment A states that an action is not IG if the decisionmaking is
``limited or guided by existing policies, procedures, directions,
orders, and other guidance that: (1) identify specific ranges of
acceptable decisions or conduct; and (2) subject the discretionary
authority to final approval or regular oversight by agency officials.''

3. Senator Levin. Secretary Bell, is it your understanding that DOD
has sufficient qualified government personnel to ``properly supervise
and closely monitor'' contract interrogators throughout the
interrogation process?
Mr. Bell. Yes, the Department believes it has sufficient qualified
government personnel to properly supervise and closely monitor contract
interrogators throughout the interrogation process.

4. Senator Levin. Secretary Bell, if DOD has sufficient qualified
government personnel to supervise and monitor all interrogations, why
don't those government personnel conduct the interrogations themselves?
Mr. Bell. The DOD normally conducts interrogations with pairs of
interrogators. If a contract interrogator is used, he or she is paired
with a DOD civilian or military interrogator, thus fulfilling the
monitoring requirement. Additionally, all interrogations are subject to
remote monitoring by live video feed, which makes it possible to
monitor multiple interrogations at the same time.

CONTRACTORS AND FOREIGN SUBSIDIARIES

5. Senator Levin. Secretary Finley, at the hearing, I asked you
about an article in which the Boston Globe reported that Kellogg Brown
& Root, Inc. (KBR) employs more than 21,000 workers in Iraq, including
about 10,500 Americans, through subsidiaries in the Cayman Islands,
which appear to exist largely on paper. A KBR spokesman acknowledged
that these subsidiaries were created to enable the company to avoid
paying Social Security and Medicare taxes, as well as State
unemployment taxes. You agreed that this seems inappropriate.
Has the DOD informed the Internal Revenue Service (IRS) of KBR's
actions to avoid the payment of Social Security and Medicare taxes, so
that the IRS can determine whether those actions are legal? If so, what
position has the IRS taken on this issue?
Mr. Finley. In response to this question, we conferred with the
IRS. The IRS confirmed that under section 3121 of title 26, U.S.C.,
commonly referred to as the Internal Revenue Code (IRC), a company is
not subject to Federal Insurance Contributions Act (FICA) taxes if the
services are performed outside of the United States by a United States
citizen (or resident) who is an employee of a foreign company or
subsidiary. Because the workers at KBR's subsidiaries are employees of
a foreign company performing work outside the United States, KBR
believes payroll taxes such as FICA are not required under the IRC. The
IRS would not comment on the legality of KBR's practice because to do
so would involve the disclosure of taxpayer return information, which
is confidential and can only be disclosed in narrowly prescribed
circumstances under section 6103 of title 26, U.S.C.

6. Senator Levin. Secretary Finley, does the DOD believe that
legislation would be needed to preclude contractors from obtaining a
competitive advantage by using foreign subsidiaries to avoid the
payment of Social Security and Medicare taxes? If so, has the DOD
proposed such legislation? Would the DOD support such legislation?
Mr. Finley. Payment of FICA taxes and related payroll taxes is a
requirement of U.S. tax law, not contract law or regulation. As such
legislative proposals to change the tax law would come from the
Department of the Treasury. The DOD would support any legislation that
is in the best interest of the United States.
______

Questions Submitted by Senator Claire McCaskill

MUNITIONS CONTRACT FOR AFGHANISTAN

7. Senator McCaskill. Lieutenant General Thompson, on March 27, the
New York Times reported that in January 2007 the Army awarded a Federal
contract worth nearly $300 million to AEY, Inc., making them the main
supplier of munitions to Afghanistan's army and police forces. At the
time the contract was awarded, the company's president was 21 years old
and the company had little substantive procurement experience,
especially as it relates to a contract of such magnitude. Past
contracts with AEY had been much smaller, and according to two
officials involved in contracting in Iraq, AEY's performance on even
those smaller contracts was troubling. These officials stated that AEY
was not reliable and ``if they did come through, they did after many
excuses.'' AEY has not performed as expected under the January 2007
contract. The company has provided ammunition that is in some cases
over 40 years old and in decomposing packaging. Some of the ammunition
arrived in such poor condition that it was not used.
At the hearing I was informed that before AEY was awarded the
contract its bid went through all the normal procurement procedures of
both the Army and DOD. It seems to me the fact that normal procedures
were followed and AEY was still awarded the contract indicates a flaw
in how the Army is evaluating potential contractors. Furthermore, it
was stated to me that the Army has been reviewing the AEY contract for
the past 7 months, but when I asked which office or person was
responsible for awarding this important contract to an immature, and
ultimately unsuitable company, I was not able to get an answer.
Can you tell me whose office was ultimately responsible for signing
off on the January 2007 AEY contract to supply munitions to the
Afghans?
General Thompson. Headquarters, United States Army Sustainment
Command (ASC), Acquisition Center, 1 Rock Island, Rock Island, IL
61299-6500. ASC was acting as the contracting office for the Joint
Munitions Command, the Army's command responsible for ammunition
procurement.
The total dollars awarded to AEY is $154 million. This amount
represents the total value of all delivery orders issued against the
contract.
Past performance was evaluated and responses regarding AEY's
performance were positive. AEY had performed under a similar contract
for nonstandard ammunition and weapons with a not-to-exceed price of
$300 million with the Joint Contracting Command-Iraq/Afghanistan (JCC-
I/A).
The Afghanistan National Army and National Police did not identify
or specify an age requirement for the nonstandard ammunition.
The solicitation was issued on a full and open competition basis
for a 2-year requirements contract for nonstandard ammunition. This
procurement action called for a best value award, which included the
evaluation of past performance, price, and small business utilization.
AEY was determined to be the best value. A pre-award survey was
requested and completed by Defense Contract Management Agency (DCMA)
with support from Defense Contract Audit Agency, which reviewed AEY's
financial capability, accounting system, and transportation
capabilities. The DCMA report recommended full award. The Excluded
Parties List was also checked prior to award and neither AEY nor any
company affiliate was listed as being suspended or debarred.

8. Senator McCaskill. Lieutenant General Thompson, you stated that
in awarding this contract, AEY's past experience and reputation were
considered. Can you tell me specifically which of AEY's past contracts
indicated they were capable of delivering on a contract of the
magnitude and importance of the January 2007 contract?
General Thompson. The past performance criteria evaluated was On-
time Delivery, Quality, System Integrator, and International Movement.
Past performance surveys were issued by the evaluators who received the
following information regarding AEY:

AEY was awarded an Indefinite Delivery, Indefinite Quantity
(IDIQ) (Contract W914NS-05-D-9012) issued by the JCC-I/A on
March 15, 2005, for the same and similar ammunition items and
associated weapons and components (various nonstandard
ammunition items and other weapon items and components). The
maximum potential value of this contract was not to exceed $300
million or, if multiple awards were made, the aggregate total
would not exceed $300 million. JCC-I/A's Multi-National
Security Transition Command-Iraq Support Division provided past
performance information regarding Delivery Order 0004 for the
supply and air delivery of 21 different nonstandard ammunition
items, to include small caliber, shot shell, anti-tank,
fragment grenade, 40mm ammunition, and the associated weapon
components and systems. The input provided showed that
deliveries were made within the contract schedule and that AEY
performed satisfactorily against the contract requirements.
Under two other contracts, AEY performed as subcontractor for
other prime contractors. Positive feedback was returned
indicating no performance issues.

These contracts were evaluated using a past performance criterion
that addressed the magnitude and relevancy of anticipated contract
requirements. Based on all of the information we received prior to the
AEY contract award, all indication was that the ASC contract would be
similar to the contracts previously performed by AEY.

9. Senator McCaskill. Lieutenant General Thompson, what was the
specific value of each AEY contract that was used to rate their past
performance?
General Thompson. The specific dollar values of the contracts that
were evaluated for AEY's past performance are as follows:

a. JCC-I/A Contract No. W914NS-05-D-9012. The contract was an
IDIQ Contract for various types of nonstandard ammunition,
conventional ammunition, weapons, and components. It had a not-
to-exceed dollar value of $300 million.
b. AEY's other two contracts are as a subcontractor for
private companies valued at approximately $2 million.

10. Senator McCaskill. Lieutenant General Thompson, please describe
how these contracts were related to ammunition and delivery.
General Thompson. These contracts were similar to the procurement
in question. They also were evaluated using past performance as an
evaluation criterion, and they called for the delivery of the same or
similar nonstandard ammunition items and other weapons and components
with deliveries from an outside continental United States (OCONUS)
location into other OCONUS locations.

11. Senator McCaskill. Lieutenant General Thompson, you stated that
the Army has been reviewing the AEY contract for the past 7 months.
Please tell me what, if any, problems the Army has identified in its
procurement process that allowed AEY to be able to receive a contract
they seem incapable of performing? Has the Army taken any steps to
correct these problems in its procurement process? If yes, please
describe the changes in detail.
General Thompson. The Army places the safety of U.S. and allied
soldiers as a priority in the global war on terror. As a result of our
concern with the subject AEY contract, we are conducting a thorough
review to ensure our Afghan allies are provided with good quality
ammunition, and to ensure the soundness of the processes the Army uses
to acquire supplies for its allies. As an Army, we continually assess
how we are meeting the needs of our customers and ensuring that we are
improving our business practices. As a result of our review so far into
this matter, we recognize that changes need to be made in our
acquisition of nonstandard ammunition. We have already made changes to
our packaging requirements for nonstandard ammunition and will ensure
that we cite appropriate international packaging and quality standards
as the applicable U.S. standard and hold our contractors to that
standard. We also have chartered a team of subject matter experts to
better define the quality standards necessary for future nonstandard
ammunition requirements, how and where the ammunition should be
inspected, and the best DOD agency to accomplish these inspections.

12. Senator McCaskill. Lieutenant General Thompson, Defense
Criminal Investigative Services and Immigration and Customs Enforcement
initiated an investigation into AEY in October 2005 in order to look at
issues dealing with violations of the Arms Export Control Act. Which,
if any, contracting or auditing agencies were notified? How were they
notified?
General Thompson. Based on direction from the Department of
Justice, questions relating to investigations need to be addressed to
the various investigative agencies.

13. Senator McCaskill. Lieutenant General Thompson, was AEY awarded
any other contracts while under audit?
General Thompson. AEY did receive a number of other contract awards
from other contracting activities across DOD and from other Federal
agencies such as the Department of State.

[Whereupon, at 4:18 p.m., the subcommittee adjourned.]