[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


                                     

                         [H.A.S.C. No. 111-82]
 
        MANAGING SERVICE CONTRACTS: WHAT WORKS AND WHAT DOESN'T?

                               __________

                                HEARING

                               BEFORE THE

                  PANEL ON DEFENSE ACQUISITION REFORM

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             JULY 16, 2009

                                     
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                  PANEL ON DEFENSE ACQUISITION REFORM

                  ROBERT ANDREWS, New Jersey, Chairman
JIM COOPER, Tennessee                K. MICHAEL CONAWAY, Texas
BRAD ELLSWORTH, Indiana              DUNCAN HUNTER, California
JOE SESTAK, Pennsylvania             MIKE COFFMAN, Colorado
                Cathy Garman, Professional Staff Member
                 John Wason, Professional Staff Member
                     Alicia Haley, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2009

                                                                   Page

Hearing:

Thursday, July 16, 2009, Managing Service Contracts: What Works 
  and What Doesn't?..............................................     1

Appendix:

Thursday, July 16, 2009..........................................    27
                              ----------                              

                        THURSDAY, JULY 16, 2009
        MANAGING SERVICE CONTRACTS: WHAT WORKS AND WHAT DOESN'T?
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Andrews, Hon. Robert, a Representative from New Jersey, Chairman, 
  Panel on Defense Acquisition Reform............................     1
Conaway, Hon. K. Michael, a Representative from Texas, Ranking 
  Member, Panel on Defense Acquisition Reform....................     3

                               WITNESSES

Masiello, Brig. Gen. Wendy M., USAF, Air Force Program Executive 
  Officer for Combat and Mission Support, U.S. Air Force.........     4
Parsons, Jeffrey P., Executive Director, Army Contracting 
  Command, U.S. Army Materiel Command, U.S. Army.................     6
Punderson, Jerome F., Director of Contracts, Naval Sea Systems 
  Command, U.S. Navy.............................................     9

                                APPENDIX

Prepared Statements:

    Andrews, Hon. Robert.........................................    31
    Conaway, Hon. K. Michael.....................................    33
    Masiello, Brig. Gen. Wendy M.................................    36
    Parsons, Jeffrey P...........................................    46
    Punderson, Jerome F..........................................    58

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Andrews..................................................    67

Questions Submitted by Members Post Hearing:

    Mr. Andrews..................................................    71
        MANAGING SERVICE CONTRACTS: WHAT WORKS AND WHAT DOESN'T?

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                       Panel on Defense Acquisition Reform,
                           Washington, DC, Thursday, July 16, 2009.
    The panel met, pursuant to call, at 8:03 a.m., in room 
2212, Rayburn House Office Building, Hon. Robert Andrews 
(chairman of the panel) presiding.

OPENING STATEMENT OF HON. ROBERT ANDREWS, A REPRESENTATIVE FROM 
   NEW JERSEY, CHAIRMAN, PANEL ON DEFENSE ACQUISITION REFORM

    Mr. Andrews. Good morning ladies and gentlemen. Welcome to 
the panel. We appreciate the attendance of our colleagues and 
our witnesses and the ladies and gentlemen of the public and 
media that are here.
    In the last decade or so, the amount of money that the 
Department of Defense (DOD) spends on service procurement has 
doubled from around $100 billion a year to about $200 billion a 
year, and as the panel has progressed, we have learned a couple 
things about that.
    The one is that you really are comparing apples and oranges 
when you look at weapon systems versus services. They are very 
different kinds of procurement. They call for different needs 
and different skill sets and frankly different metrics to 
measure the success or lack thereof in buying them.
    We also learned that there is a wide array of types of 
services that the Department of Defense buys. Everything from 
car washing services to very detailed software consulting. You 
might be buying group services would help you move a tremendous 
amount of stuff a lot of miles or you might be buying someone 
who is going to fix light fixtures on a base.
    A lot of things happen, and therefore there is a huge 
variety of systems that are in place, some good, some bad, some 
indifferent. As we have discussed before, the panel's work 
program is the first to define metrics to measure the 
difference between the cost that we are paying and the value 
that we are getting, which we have completed that part of our 
effort.
    And then to move onto a series of hearings that are 
hypotheses really about what might explain the difference 
between the cost we are paying and the value that we are 
getting.
    This morning, our hypothesis essentially is that service 
contracts that have well-defined objectives, and that are 
carefully monitored provide much better value for the taxpayer 
than those that have neither of those characteristics.
    So a service contract, where the needs are very clearly 
spelled out, the expectations are very clearly contracted, and 
where there is in place an evaluative mechanism to protect the 
taxpayer and monitor the contractor, the results tend to be 
quite good and that the taxpayers get the value that we are 
seeking and we pay the cost or less than the cost that we have 
contracted for.
    The other end of the spectrum are contracts where the 
requirements are ill-defined or rushed through, and where there 
is minimal oversight of the work that goes on. The record tends 
to show that we do not receive sufficient value and we overpay 
for such services.
    So with that generic framework in mind, we are going to 
look this morning at three examples of service contracts, some 
of which have great strength, some of which have great 
weaknesses, and try to use those contracting experiences as a 
learning experience for the panel so that when we prepare our 
legislative recommendations to the full committee in the spring 
of 2011, we can draw from those experiences.
    We are going to be looking at an Air Force contract and a 
Navy contract and an Army contract, but that frankly is not 
meant to suggest we think that any of those branches has the 
corner on the market or on the good, the bad or the 
indifferent.
    The fact that we have chosen what we think is a very 
positive example from the Navy doesn't mean that we imply that 
we think the Navy does a better job than the other branches, 
the more controversial one is in the realm of the Army and 
conversely we don't think the Army does a poorer job. We just 
happened to choose those contracts for purposes of exploration 
today.
    Obviously, the contract that has drawn the most attention 
is the Logistics Civil Augmentation Program (LOGCAP) contract 
and that is the one that frankly is more rife with trouble. The 
Government Accountability Office (GAO) found that that contract 
had insufficient personnel to manage it. The planning guidance 
was ignored. There was a failure to define or definititize, 
which I don't actually think is a verb, but a failure to define 
the task orders in a timely manner, poor requirements 
definition and contractor problems, making management 
difficult.
    The other end of the spectrum, the Navy contract that we 
are going to look at this morning, seems to have achieved high 
value and high efficiency and seems to be a role model for what 
we might want to do in the future.
    But I do want to emphasize from the outset, this is a very 
small sample in a very large universe. We do not by any means 
mean to imply that the positive example is characteristic of 
that branch or the negative example is characteristic of the 
other one. We want to learn from these experiences and use that 
learning to make good recommendations to our colleagues on the 
full committee and in the House.
    With that in mind, I am going to turn to my friend, the 
ranking member from Texas, Mr. Conaway, for his opening 
statement.
    [The prepared statement of Mr. Andrews can be found in the 
Appendix on page 31.]

  STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE FROM 
   TEXAS, RANKING MEMBER, PANEL ON DEFENSE ACQUISITION REFORM

    Mr. Conaway. Thank you. Good morning, Mr. Chairman. Thank 
you for holding this hearing, and ladies and gentlemen, thank 
you for being with us today. I appreciate that.
    This is our second panel on service contracting. Our first 
hearing was in April which looked at the issue of measuring 
value for service contracts. The focus of today's hearing is to 
learn what works, what doesn't work in regards to managing 
these service contracts.
    As mentioned in our April hearing, the Department of 
Defense now spends more than--on its budget on services than on 
products which includes weapon systems. The GAO has reported 
numerous reports that the management and execution of service 
contracts is obviously not like managing and executing weapon 
systems contracts; master of the obvious.
    In its 2006 report, GAO noted that the successful service 
acquisition management requires attention to the organization's 
ability to move from a fragmented manner of doing business to 
one that is more coordinated and strategically oriented; 
wonderful phraseology, hard to get to.
    Primarily, this involves changing out services that are 
required in terms of business processes, organizational 
structures, their roles and responsibilities. In your submitted 
testimony, one thing that stood out was a need for oversight 
management after the contract is awarded. This could mean focus 
on efforts on adding more qualified and trained personnel, but 
not necessarily.
    I look forward to hearing from the witnesses have to say 
and helping us gain some insight into how we spend taxpayer 
dollars better than we have been doing it. So with that, Mr. 
Chairman, I yield back and I look forward to our testimony of 
our witnesses.
    [The prepared statement of Mr. Conaway can be found in the 
Appendix on page 33.]
    Mr. Andrews. Well, thank you, and without objection opening 
statements from any member of the panel will be included in the 
record. Well, welcome. I know that each of the three of you is 
a veteran of these kind of hearings and I won't spend too much 
time describing the rules. We would simply ask you to summarize 
your written testimony in about a five-minute oral synopsis.
    Without objection, the full extent of your written 
testimony is a part of the record. We have had a chance to read 
it. The panel tries to maximize question and answer dialog 
between the witnesses and the panel so we can learn more. I am 
going to begin by reading brief biographies of the three 
witnesses, and then we will get to the statements and then we 
will get to the questions from the members.
    We will start with Brigadier General Wendy M. Masiello. Is 
that correct, General? A very distinguished career; she is the 
program executive officer for Combat and Mission Support in the 
Office of the Assistant Secretary of the Air Force for 
Acquisition here in Washington.
    She leads the acquisition of Air Force services and is 
responsible for more than $100 billion in existing and planned 
contracts across the Air Force. She earned her bachelor's of 
business administration degree in marketing from Texas Tech 
University in Lubbock. Her master's from the Air Force 
Institute of Technology, the Wright-Patterson Air Force Base in 
Ohio.
    She is a distinguished graduate of the Squadron Officers 
School. And I do want to read her major awards and decorations 
because they are very impressive and significant. Legion of 
Merit, the Bronze Star Medal, the Defense Meritorious Service 
Medal with an oak leaf cluster, the Meritorious Service Medal 
with two oak leaf clusters, the Air Force Commendation Medal, 
the Joint Service Achievement Medal with an oak leaf cluster, 
the Air Force Achievement Medal, and the Global War on 
Terrorism Service Medal.
    General, thank you for your years of service and devotion 
to your country. We are glad that you are with us here this 
morning.
    We want to welcome back Mr. Jeffrey Parsons who was with us 
a few months ago. We are happy to have him with us again. Mr. 
Parsons is the executive director of the U.S. Army Contracting 
Command, a new major subordinate command of the U.S. Army 
Materiel Command (AMC).
    Prior to assuming his current position, Mr. Parsons served 
as the director of contracting, Office of Command Contracting 
Headquarters AMC at Fort Belvoir, Virginia. Prior to his 
appointment to the Senior Executive Service, Mr. Parsons was 
the director of Contracting Headquarters, U.S. Air Force 
Materiel Command at Wright-Patterson Air Force Base in Ohio 
where he retired from active duty as an Air Force Colonel after 
26 years of service.
    Mr. Parsons is a graduate of St. Joseph's University, as I 
noted before, and we are very happy to have him with us again. 
Mr. Parsons, thank you.
    And finally, Mr. Jerome Punderson is the director of 
contracts for Naval Sea Systems Command (NAVSEA). He has the 
full authority and responsibility for one of the largest and 
most responsible procurement organizations in the Federal 
Government or the world for that matter.
    His duties involve the obligation and expenditure of 
billions of dollars annually. He is a member of the Senior 
Executive Service (SES). Members of the SES serve in the key 
positions just below the top presidential appointees.
    He was born in Lakewood, New Jersey about an hour from 
where I live, Mr. Punderson, and the important--he attended 
Rutgers University where in 1979 he earned his bachelor's of 
arts in biology.
    In 2003, he earned a master's of science in national 
resource strategy from the Industrial College of the Armed 
Forces. Mr. Punderson is a recipient of the Navy Meritorious 
Civilian Service Medal and numerous special act awards. Thank 
you for your service to our country, and welcome to the panel.
    General, we are going to begin with you. We will ask if you 
will give us about a five-minute synopsis and we will go to 
questions.

  STATEMENT OF BRIG. GEN. WENDY M. MASIELLO, USAF, AIR FORCE 
PROGRAM EXECUTIVE OFFICER FOR COMBAT AND MISSION SUPPORT, U.S. 
                           AIR FORCE

    General Masiello. Okay. Chairman Andrews, Congressman 
Conaway, distinguished members of the Defense Acquisition 
Reform Panel, I thank you for the opportunity to share with you 
the latest efforts in Air Force oversight and management.
    I would like to set the stage if I could with where my role 
is and what the parameters of my responsibilities are. The Air 
Force Program Executive Office (PEO) for Combat Mission 
Supporter Services Acquisition was established in February of 
2002 in response to the fiscal year 2002 National Defense 
Authorization Act (NDAA-02) expectation that the services 
create a management structure for procurement of services 
comparable to the structure for procurement of supplies.
    My office provides the dedicated management structure for 
pre- and post-award service programs greater than or equal to 
$100 million. Currently we track 170 programs with a potential 
contract value of $150 billion.
    The scope of our portfolio is broad, includes everything 
from base operating support to weapon system sustainment, 
information technology and advisory and assistance service 
efforts. But what makes us different from other PEOs is that we 
work through at least seven different major command chains and 
contracting authorities with none of them reporting to me or my 
subordinates.
    We are not directly affiliated with any weapon system, 
installation or specific war fighting mission, and we have no 
budget input or control, yet we own all the acquisition 
responsibility for services over $100 million worldwide and I 
have 17 people on staff to help make that happen.
    Initially, our office focused on acquisition strategy and 
contract structure for programs over $100 million, leaving 
post-award oversight to the owning organization. The theory was 
that if we got the contract right, then everything else would 
fall into place.
    In the pre-award stage, we started doing things like moving 
from time and materiel to firm fixed-price agreements or cost 
fixed-fee arrangements when it was possible. We have weaned our 
teams for the most part off cost-plus award fee contracts. We 
shortened the length of our services contracts, beefed up 
government program teams overseeing multiple award indefinite 
delivery, indefinite quantity (IDIQ) contracts.
    We have also enticed some flag officers from various major 
commands to assist us in the service program oversight by 
offering delegation of acquisition authority. And the 
delegation program has enabled our office now to reinstitute 
our post-award review, and these post-award reviews we have 
made our biggest shift of all where we think of service not as 
contracts but as programs.
    And as we look at things with programs, that means we 
engage not just our contracting officer, but we get our quality 
assurance representatives, we get auditors, we get our 
financial advisors, and we get the commanders who own the 
mission being performed by the service provider at the table 
with us to talk about it.
    During our annual post-award reviews, we examine 
contractor's performance and also discuss the government team's 
execution oversight of the programs they are responsible for. 
Here are some of the things that we have learned in that 
process.
    In some cases, the teams responsible for the program's 
reviewing had never talked to each other until they prepared 
the briefing for our review. Some commanders were very 
frustrated with their contractors but didn't know how to get it 
fixed so they were just living with the problems.
    Some organizations had great Web-based quality assurance 
reporting tools to facilitate good tracking, even in the 
worldwide environment, so we are stealing those ideas to share 
across the Air Force.
    Just because we move from a time and materiel contract to a 
cost-plus-fixed-fee contract doesn't necessarily mean the team 
is managed that way. We found that in some cases, even with a 
cost-plus-fixed-fee contract, there is a tendency to still 
manage it as though it is a time and materiel effort.
    Adding more contractors to a multiple award IDIQ contract 
isn't necessarily a good thing, and we have challenges managing 
IDIQ ceilings and growth on individual task orders in those 
types of contracts too.
    Our contracts are not always living up to the commitments 
that they have made, especially with regard to small business 
subcontracting. But the bottom line, as well constructed as our 
contract might have been, the success of the effort depends on 
the post-award involvement and the multi-functional government 
team and the preparedness of that team for the roles they must 
play.
    In conclusion, laws and regulations will describe the 
continuum of the contracts that are available to us. Service 
actions often fall into a fixed price or the fixed price end of 
the spectrum, but it takes discipline to get there and 
sometimes the requirement legitimately needs the flexibility of 
the time and materiel cost-reimbursable effort.
    So rather than defining preferred contract types, we have 
worked in the Air Force for more oversight and a 
multifunctional role and the post-award environment and we 
found that, as we get the teams involved, in the end they 
realize the benefit of their participation in the beginning as 
they define those requirements and we actually begin to improve 
our source selections in both the pre- and post-award 
environment.
    We have improved competition. We are getting better prices 
with that greater discipline. We have increased attention on 
our small business participation with that and we have begun to 
link our large dollar service acquisitions with Air Force 
strategic vision and enterprise solutions in a way we haven't 
been able to before
    I previously submitted my statement about the individual 
contracts, Mr. Chairman, and this concludes my statement. Thank 
you.
    [The prepared statement of General Masiello can be found in 
the Appendix on page 36.]
    Mr. Andrews. General, thank you very much. We appreciate 
it.
    Mr. Parsons, welcome back to the committee.

   STATEMENT OF JEFFREY P. PARSONS, EXECUTIVE DIRECTOR, ARMY 
   CONTRACTING COMMAND, U.S. ARMY MATERIEL COMMAND, U.S. ARMY

    Mr. Parsons. Yes, thank you, Chairman Andrews, Congressman 
Conaway and distinguished members of the Defense Acquisition 
Reform Panel. Thank you for this opportunity to discuss the 
Army's initiatives to improve service contracting.
    The Army has undertaken initiatives that enable our 
contracting mission to be agile, expeditionary and responsive 
to our warfighters while ensuring proper fiscal stewardship of 
taxpayer dollars.
    We use metrics to collect information about program 
performance and contract execution and use that information to 
improve how we structure future contracts. We use this approach 
to improve the acquisition strategy for our recent LOGCAP IV 
acquisition. A Logistic Civil Augmentation Program known as 
LOGCAP, is one of the primary service contracts the Army uses 
to support deployed warfighters.
    LOGCAP is an initiative by the United States Army to pre-
plan during peacetime for the use of civilian contractors to 
perform selected services in wartime and other contingencies to 
augment U.S. forces in support of DOD missions.
    LOGCAP can also provide support to coalition or multi-
national forces in other government and non-government agency 
components in support of joint combined coalition and multi-
national operations.
    This includes operations other than war such as disaster 
relief, peacekeeping or humanitarian assistance missions. We 
are pleased to report that the Army, through LOGCAP, is 
providing quick reaction support for operations worldwide 
including operations in very austere conditions.
    The LOGCAP III contract was awarded on December 14, 2001 
soon after 9/11, to Kellogg Brown & Root Services as a result 
of a competitive best value source selection. The contract is 
an indefinite delivery, indefinite quantity contract with one 
base year and nine option years.
    When the Army awarded LOGCAP III, there was no prediction 
that we would execute the level of requirements that we have 
experienced to date. The requirements placed on LOGCAP III 
contract to support the overseas contingency operations have 
dwarfed the combined efforts of all previous LOGCAP contracts.
    In the first 4 years of LOGCAP III, obligations exceeded 
previous efforts by almost 300 fold and grew to over $14 
billion by October 2005. These dramatic increases in the level 
of effort of the LOGCAP III contract, coupled with the 
challenges and problems that resulted from this rapid 
expansion, made it clear to the Army that it needed to develop 
and execute a new contract strategy to support the soldier.
    The Army carefully considered the lessons learned from 
LOGCAP III execution and consulted with the Department of 
Defense, sister services, combatant commands and industry as 
the new acquisition strategy was developed.
    The primary objectives of the new LOGCAP IV acquisition 
strategy were to reduce program risk, increase capacity, and 
incentivize contract performance. After considering how best to 
achieve these objectives, the Army made changes in strategy and 
organization structure to provide better service delivery to 
the war fighter and value to the taxpayer.
    Four examples of these improvements include the following. 
The Army now uses deputy program directors stationed forward to 
support operations in Iraq, Kuwait and Afghanistan, and support 
the execution of theater support contracting.
    These individuals serve as the senior LOGCAP advisor to the 
combatant commanders. These individuals also lead the team 
LOGCAP effort in the operational area. The LOGCAP deputy 
director's specific duties include overseeing LOGCAP contract 
management and administration, conducting task order change 
management, assisting in requirements planning and providing 
cost management acquisition information as required.
    Secondly, the Army now has senior executives in charge of 
the LOGCAP program office and contracting office to ensure 
better communication and access with the war fighting commands. 
The appointment of Senior Executive Service (SES) to these key 
positions demonstrates the Army's commitment to ensuring that 
LOGCAP is properly managed. These positions are now at the same 
relative level as those controlling similar war fighting 
resources.
    Thirdly, the Army uses multiple award indefinite delivery, 
indefinite quantity contracts to eliminate a single point of 
failure. Having three LOGCAP IV contractors lessens the 
probability that contractors will become overwhelmed by 
increases in requirements.
    It also allows the Army to take advantage of competition 
throughout the life of the contracts. This helps keep prices 
down and quality and responsiveness up. One of the reasons for 
re-competing the LOGCAP requirements prior to the expiration of 
LOGCAP III, was to reduce the risk inherent in having only one 
contractor providing services.
    When the Army competed LOGCAP III, this risk did not appear 
to be excessively high when viewed in the context of the level 
of services requested under LOGCAP I and LOGCAP II. However, as 
I mentioned before, due to the tremendous increase in services 
required by the overseas contingency operations, the Army 
Sustainment Command incorporated into LOGCAP IV this multiple 
award portfolio approach that mitigates the risk of any one of 
the three failing to perform.
    Should any contractor fail to perform any task order it 
receives under the indefinite delivery, indefinite quantity 
arrangement, the other two contractors will serve as built-in 
backstops to allow ongoing mission support. The new business 
arrangement substantially reduces the risk of contractor non-
performance.
    Department of Defense is executing more control over LOGCAP 
requirements by a validation through a joint acquisition review 
board. This board ensures consistency and support levels across 
operating locations, and allows funds to be spent where they 
will provide the maximum benefit, given current mission 
requirements.
    The supporting units have the planners and organizations 
that define the requirements to meet the needs of the U.S. 
forces. In addition, in an attempt to determine the proper use 
of LOGCAP as a capability in future contingencies both in 
continental United States (CONUS) and abroad, headquarters 
department in the Army G4 recently established the LOGCAP 2010 
Strategy General Officers Hearing Committee which includes 
Army-wide representatives as well as participants from the 
Assistant Deputy Under Secretary of Defense for Program Support 
and the J4 from the Joint Chiefs of Staff.
    The purpose of this committee is to address key program 
issues and collaboratively develop strategy for future LOGCAP 
utilization policy. Let me assure you that the Army contracting 
command is committed to excellence in all contracting, 
including these very complex and critical LOGCAP contracts.
    We continue to collect lessons learned and make 
improvements and adjustments along the way to ensure mission 
success and protection of the interests of the government and 
the taxpayer. Thank you for inviting me to speak with you 
today. This concludes my statement.
    [The prepared statement of Mr. Parsons can be found in the 
Appendix on page 46.]
    Mr. Andrews. Thank you very much, Mr. Parsons.
    Mr. Punderson, welcome.

STATEMENT OF JEROME F. PUNDERSON, DIRECTOR OF CONTRACTS, NAVAL 
                 SEA SYSTEMS COMMAND, U.S. NAVY

    Mr. Punderson. Thank you. Good morning. Mr. Chairman and 
distinguished members of the Defense Acquisition Reform Panel, 
thank you very much for this opportunity to testify on Navy 
contracting, particularly as it pertains to the SeaPort 
Enhanced or the Seaport-E Program.
    I am here as the director of contracts for the Naval Sea 
System Command, NAVSEA. I am responsible for the warranting of 
all contracting offices throughout the NAVSEA claimancy. I have 
worked in the contracting field for the Navy for the last 28 
years including multiple leadership positions at NAVSEA 
responsible for the procurement of major weapons.
    I also served as the program manager for the SeaPort-E 
which is a strategic approach to acquisition of services, 
employing affordable and timely procurement of services for a 
completely electronic Web-based marketplace.
    While I am no longer the SeaPort-E program manager, as 
director of contracts, I oversee the SeaPort-E program to 
ensure appropriate management of this contract vehicle within 
the NAVSEA claimancy.
    The SeaPort-E program is a follow-on to the original 
Seaport program which we initiated in NAVSEA in 2001. That 
program was started at NAVSEA headquarters as a means to 
rationalize spending across four common support service areas 
who were using many inefficient--we had some vehicles over at 
the General Services Administration, some were individual 
contracts.
    But we were able to go from 350 separate contracts to 21 
multiple award contracts. SeaPort did not provide as much 
opportunity for small businesses to compete as we desired 
because even though they held a third of the contract, they 
were only winning about 10 percent of the business.
    So we created SeaPort-E in order to provide increased 
opportunity for small businesses and to expand the functional 
areas of those contracts to address the needs of our field 
activities and eventually the whole Navy.
    We expanded to 22 functional areas of professional support 
services and engineering services and added the capability, set 
requirements aside, for small business, service disabled 
veteran-owned small business and Small Business Administration 
(SBA) approved 8(a) contract.
    We compete all requirements under the vehicle and we use 
the zone-based approach. These services are primarily CONUS 
services. There are some non-CONUS, but I would say it is 99 
percent for CONUS. These geographic zones help small businesses 
compete in as small an area as they want or across the country 
if they desired.
    We didn't want to take a small business that might support 
one of Indian Head's in ordnance expertise and think that they 
had to compete nationwide to get any business. Nearly 85 
percent of the SeaPort-E contract holders are small businesses.
    SeaPort-E portal provides a standardized sufficient means 
of soliciting offers from among the diverse population of large 
and small business. The SeaPort-E approach to acquiring 
services provides opportunities for many small companies, 
thereby bringing to the Navy diverse ideas and concepts.
    This benefits the Navy and encourages job growth of the 
Nation. Small businesses benefit by being able to compete among 
other small businesses or on an unrestricted basis for Navy 
work. Since the inception of SeaPort in 2004, 47 percent of the 
approximately 1,700 task orders have been won by small 
business.
    Three billion dollars have been obligated to small business 
as prime contracts and another $2 billion have been 
subcontracted to small business. Every Navy requirement is 
pushed to all SeaPort-E contract holders via the portal rather 
than having to search the database for a particular 
solicitation.
    They receive on-the-desk electronic notification linked 
right to that solicitation. In fact, some companies have said 
that they get too much information. We use a variety of cost 
and fixed price type task orders, but we do not use time and 
materiel type contracts. We use defense contract Audit Edge. 
They prorate information on all cost-type orders prior to award 
and Defense Contract Management Agency (DCMA) has assigned 
responsibility of contract administration.
    SeaPort-E was designed to provide a powerful strategic tool 
to allow the contracting officers the maximum flexibility to 
exercise their own business judgment to best meet the needs of 
their customer.
    Each ordering activity has the tools to manage the task 
orders using their own head of contracting activity, HCA 
authority--and developed the track acquisition cycle times, 
work load efficiencies, dollars awarded under SeaPort-E in both 
prime and sub-prime contract level.
    These metrics continue to be refined and developed through 
the life of the program. For instance, we developed the 
capability to collect subcontracting actuals at the task order 
level electronically every six months to ensure the larger 
businesses are meeting their small business subcontracting 
goals.
    We believe the SeaPort-E contracting vehicle is a success 
story for both the Navy and industry. We work with our partners 
both government and industry to continue to improve the 
program. At times we struggle with the ability to attract, 
train and retain acquisition personnel, both in contract and 
program offices that would enable the Navy to further realize 
the benefits.
    We have undertaken efforts using the money provided by 
Section 852 of the NDAA to improve our workforce and use our 
performance space service acquisitions, contract and authorize 
representative duties and advance source selection techniques.
    Thank you again for allowing me to testify today, and I 
look forward to your questions.
    [The prepared statement of Mr. Punderson can be found in 
the Appendix on page 58.]
    Mr. Andrews. Well, thank you ladies and gentlemen.
    Mr. Punderson, your last comment about acquisition 
workforce will be the focus of the panel's next inquiry next 
week and we will look into that issue. Thank you for the 
testimony, each of the three witnesses.
    I wanted to begin, Mr. Parsons, with some questions about 
LOGCAP III. And, I am pleased to hear about the lessons 
learned. I just want to go back into the GAO report from, I 
believe 2005, and one example that struck me--it is actually 
2004. In LOGCAP III, the GAO reported the Army directed the 
contractor in that case, to provide water for units within 100 
kilometers of certain designated points.
    But at least according to the GAO, the statement of work 
did not indicate how much water needed to be delivered to each 
unit or how many units there were. So if I read this correctly, 
the scope of work said, you know, within 100 kilometers of 
Tikrit or somewhere, deliver water, but it didn't say how many 
units there were within 100 miles of Tikrit or how much water 
each unit needed.
    Is that correct, that the scope of work was that 
insufficient?
    Mr. Parsons. Yes, sir, that is exactly one of the things 
that mean lessons learned that we had out of LOGCAP III, was 
the need to be more specific in the defining of the 
requirements.
    Mr. Andrews. But in this case as you--is this correct that 
that was----
    Mr. Parsons. I believe so. I mean if you take a look at the 
original LOGCAP III task order that was for the base life 
support was very general in nature.
    Mr. Andrews. Yes. One of the things I wanted to say, Mr. 
Conaway and I have talked about this, we want to make sure we 
hear from the contractor side of this and in future panels we 
will. I want to be very clear about that so we hear both sides, 
but it strikes me that sometimes contractors get beat up for 
things that we don't do very well in the government.
    And this is not a rhetorical question, but how could this 
happen? How could we enter a contract that says we want to buy 
water, and that we, from our side, didn't give direction to the 
contractor as to how much water and how many units it had to go 
to?
    Mr. Parsons. Well, sir, the whole nature of the original 
LOGCAP contract envisioned a short duration type of an 
operation, and, you know, there wasn't an expectation that you 
would be providing these services for a long period of time. 
People understood that things were going to change, and that is 
one of the toughest challenges we have as the task order 
changed management.
    Mr. Andrews. But wouldn't the contract even--I understand 
that. If you don't know the requirements when you do a 
potential 10-year contract, but wouldn't there be a provision 
that would say, you know, within x number of days or hours of 
delivery, that we would notify the contractor the quantity that 
was needed. Is there a provision like that?
    Mr. Parsons. There is today, and if you take a look at 
LOGCAP IV's statement of work and the objectives and the 
specific metrics. It is much more specific.
    Mr. Andrews. How could there not be in the past? I mean 
this is reminiscent of our discussion in April where, I 
believe, it was about catering services, that it just strikes 
me as so elemental that when someone higher than your pay 
grade, I am sure, approved this contract, the fact that he or 
she missed this is just dumbfounding to me.
    That, again, to use a sort of a homeowners example, I don't 
think any of us would say to the electrician, ``Come over today 
and whatever you think needs to be fixed fix it and let me know 
how much the bill is.'' I mean, it is just astonishing to me 
that how do we get to a point that we issue a contract with 
that little specificity?
    Mr. Parsons. Well, again, sir, it was the nature of what 
that contract was originally designed for which was very 
undefined requirements for initial operations in providing some 
base life support to the soldiers who----
    Mr. Andrews. Now, tell me what would happen today, in 
Afghanistan for example, if under LOGCAP IV I guess it would be 
at, right? Or is Afghanistan under three or four?
    Mr. Parsons. Four.
    Mr. Andrews. Okay.
    Mr. Parsons. And we just awarded task orders for that, sir.
    Mr. Andrews. If we were going to deliver water to units 
within 100 miles of Khost Province, who would be responsible 
for specifying the specifics of how much water, for whom and 
when? How would that work?
    Mr. Parsons. That would start with the units that have the 
actual requirements and they would inform the LOGCAP teams that 
is in country exactly how much water they needed delivered, the 
exact location, and then the administrative contracting 
officers that are located in Afghanistan would give direction 
to the LOGCAP contractors. But it all starts with the units 
being able to define the requirements.
    Mr. Andrews. Now, one of the other criticisms in the GAO 
report was that there weren't enough contract officers, enough 
management personnel in place. Has that problem been fixed? Let 
us go back to LOGCAP IV. How many personnel, if it is not 
classified, how many personnel are in country right now in 
Afghanistan to manage this?
    Mr. Parsons. Performing LOGCAP oversight?
    Mr. Andrews. Yes.
    Mr. Parsons. And just in Afghanistan?
    Mr. Andrews. Yes.
    Mr. Parsons. I would have to get back to you with the exact 
numbers, but I think between both countries we have about 120 
personnel today that are involved with LOGCAP management.
    Mr. Andrews. Do you know the breakdown between Iraq and 
Afghanistan.
    Mr. Parsons. No, I do not, but I can get that for you.
    [The information referred to can be found in the Appendix 
on page 67.]
    Mr. Andrews. Do, you know, I have no frame of reference for 
that. How many people in country did we have in 2004, 2005?
    Mr. Parsons. That was part of the problem. We didn't have 
any.
    Mr. Andrews. We didn't have any.
    Mr. Parsons. Had them early. They were early on in 2004 
and----
    Mr. Andrews. Well sure, there are some reasons for that.
    Mr. Parsons [continuing]. That is why we re-established----
    Mr. Andrews. I realize that there are--obviously it is a 
war zone. There are some safety issues, other issues, but that 
is astonishing.
    Mr. Parsons. Yes.
    Mr. Andrews. Well, when did we first have personnel in 
theater under LOGCAP III?
    Mr. Parsons. Yes. Well, let me qualify. It means is the 
Defense Contract Management Agency had been there from the 
start performing contract administration, contract management. 
We did not have any LOGCAP program office personnel.
    Mr. Andrews. I understand.
    Mr. Parsons. But that was made in 2004.
    Mr. Andrews. But when did we first have LOGCAP program 
managers in country under----
    Mr. Parsons. End of 2004, beginning of 2005.
    Mr. Andrews. Wow. So we essentially had a situation where 
on the ground from March of 2003 on with no contract officer 
until January of 2005? Why is that?
    Mr. Parsons. Again, there was no foresight into how long 
this operation was going to be, and I think if you remember and 
recall there was a lot of people that were forecasting it to be 
a short-term operation.
    Mr. Andrews. We do remember that, yes.
    Mr. Parsons. And you know, as a result, you know, folks 
thought that they could manage this sufficiently from back in 
the states, but again, that was one of the lessons learned to 
think as general managers.
    Mr. Andrews. I am not unsympathetic to the point that 
placing civilian personnel in a hostile environment is a very 
sensitive problem. It is not something you do lightly, but boy, 
it seems like--okay, I am going to come back for a second round 
and thank you for your answers and go to Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. Mr. Parsons, you were 
doing a lot of head nodding at the end of the General's 
testimony. Either you are a really bad poker player or you were 
agreeing with a lot of the systems of how the Air Force does it 
versus the way the Army does it.
    And helping us understand, you know, we would like to do 
the best of both systems. Neither one of them are perfect, but 
both of them are good and we would like to try to make sure we 
understand the best of those.
    And you had mentioned post-award involvement, but you also 
said that your team doesn't have any post-award authority for 
once a contract has been awarded and handed off to whatever. 
Can you kind of walk me through how that works?
    General Masiello. If I communicated that it was 
inappropriate. What we had not done for a couple of years 
because our staff was very small and we were working direct 
relationships with each program, that any contract that was 
going to exceed $100 million we got involved in defining the 
source selection strategy, helping make those decisions.
    And because we had such a lean staff we weren't doing any 
of the post-award, but in the past couple of years we have 
started delegating some of our authority to some of the general 
officer and Senior Executive Service members out in the major 
commands, and getting them to help us provide better oversight 
with certain conditions.
    And that has then relieved our office to go out and get 
more involved in the post-award oversight role because that is 
part of our responsibility as well. And really, in my mind, 
that is one of the things we haven't done well. We just haven't 
had the resources or dedicated much time to paying attention to 
what goes on in services acquisition.
    Historically, I, my observation, having grown up in the 
contracting community, too, many times our functionals or our 
customers will have a need and they will say, ``Oh, okay, 
contracting, I need people to do maintenance for me. Over to 
you.'' And then the contract gets put in place and people don't 
pay much attention to it.
    And historically if there was something wrong with that 
particular contract or in an inspection or in evidence, or in 
some type of inspection something went wrong or that contractor 
didn't perform well, it was the contracting officer that got 
held accountable for that failure, when the reality is that 
contractor is performing a commander's mission.
    That commander's very mission success depends on the 
quality of that contractor and their performance, which means 
when a quality assurance evaluator is assigned by that mission 
commander, the theory is you would assign among your best to do 
that role. Historically we haven't done that very well.
    So in this post award environment we have put a lot of 
attention on how the government team is organizing, who they 
are assigning to provide that oversight. Does that mission 
commander even know what the contractor is or even understand 
the value of those contractors to the success of their mission?
    And we are getting them increasingly involved, and if I 
could just give you an example. I am sure you have heard about 
Vance Air Force Base, one of our training bases in the Air 
Force. Almost the entire installation is contracted and when we 
do one of our annual execution reviews with that particular 
wing commander, he was involved in that post-award discussion.
    We had a lot of really good dialogue about what that 
contractor was doing and does he know what they are doing and 
how aware and how well is his team managing that contractor to 
achieve the objectives they need to do.
    And I could hear the light bulbs coming on and in the time 
that he took over he went back and realigned performance plans 
for his civil servants who were responsible for overseeing the 
contractor. He started holding his military leaders accountable 
for what those contractors were doing.
    They actually prepared exercises that they tested what they 
would do if the contractor wasn't able or chose not to perform 
for some reason, for example, a strike, and had run those 
exercises a couple of weeks prior to the strike actually 
occurring that shut down mission training for three weeks.
    And the good news is they had worked out all of those work-
around strategies. They knew what they were going to need to do 
in order to keep mission going. That is part of staying 
involved, and when you have those dialogues you get involved.
    Now, what I want to make sure is we have just never thought 
that way before. Good or bad or indifferent, we just 
traditionally as a culture haven't thought that way before. So 
to have this dialogue, to have this mentoring discussion to 
coach them on what it is they need to do and how to get 
involved, has been just really productive and enlightening for 
many of the functionals. So that is how we have gotten involved 
in the post-award environment.
    Mr. Conaway. Okay. I want to get one real quick one with 
Mr. Parsons. Would you explain what is going on with LOGCAP III 
in Iraq versus LOGCAP IV? What is the kind of transition?
    Mr. Parsons. We are in the process of releasing the 
solicitation to transition the work in Iraq off of LOGCAP III 
into LOGCAP IV, and that solicitation should be out on the 
street in the next week or so, with the anticipation that we 
will do an award sometime in August, late August or early 
September.
    Mr. Conaway. And that would provide for the drawdown 
requirements as well?
    Mr. Parsons. Correct.
    Mr. Conaway. All right, and then, okay. Once it is awarded 
in August then you will be off the LOGCAP III concept?
    Mr. Parsons. We will be, again, I think it will be early 
September when we make the awards and then there will be a 
transition timeframe and then you have got to transition the 
work from the incumbent contractors to whoever winning 
contractors will be, and that takes a period of anywhere 90 to 
120 days depending on what the service is.
    Mr. Conaway. Okay. I may have a second round as well. 
Thanks.
    Mr. Andrews. Thank you, Michael.
    Mr. Ellsworth is recognized.
    Mr. Ellsworth. Thank you, Mr. Chairman. I would like to, I 
guess, piggyback on both the former Members' comments. Going 
back to the water for a second, I guess there is an----
    Mr. Andrews. We are not former Members.
    Mr. Conaway. We are former Members?
    Mr. Ellsworth. Really. Sorry about that.
    Mr. Conaway. I woke up and thought I was still a Member of 
Congress.
    Mr. Ellsworth. Not at all.
    Mr. Conaway. Wow, things change quickly.
    Mr. Ellsworth. The Members that formerly spoke.
    Mr. Andrews. There you go.
    Mr. Conaway. Formerly questioned.
    Mr. Ellsworth. You know, I have totally forgotten what I 
was going to say.
    Mr. Andrews. Sorry, Brad.
    Mr. Ellsworth. Let me go back to the water for just a 
second in that assumption that what the chairman said that, you 
know, when you make this contract you don't think you are going 
to be there forever, this long, but there is an assumption that 
this contractor is a water expert I guess and they would 
therefore do the calculation that this soldier carrying this 
much equipment would need this many liters of water over the 
course of a day in this weather, and that is their job to 
figure that out.
    We are going to give them the contract, but there needs to 
be that communication, you know, between them. Somebody needs 
to be checking and saying--I am sitting here thinking things. 
It was, ``How many big screen TVs do we need or, you know, on 
certain meals or certain comforts, but weapons, ammunition, 
things like water, food and ammunition would be absolutely 
critical that we got it right.
    And there is not a lot of leeway on water of, you know, 
when these guys are in the field or in an outpost that can't 
just call back and say, ``I need five more skids,'' and it gets 
there like that.
    So I guess that is why that example is so critical for the 
basics for life. On not-former-Member Conaway's comment, talk 
about what both like LOGCAP and Air Force Contract Augmentation 
Program (AFCAP), General and Mr. Parsons about the drawdown, 
and if you can, the involvement there. What is happening? How 
involved and what is the involvement of both AFCAP and LOGCAP 
in the drawdown, if you can explain that to us, how your 
organizations are involved?
    General Masiello. From what I am hearing from the AFCAP 
team as LOGCAP draws down AFCAP is standing ready to receive 
perhaps some of the effort that LOGCAP once does. And in fact, 
it creates a competitive environment now between a LOGCAP-type 
environment or AFCAP-type of provider.
    Part of our condition on taking that in is having a point 
of contact responsible for defining that requirement in a 
disciplined way, and that is how the AFCAP tasks are assigned 
in the beginning. They come assigned with a quality assurance 
evaluator in the beginning. So that becomes a point of contact, 
not only in the final requirement but also in the post-award 
evaluation process.
    So AFCAP is posturing to support Iraq effort as is 
required. Clearly, we are not at all the dominant player in 
that theater, but are standing ready to support as required.
    Mr. Parsons. Yes, in terms of the LOGCAP, our executive 
program director for the program has been over to Iraq quite 
frequently over the last six to eight months and working with 
them in the planning on the drawdown.
    What they are looking at is trying to establish where are 
the more enduring bases going to be located after the drawdown? 
Which camps are being transitioned over to the Iraqis and the 
timing of that, and so all that is being worked as we speak.
    In fact, it is one of the things that has kind of delayed 
us getting the solicitation out is because the theater hasn't 
been real definitive, well, I shouldn't say real definitive. It 
is that things have been changing as far as, you know, where we 
are pulling troops out, where we are going to still have troops 
stationed for the more enduring operations.
    And so all that planning has been taking place. It is being 
communicated and then it is folded into the statement of work 
that we will be issuing with the request for proposal (RFP). In 
that the LOGCAP contract probably will be used to provide some 
of the retrograde as the forces draw out of Iraq, we anticipate 
that we will probably issue some additional task orders for 
transportation type of things to withdraw some of the equipment 
out.
    Mr. Ellsworth. And I have to assume that is all part of it 
is what we leave and what stays, what we transfer, what we just 
abandon. What costs more to bring back than it does to leave 
there because I can just, you know, you look in the crystal 
ball about the ``60 Minutes'' program down the road that says 
the story about what was left of American equipment that we 
paid for that maybe we shouldn't have or maybe, you know, we 
should have brought home or destroyed or whatever it might be.
    Mr. Parsons. Cheaper to----
    Mr. Ellsworth. I will yield back for now, too. Go ahead.
    Mr. Parsons. If I could just add, Army Materiel Command in 
a separate LOGCAP itself has got a large planning process going 
on in taking a look at retrograde and trying to ensure that we 
don't repeat a lot of the lessons that we had from the Gulf War 
and making sure that we do more of what they call responsible, 
you know, reset responsible retrograde and making sure that we 
are bringing the right things out.
    Mr. Andrews. If I may, I think Chairman Snyder has already 
done some work with his subcommittee on coming up with a method 
to do an evaluation of the cost effectiveness of bringing stuff 
home with all the transportation costs versus selling what you 
can sell versus simple abandonment.
    Mr. Parsons. Right.
    Mr. Andrews. And I know that he has done some work on that 
as long as maybe 18 months ago, so they have done some office--
we have done some good work in the committee on that already. 
It is a very big problem.
    Mr. Parsons. Yes.
    Mr. Andrews. Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman. I am wondering, 
obviously, one of the big concerns here is the professionalism 
of our contracting personnel, and having been retired military 
myself I am always interested in taking snapshots of where we 
are.
    And I look back at being an infantry officer and a platoon 
commander in 1980 in the Marine Corps and the quality of the 
force at that time, going back to the first Gulf War, the 
quality of the force then, and then going back to Iraq in 2005 
and the quality of the force then. It evolved dramatically 
upwards during those three snapshots in terms of the quality of 
particularly the young enlisted personnel.
    In looking at the--our contracting folks, are most of them, 
I guess my first question would be are most of them, I mean, is 
that a career path in and of itself? Or do people do that or 
are they logistics people that, you know, go out to the fleet, 
you know, on one tour of duty and then come back in a 
subsequent tour and do contracting?
    Or are we evolving more into just specific contracting 
personnel and give me a snapshot maybe 10 years ago what it 
looked like and today and what it looks like, and tell me which 
direction we are moving in? Either one--anybody.
    General Masiello. Sir, I will go ahead and start from an 
Air Force perspective. It is a little out of my line job jar-
wise but as a contracting professional I can speak from that 
particular side of my background.
    In the Air Force, our enlisted troops and our officers have 
a career path dedicated to contracting specifically. So from 
the very beginning, swearing in as a basic trainee, they will 
be a contracting professional. Now, on occasion, we will cross 
flow other careerists into the contracting career field and 
then we will put them through our traditional training.
    But in the Air Force it is contracting both, or contracting 
skill sets for both enlisted and officers. It is probably one 
of the things that has contributed to our ability to support 
the theater, where the Air Force has represented 70 to 80 
percent of the deployed contracting support capability for the 
entire department.
    Mr. Parsons. And I will just add, I mean, obviously this 
was one of the topics of the Gansler Commission review that 
took place back in the fall of 2007, and there was a 
considerable discussion in that report of the Air Force model 
for growing contracting professionals in the military and in 
the Army.
    And the recommendation is, because what happens in the Army 
is we do not cross folks over into contracting until they are 
what they call branch qualified, which could take up to eight 
years. So it is not unusual that the people that were getting 
into contracting on the Army side had done seven, eight years 
as an infantry officer, an Army officer, maybe even a, you 
know, quartermaster before we bring them over.
    Based on the Gansler Commission recommendation we are 
looking to move that back because the Gansler Commission 
believes that there is some value to having contracting people 
who have operational experience.
    And I can tell you being a product to the Air Force model I 
didn't have any operational time when I was a contracting 
person, and if there is one area where I wish I probably had 
had some, and so, as General Masiello says, I think the Air 
Force is trying to cross some people over to give them some 
exposure to that. I think you need to have some operational 
flavor to do this.
    But clearly we have to start the contracting individuals 
earlier in the career field to get the type of expertise that 
we need, and in fact, up until two years ago, we didn't even 
have an non-commissioned officer (NCO) designation for 
contracting like the Air Force.
    And the Air Force, you know, their contingency crew, the 
backbone is really on NCOs and so the Army is just now 
developing, and we have about 125, 130 NCOs that we have just 
brought in to start doing contracting training.
    Mr. Punderson. I can't speak for the whole Navy. I can only 
speak for NAVSEA. Only military contracting officers have our 
officer rank. I can get you an exact number, but I think there 
are 12 at headquarters. And I suspect there are another 10 to 
15 scattered around the field as part of a workforce of 
approximately 800 people. Everyone else is civilian. But we are 
an acquisition unit. We are not in operational management.
    Mr. Coffman. Right.
    Mr. Punderson. We do the supply corps officers which are 
the military officers that do contracting, go over in theater 
on individual augmentation basis, on a 9-month or 12-month 
tour, but there is no--from NAVSEA, very limited military 
involvement in contracting.
    Mr. Coffman. Well, certainly I think from the standpoint of 
the Army seems to be evolving. The Air Force seems to be there. 
Where we are developing a specialty or in fact you are already 
there----
    Mr. Punderson. Yes.
    Mr. Coffman [continuing]. Of an expertise in contracting. 
And that is interesting about having or not having the 
operational experience and how that plays into it. I know the 
Marine Corps loves operational, everybody to have the common 
set of experiences.
    Now, General, you mentioned point of contact issues in 
terms of responsibility. Is that one of the problems that we 
have, that there are so many people with their fingerprints on 
this that no one person seems to be responsible and that is 
maybe how we get contracts that are out of line?
    I mean, do we have problems with service contracts crossing 
boundaries where, you know, tours of duty or command changes 
where, you know, it is kind of like who is responsible?
    General Masiello. That is part of it. I think it is also a 
cultural thing that often when a contractor steps into the role 
to do the job there can be a mindset of just kind of shutting 
down the brain to know that is a contractor's responsibility, 
but that is a problem because it is the government's 
responsibility to make sure the contractor does what it is they 
need to do.
    And in fact it is the government's responsibility to define 
the requirement, and what is often challenging as we have 
relied on contractors and I find as we go in our press to war 
environment or even as we plan for follow-on acquisitions, it 
is certainly the dollar level that I am dealing with sometimes, 
is we have relied on contractors to do that work for so long in 
some cases we are not even sure what they are still doing for 
us.
    So we have to really spend a lot of time re-baselining what 
our contractors are doing for us and that is, in my opinion, 
best handled by the people whose mission the contractor is 
being performed.
    They are the people who understand what the contractor 
should be doing, how and why, and as the contract is really the 
tool for documenting that requirement, somebody has to help us 
best define that requirement, and it is usually the person who 
owns the requirement.
    And to be fair, often they don't know how to do that, but 
what we have done is we have been working with the University 
of Tennessee and Defense Acquisition University (DAU) to help 
develop some training programs to prepare those folks that we 
need to help us define these requirements well to do that role.
    And it is one of those things where you are really 
frustrated when you are asked to do something and you don't 
know how to do it, how frustrating that is, so you strike back. 
So instead of just asking somebody to do them and not give them 
the tools, we are really working to try to give them the tools 
to help best succeed in getting this right.
    Mr. Andrews. Yes. If you could answer quickly, the 
gentleman's time expired, but if there are anyone else to 
answer Mr. Coffman's question? Okay, we will move on.
    I wanted to, General Masiello, ask you about the Defense 
Intelligence Agency (DIA) experience with Intelligence 
Information, Command and Control Equipment and Enhancement 
(ICE2) contract that you mentioned in your testimony, and it 
appears that this successful collaboration resulted in a 25 
percent reduction in fixed labor rates producing a $145 million 
increase in buying power in the final 2 years of the contract. 
Could you elaborate for us how that worked and how that 
calculation was derived?
    General Masiello. We worked with the Defense Contract Audit 
Agency and the contractor to get an understanding of what cost 
elements were involved as we extended the contract two 
additional years. When you extend your contract value or where 
you can extend your contract, you need to have cost insight in 
the sole source environment.
    Previously the rates were set in a competitive 
environment----
    Mr. Andrews. Right.
    General Masiello. And for the follow-on we wanted some 
insight. We worked with the auditors. We worked with the 
contractor and came to the agreement of a 25 percent reduction.
    Mr. Andrews. And what was the size of this contract? What 
is the $145 million measured against?
    General Masiello. It is about 25 percent. It was about $600 
million, $600 million to $700 million.
    Mr. Andrews. So----
    General Masiello. It was very healthy.
    Mr. Andrews [continuing]. In other words, the status quo 
would have us spending about $600 million, but we got the same 
value for $455 million or something like that?
    General Masiello. Exactly sir. We kind of looked at it the 
other way. We had a $600 million ceiling so we are really 
buying in that $145 million worth of work.
    Mr. Andrews. And it, in layperson's terms, to what would 
you attribute that success? Why were we able to achieve that 
level of success?
    General Masiello. Working with a contractor and they are 
realizing that they had a mission to help us perform and they 
worked with us to get the data ready.
    Mr. Andrews. I am sorry. What exactly was the contractor 
doing?
    General Masiello. This was information technology (IT) 
solutions for the intelligence communications.
    Mr. Andrews. So the DIA needed some IT solutions. We had a 
contractor that was providing them.
    General Masiello. And had been for a number of years.
    Mr. Andrews. And you were called in to manage that process 
when it went to the sole source world.
    General Masiello. The Air Force had that contract for a 
number of years and it, in the global war on terrorism boom, we 
had maxed out the ceiling available on that contract and we 
needed to buy a couple more years----
    Mr. Andrews. Right.
    General Masiello [continuing]. In anticipation of DIA 
taking it on.
    Mr. Andrews. Mr. Punderson, I wanted to ask about the 
success of the Seaport-E program and it sounds like you have 
done a great job at enhancing competition and diversity with 
small businesses and, I mean, intuitively I think that that 
does drive better value and lower cost.
    But are there metrics by which we could measure that and 
then should we fill in the blanks that because you have had 
this success in creating more competition we saved x dollars, 
or is there an equivalent to what General Masiello just said we 
could say about Seaport-E?
    Mr. Punderson. I don't have hard data. We have anecdotal 
from program managers. We had come off--our biggest savings was 
competing things that had not necessarily been competed before 
in our first days.
    Some of the time and materiel contracts with General 
Services Administration (GSA), the program manager told us that 
he got the same team at a 45 percent reduction from the same 
people at the same company.
    Mr. Andrews. And what did that team do?
    Mr. Punderson. This was the team providing program 
management support for them----
    Mr. Andrews. Okay.
    Mr. Punderson [continuing]. Helping them to manage their 
program.
    Mr. Andrews. So at least in that anecdote the testimony was 
a 45 percent savings through the competition?
    Mr. Punderson. Right. Now, that was coming off a very 
inefficient vehicle.
    Mr. Andrews. Right.
    Mr. Punderson. And I would say that savings phase----
    Mr. Andrews. Right. So it was a horrible baseline that we 
are working from.
    Mr. Punderson. Yes.
    Mr. Andrews. Yes.
    Mr. Punderson. It is a wonderful success story other than 
you shouldn't have to do it in the first place.
    Mr. Andrews. I understand.
    Mr. Punderson. And now we are coming around again, and we 
are saying, okay, that was kind of like low-hanging fruit.
    Mr. Andrews. Right.
    Mr. Punderson. So now we are working on getting better 
requirements definitions so in our next phase of competitions 
is----
    Mr. Andrews. Yes. We want to be careful and understand that 
diminishing savings may be a function of better requirements 
than actual savings. We get that that we don't want to punish 
people for doing a good job on requirements.
    Is there a plan in place to derive the data I just asked 
about, that we can move beyond the anecdotal?
    Mr. Punderson. We had a very hard time setting a baseline 
and what we were coming from because as I told you, we had 350 
contract people just at NAVSEA headquarters.
    Mr. Andrews. Yes.
    Mr. Punderson. And to say you had the same requirement five 
years later was very hard, especially in that program 
management support area. So we have not found an effective way 
of telling you absolutely it cost $100 here. It is $97 here.
    Mr. Andrews. I know witnesses hate to do this, but without 
prejudice, as we say, meaning that neither you nor NAVSEA will 
be held to this, if you had to make an educated guess as to 
what that $100 was reduced to, what would that be?
    Mr. Punderson. We actually----
    Mr. Andrews. Again, we will not hold you to this in----
    Mr. Punderson. We had a study done, at the time we were 
starting, and they anticipated that it would average 7 to 10 
percent.
    Mr. Andrews. Well, that is very good.
    Mr. Conaway.
    Mr. Conaway. Just one final thing. Mr. Parsons, you have 
got two years under your belt now, with LOGCAP IV but no GAO 
report yet. Clearly criticisms from III and II, do you expect 
that GAO will not find criticisms with III, when they do their 
review of LOGCAP IV?
    Mr. Parsons. That they won't have criticism especially with 
LOGCAP IV?
    Mr. Conaway. Well, that they won't find the same criticisms 
as the ones they found in III.
    Mr. Parsons. Actually, I think there were some follow-on 
GAO reports, even after the early ones in LOGCAP III, where 
they recognized a lot of the improvements we made by, you know, 
putting more program management structure in place, putting 
people forward.
    Yes, you know, we welcome any kind of further reviews. I 
mean, we have asked the Army audit agency to do follow-on 
reviews on how well the LOGCAP IV is being managed because 
there is always room for improvement.
    But I can personally tell you, having been associated with 
the program for five years, we are not managing it today like 
we did five years ago when I came in.
    And part of the reason I was nodding my head with General 
Masiello is I did have some involvement with the development of 
her office and I brought it to the Army and said, ``Well, we 
manage these service contracts, especially something like 
LOGCAP, where we are in the billions of dollars. You need some 
kind of program management structure in here to do this 
properly.''
    And I was one of the ones that originally pushed to get a 
Senior Executive Service member to lead the program. And you 
see, on the hardware programs, you have got general officers 
and SES running those hardware programs, and here we have a $5 
billion a year service contract that warrants to have a general 
officer or SES running that as well.
    Mr. Conaway. Okay. Thank you, Mr. Parsons.
    Mr. Andrews. Mr. Ellsworth, any follow-up?
    Mr. Ellsworth. I know not to reference comments from other 
Members.
    Mr. Andrews. Other present Members?
    Mr. Ellsworth. From my higher ranking Members that I admire 
so much.
    Mr. Conaway. Keep it up.
    Mr. Andrews. You are doing very well.
    Mr. Ellsworth. Mr. Punderson, you have talked in your 
testimony, in the written comments, about small business and 
some of the improvements and the things we have done to 
increase that. I have a lot of friends I hear from that would 
love to break into, you know, kind of provide very good service 
on this thing, and would love to get into some of the business.
    Can you talk about some of the efforts you have made and 
how they might break into that ever-expanding web of government 
contracting? I hear it every weekend when I go home, ``How do I 
get into that system?''
    Or they will go on the Web site, look at the system, and 
then say, ``No, that is not for me, way too complicated,'' 
which appears to them to be a monopoly and wouldn't be 
competition of other small businesses. How have you had those 
successes?
    Mr. Punderson. What we do is, when we put the contracts in 
place, first SeaPort-E contracts in 2004, we had 141 contracts. 
Every year we have done what we call rolling admissions. The 
contract allows us to add more contractors.
    So every year except this year, so far, we have put a 
solicitation out to allow people the opportunity to propose 
against the solicitation put out of our office, it is all in 
Virginia, it is on FedBizOpps, the information about it is on 
seaport.navy.mil and we would announce there in advance.
    We put questions and answers that have ever been asked 
about the program. Last year we did two, because the Small 
Business Administration asked us to do a special one just for 
8(a) contractors. We added that and we did that and added, I 
believe 199 8(a).
    So as long as--and Dahlgren never hear this, we plan on 
later this year putting another solicitation out----
    Mr. Ellsworth. We will keep it quiet for you.
    Mr. Punderson. Thanks. So if people look at 
seaport.navy.mil all the information on how you get in and when 
that occurs is all published.
    Mr. Ellsworth. And just in my final comment, Mr. Chairman, 
I was looking at your resumes, all three of you before this, 
and, you know, we were talking a few minutes ago about trying 
to shirk responsibility and, you know, people that don't want 
to take the blame.
    And I look at this and all three of you are people that 
have invited responsibility your whole lives and your whole 
careers, and the kind of people that get stars on their 
shoulders and have these kind of careers are the ones that say, 
``I will take that on,'' knowing that someday I might get 
invited to a hearing like this and get, you know, the what beat 
out of you.
    Or a GAO report comes down, your response, and I appreciate 
that because you have probably said, you and many like you are 
willing to take it on, knowing what is going to be criticism, 
let us improve more forward from here, so thank you all very 
much. I yield back, Mr. Chairman.
    Mr. Andrews. Thank you.
    Mr. Coffman, any follow-up?
    Mr. Coffman. No, Mr. Chairman.
    Mr. Andrews. Well, thank you. I want to thank my colleagues 
and the witnesses for doing an excellent job, as we expect.
    I want to echo something Mr. Ellsworth just said. There was 
a news report yesterday that a prominent investment bank that 
we used to own a piece of, until they paid it back, had record 
profits, and the average salary, if you divide their profits by 
the number of people they have, is over $700,000 a year.
    And I do want to reflect the fact that we appreciate the 
sacrifice the three of you are making to manage huge amounts of 
money, and more importantly, manage programs that are life and 
death in many cases, for the people who wear the uniform of 
this country, and we appreciate the sacrifice that you make and 
how hard you have worked throughout your career.
    The other thing that occurs to me, and this is not a 
criticism of you, it is more of an observation of us, in this 
$200 billion a year enterprise, where we are spending a huge 
amount of money, in a huge number of contract vehicles, to buy 
everything from, you know, food supplies to software and 
everything in between, we don't do a very good job of gathering 
and analyzing data.
    And again, you are all busy actually doing the contracting, 
I am not criticizing you, but we really don't have our arms 
around trends and data the way that we should, and I think that 
is one of the things that the Congress is going to have to 
focus on to make sure that we have a better picture.
    It strikes me that General Masiello's testimony is a 
success story because you got a grip on data. In that DIA 
contract that you made reference to. It sounds to me like the 
first thing you did was get a sense of what had gone on in the 
past, particularly the labor rates, drilled down on that and 
achieved a very, very good result.
    I am sure there are other examples where the Army and the 
Navy have done the same thing, but I think we want to 
institutionalize that success, and that is the challenge that 
we have legislatively.
    Mr. Conaway, do you have any closing comments?
    Mr. Conaway. No, I just appreciate you being here this 
morning, and I agree with your comments about your dedication 
and service to this country over a long period of time, when 
perhaps more lucrative careers would have been available to 
you.
    So thank you for your service and we may have some other 
questions, on a go-forward basis. I think, collectively, we can 
say that we are really more about looking forward, making sure 
that we have not made the mistakes we have made in the past. We 
have got plenty of new mistakes to make. They are out there. 
But we are all in this together and the taxpayers deserve our 
really best----
    Mr. Andrews. I completely agree with that. This panel is 
not about grandstanding on problems that we can identify. It is 
about trying to analyze and fix them, as I think you are all 
about as well.
    So thank you very much for your time and we will be calling 
you again. Panel is adjourned. Thank you.
    [Whereupon, at 9:09 a.m., the panel was adjourned.]
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                            A P P E N D I X

                             July 16, 2009

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                             July 16, 2009

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             July 16, 2009

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             RESPONSE TO QUESTION SUBMITTED BY MR. ANDREWS

    Mr. Parsons. The current numbers of LOGCAP Program management 
personnel in the theater are:

    Iraq

    55 DCMA Military, 28 Military LOGCAP (LSU)
    54 DCMA Civilians, 27 LOGCAP Program Office Support Contractors

    Afghanistan

    28 DCMA Military, 30 Military LOGCAP (LSU)
    64 DCMA Civilians, 18 LOGCAP Program Office Support Contractors

    These are in addition to personnel from the three companies that 
have what we call ``execution'' contracts--the contracts that provide 
support to the military units deployed in the area such as dining 
halls, facility support, etc. [See page 13.]
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             July 16, 2009

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                   QUESTIONS SUBMITTED BY MR. ANDREWS

    Mr. Andrews. From the Air Force's point of view what have been the 
benefits and disadvantages of having a multi-award AFCAP contract as 
opposed to a single award contract. What studies or analysis has been 
completed to document the advantages and disadvantages?
    General Masiello. There have not been any formal studies 
documenting the advantages and disadvantages of multiple award versus 
single award contracts for AFCAP services. However, the primary benefit 
of the AFCAP III multiple-award contract is the ability to obtain 
competitive rates for labor, materials, and equipment at worldwide 
locations with ever changing market conditions. In addition, since past 
performance on AFCAP task orders is an evaluation factor for award of 
new task orders, the contractors are incentivized to successfully 
perform in order to effectively compete for future awards. The main 
disadvantage associated with the multiple award contract type is the 
quantity of work must be sufficient to sustain the participation of 
multiple vendors; however, this has not been a challenge under AFCAP 
III where almost all task orders are competitively awarded. An 
additional burden to multiple award contracts is the increased time to 
assess multiple proposals in a task order source selection. This is 
mitigated on the AFCAP III program by having a manageable number of 
contracts that promote competition while still permitting the source 
selection to be accomplished in a period of time responsive to the 
user's needs.
    Mr. Andrews. DCMA currently provides a significant amount of 
support to the AFCAP contracts in theater. The Committee understands 
that in the near future, DCMA will no longer provide contract 
administration services to either contract. Could you tell the 
committee how the Air Force plans to provide oversight of the contracts 
in deployed locations considering the shortfalls in the acknowledged 
shortfalls in the acquisition workforce?
    General Masiello. The Air Force is part of an OSD led joint working 
group examining the optimal execution and resourcing of Contingency 
Contracting Administration Services (CCAS). However, this will not 
impact DCMA's support of our CCAS needs in the AOR for the foreseeable 
future. Additionally, for countries other than Iraq or Afghanistan, the 
Air Force currently provides its own CCAS for AFCAP. In Iraq and 
Afghanistan, Joint Contracting Command Iraq/Afghanistan (JCC-I/A) has 
cognizance and utilizes DCMA to provide CCAS on the AFCAP III program. 
If at some point, a decision is made to alter the CCAS support DCMA 
provides in theater; the Air Force will work with stakeholders within 
the Department to ensure effective CCAS support to the warfighter.
    Mr. Andrews. The current AFCAP contract is for 1 year plus 9 option 
years? What are the advantages of having contracts of this length? Are 
there any disadvantages?
    General Masiello. There are several advantages of the AFCAP 
contract of 1 year plus 9 options years. Anecdotally, contractors have 
stated they are more likely to propose on a contract with a longer 
period of performance thereby potentially increasing our competitive 
base on this multiple award program. From a government resource stand 
point, longer periods of performance allow us to focus limited 
acquisition resources on the post-award administration and then surge 
to conduct source selections. An award every three to five years, would 
keep us in a near perpetual source selection surge on this program. To 
mitigate the potential risk of stale pricing associated with longer 
term contracts, each AFCAP III requirement is competed at the task 
order level and there are no set pricing conditions over the life of 
the contract that drive to specific labor or material pricing rates. 
Therefore, the Air Force receives competitively derived pricing on task 
orders regardless of option year. A known disadvantage of a ten year 
basic contract is the risk associated with contractor mergers and 
acquisitions and changes to company business models that could 
potentially reduce the number of active contractors on this program. 
AFCAP III mitigated this risk by having a large enough contractor base 
so that we maintain healthy and active task order competition at nearly 
the halfway point on this 10 year contract.
    Mr. Andrews. What are the lessons learned from the use of this type 
of contract?
    General Masiello. As previously mentioned, the AFCAP III program 
has learned several lessons from the first iteration of AFCAP. The 
AFCAP III program has learned the Air Force receives much more benefit 
when using definitized requirements, competition, and multiple contract 
types to craft the best acquisition strategy for the requirement.
    Mr. Andrews. LOGCAP guidance reflects the single contractor 
concept. What plans does the Army have to revise its LOGCAP guidance to 
reflect the new concept of operations?
    Mr. Parsons. The Army is currently revising doctrine to reflect 
lessons learned in Iraq and current LOGCAP constructs. Under the 
Logistics Civil Augmentation Program (LOGCAP) Strategy 2010 General 
Officer Steering Council, the Army G-4 (Logistics) is leading an effort 
to examine present LOGCAP implementation realities and challenges, 
revisit all past program assumptions, determine enduring and 
appropriate tenets of the LOGCAP program, and develop a strategy for 
future utilization and programmatics. The results will be incorporated 
into an updated Army Regulation 700-137 Logistics Civil Augmentation 
Program. After this group has a completed product, it will be staffed 
throughout the Army them published. The staffing process is expected to 
begin in early 2010. These efforts will result in doctrine and policy 
that align with the LOGCAP IV multiple contractor concept.
    Mr. Andrews. DCMA currently provides a significant amount of 
support to the AFCAP contracts in theater. The Committee understands 
that in the near future, DCMA will no longer provide contract 
administration services to either contract. Could you tell the 
committee how the Air Force plans to provide oversight of the contracts 
in deployed locations considering the shortfalls in the acknowledged 
shortfalls in the acquisition workforce?
    Mr. Parsons. The Army Contracting Command has submitted a concept 
plan for approval that contains 31 personnel to support that mission--
one military, ten contracting personnel and 20 quality assurance 
specialists for the LOGCAP program office, and 497 deployable 
contracting and quality assurance specialists for the ACC. In addition, 
the ACC has submitted a Force Design Update (FDU) request that includes 
158 active duty Sergeants and 74 Army National Guard and 24 Reserve 
Sergeants that could augment those positions. We are working with the 
Army to identify how to resource those positions and to determine when 
personnel will be provided.
    Mr. Andrews. In the past GAO has reported that those who used 
logistic type contracts contingencies for example, the commanders on 
the ground, often did not understand how the contract worked, or what 
their responsibilities were. What steps have the services taken to 
improve customer understanding of the contracts?
    Mr. Parsons. The Operational Contract Support doctrine and related 
training are in the process of being changed to reflect changes in the 
LOGCAP program and the greater reliance on contractors in the deployed 
wartime environment. The field manual entitled Army Tactics, 
Techniques, and Procedures (ATTP)/FM 4-10 Commander's Guide to 
Operational Contract Support: will be renamed The Army Guide to 
Operational Contract Support. It will be refocused on operational level 
planning and tactical level requiring activity procedures. A draft for 
comment is expected to be circulated in late 2009. It will incorporate 
the tenets of Army Regulation 715-9 Operational Contract Support 
Planning and Management, which reflects current LOGCAP constructs.
    In addition to these doctrine changes, the Army has developed an 
Operational Contracting Support Course. The target population for the 
class is selected logistics and other non-acquisition officers/senior 
NCOs from FORSCOM and other operating force units. The second class of 
that course was held 13-24 July 2009. 17 students attended and 
graduated. The third session will begin in mid September.
    Mr. Andrews. Under the LOGCAP IV contract, each contractor proposes 
a fee as part of the proposal submitted for each task order. Under the 
LOGCAP III contract the fee was established at the time the contract 
was awarded. First, why was this change implemented and second, have 
the fees agreed upon been higher or lower then the fee agreed to under 
the LOGCAP III contract?
    Mr. Parsons. The change was implemented as part of the overall 
strategy to award to multiple contractors rather than just one single 
award. By allowing the contractor to propose fee as part of the task 
order award process, the Army conforms to the Federal Acquisition 
Regulation's requirement to align profit rate with the relative risk 
the contractor will experience for a given effort. The profit analysis 
factors in FAR 15.404-4(d) sets forth the elements to be considered in 
evaluation of profit, including at paragraph (ii)(A) the risk 
associated with the complexity and duration of the contract task. Given 
the diversity of the tasks expected to be awarded under the LOGCAP IV 
contracts, it made sense to allow the fee/profit rate to vary with the 
instant task. This has the additional benefit of allowing rates to be 
reduced in the future should the execution environment become less 
risky. Had the Army kept the rate constant, the rates would have been 
set within the context of an on-going conflict with high performance 
risk. This would have resulted in higher fees for the life of the 
contracts.
    Actual fees paid bear this out. The fee for LOGCAP III was set just 
after 9/11 before the amount of work to be performed in Afghanistan and 
then Iraq was known. The previous contracts reflected much shorter 
tasks in less risky environments. This is likely the reason that KBR 
proposed a 3% fee. The other offerors proposed a 6% fee. Fees to date 
under LOGCAP IV are higher--in the 4.5 to 10% range combining the base 
and potential award fees.
    Paying potentially higher award fees does not necessarily mean 
higher overall costs to Government. LOGCAP IV Task Order Competitions 
should drive lower estimated cost baselines upon which fees are based. 
Competition forces should drive lower actual cost. Government only pays 
actual cost plus fees based upon the estimated cost baseline.
    We note that the FAR cautions contracting officers to pay fair and 
reasonable profits and fees to contractors to encourage them to remain 
in the industrial base. FAR 15.404-4(a)(2) states ``It is in the 
Government's interest to offer contractors opportunities for financial 
rewards sufficient to stimulate efficient contract performance, attract 
the best capabilities of qualified large and small business concerns to 
Government contracts, and maintain a viable industrial base.'' In 
addition, FAR 15.404-4(a)(3) states that profit should motivate 
efficient performance and extremely low profit rates do not motivate 
such performance. ``Both the Government and contractors should be 
concerned with profit as a motivator of efficient and effective 
contract performance. Negotiations aimed merely at reducing prices by 
reducing profit, without proper recognition of the function of profit 
are not in the Government's interest. Negotiations of extremely low 
profits, use of historical averages, or automatic application of pre-
determined percentages to total estimated costs do not provide proper 
motivation for optimum contractor performance.
    Mr. Andrews. What, if any problems has the Army encountered as it 
transitioned from using LOGCAP III to LOGCAP IV in Kuwait and 
Afghanistan? What actions in the department taking to avoid similar 
problems as it transitions in to LOGCAP IV in Iraq?
    Mr. Parsons. The Acquisition Strategy from the beginning was to 
begin transition in Kuwait, capture the lessons learned and then move 
to Afghanistan, capturing the lessons learned from this transition and 
then move to Iraq. As far as problems encountered during the 
transition--none affected mission or became showstoppers.
    Obviously, the military environment changed as the President 
directed that we expand in Afghanistan. We, in the acquisition 
community, adjusted accordingly and while we did capture the lessons 
from Kuwait and successfully completed the transition we are also 
capturing the lessons from the expansion and will capture the lessons 
as we transition the legacy task orders in Afghanistan.
    There were 16 specific lessons learned from Kuwait were:

     1.  Communication
     2.  Protocols
     3.  Property Inventories
     4.  Material Inventories
     5.  Property and Materials Location
     6.  Transfer of ITAR
     7.  Certificates for Trade Employees
     8.  Hiring of Incumbent Employees
     9.  Badging
    10.  Vehicle Transfer & Registration
    11.  DODAAC
    12.  IT COMMS
    13.  CAC Process
    14.  Flight Physicals
    15.  Proprietary Determination
    16.  Site Transfer Process

    There were also lessons learned by DCMA for property transfer and 
for their QARs.
    We are just beginning the transition for Afghanistan and have yet 
to experience the difficulties we expect in transportation and movement 
of men, material, and equipment since Afghanistan lacks the 
infrastructure of Kuwait and Iraq.
    Mr. Andrews. What is the role of LOGCAP in the draw down of forces 
in Iraq? How is the LOGCAP office involved in the planning for the draw 
down? Does the LOGCAP office has enough assets in Iraq to manage the 
draw down as well as the anticipated transition from LOGCAP III to 
LOGCAP IV?
    Mr. Parsons. LOGCAP is faced with closing 10 Forward Operating 
Bases (FOBs) between now and August 2010. Since this number could 
change based on conditions on the ground LOGCAP has dedicated personnel 
assigned to the MNC/MNF-I planning cell. Under the current contract, 
known as LOGCAP III, the contractor is tasked to close the FOB upon 
direction. LOGCAP has been asked to provide personnel to man the Base 
Closure Assessment Team (BCAT) which is established to provide advice 
to those Commanders on FOBs where LOGCAP is not responsible for closing 
the base.
    Past this tasking LOGCAP has not been tasked to provide any 
additional support.
    Mr. Andrews. The current LOGCAP contract is for 1 year plus 9 
option years? What are the advantages of having contracts of this 
length? Are there any disadvantages?
    Mr. Parsons. The benefit of a 10 year contract length for the 
execution contracts is to establish three qualified contractors in a 
long term relationship with the Government, where they operate in a 
competitive environment for task orders. It provides stability for 
contractors in establishing vendor relationships and continuity for 
Government operations in not having to conduct a major source selection 
after five years when we have three quality contractors who compete for 
work. As long as the execution contractors are performing well and 
there is competition for task orders, there is no reason to cut short a 
ten year performance period. Competing the effort more frequently 
consumes significant resources related to a major source selection as 
well as the potential mission disruption while undergoing a transition 
from one contractor to another, while realizing no appreciable benefit, 
given that the Government continues to realize the benefits of 
competition through the task order process.
    As the Government also retains the ability to shorten the period of 
performance by not exercising options or using the termination for 
convenience clauses in the contract, there is no associated 
disadvantage in this approach. Note that the LOGCAP III contract is 
ending before its anticipated 10 year period of performance is 
complete.
    Mr. Andrews. What are the lessons learned from the use of this type 
of contract?
    Mr. Parsons. The Army has learned that profit and fee rates can 
motivate efficient performance if used correctly. These lessons were 
applied in developing the LOGCAP IV acquisition strategy
    The fee rates were discussed at length as the acquisition strategy 
was developed for the LOGCAP IV contract. CPAF Fees: For CPAF task 
orders on the LOGCAP IV execution contracts, there will be no minimum 
fee percents for the base or award fee portions. The maximum combined 
base plus award fee is 10%, with a maximum base fee of 3% a contractor 
can propose. A cap was set on total CPAF fee because there will be 
instances where competition is not possible and there are no locked in 
fee percents. The cap prevents possible excessive fee in those non-
competitive situations. All other things being equal, a lower base fee 
percent is more advantageous to the Government since the contractor's 
performance has to earn a higher percent of the award fee.
    In deciding on this approach, the Army considered several sources 
of input. At the July 26, 2005 Industry Day, the Army initially 
proposed possibly setting a minimum and maximum level for both base fee 
and award fee percents. Industry was receptive to this approach, as 
they perceived the very low fees the incumbent proposed on the LOGCAP 
III solicitation had an impact on the award decision. They also did not 
believe it beneficial to a company's long term financial health to be 
locked into very low fees on a long term contract. Subsequently the 
Army reconsidered the impact of competition on task orders and decided 
that fees proposed on the sample scenario should apply to real world 
task orders. With individual task orders being competed, the execution 
contractors will be more competitive if they are not locked into 
established fee percents over the life of the contract. This will 
permit them to vary their proposed fees based on the immediate 
requirement and decide how aggressive they choose to be in the fee area 
on certain individual task orders.
    Experience on the LOGCAP III contract showed that very low fees, 
locked in for a long term contract where there is only one contractor, 
are not as effective in getting good cost proposals. This led the Army 
to initially consider setting minimum base and award fee percents. 
However, it was ultimately determined that having multiple contractors, 
who will submit a proposal on each competitive task order, will provide 
enough incentive and minimum fee percents were not needed.

                                  
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