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



 
                         [H.A.S.C. No. 111-95]

 DOD SUPPLY CHAIN MANAGEMENT: CAN THE DEPARTMENT IDENTIFY AND MEET ITS 
                       SUPPLY NEEDS EFFICIENTLY?

                               __________

                                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

                           SEPTEMBER 24, 2009

                                     
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT

                                     



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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, September 24, 2009, DOD Supply Chain Management: Can 
  the Department Identify and Meet Its Supply Needs Efficiently?.     1

Appendix:

Thursday, September 24, 2009.....................................    21
                              ----------                              

                      THURSDAY, SEPTEMBER 24, 2009
 DOD SUPPLY CHAIN MANAGEMENT: CAN THE DEPARTMENT IDENTIFY AND MEET ITS 
                       SUPPLY NEEDS EFFICIENTLY?
              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....................     2

                               WITNESSES

Heimbaugh, Nancy, Senior Procurement Executive and Director of 
  Acquisition Management, Defense Logistics Agency...............     8
McCoy, Maj. Gen. Gary T., USAF, Commander, Air Force Global 
  Logistics Support Center.......................................     6
Solis, William M., Director, Defense Capabilities and Management, 
  U.S. Government Accountability Office..........................     5

                                APPENDIX

Prepared Statements:

    Heimbaugh, Nancy.............................................    52
    McCoy, Maj. Gen. Gary T......................................    42
    Solis, William M.............................................    25

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Andrews..................................................    69
    Mr. Coffman..................................................    69

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
 DOD SUPPLY CHAIN MANAGEMENT: CAN THE DEPARTMENT IDENTIFY AND MEET ITS 
                       SUPPLY NEEDS EFFICIENTLY?

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                       Panel on Defense Acquisition Reform,
                      Washington, DC, Thursday, September 24, 2009.
    The panel met, pursuant to call, at 9:38 a.m., in room 
2175, 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. Please be seated, ladies and 
gentlemen. Welcome. We thank our witnesses, thank our 
colleagues on the panel and thank our guests for being with us 
this morning for today's hearing. Any large organization has a 
responsibility for acquiring goods and getting the amount of 
goods that they need to the place that they are needed in the 
time they are needed in the most efficient and productive way. 
There are a few organizations in the world, perhaps no other 
organization in the world with the responsibility as large as 
that as the United States Department of Defense (DOD). The best 
approximation I have read of the total amount to do that in any 
given year is about $42 billion a year. That is a lot of items. 
Whether it is food, ``Meals Ready to Eat'' (MRE), whether it is 
fuel cells, it is a lot of items that have to be moved, and I 
would say from the outset that we are grateful for the men and 
women in the federal service, both uniformed and non-uniformed 
who have taken on that responsibility. We thank them for it. We 
know it is a very difficult job.
    So I want to preface all of our questions and remarks this 
morning by acknowledging that the men and women in that field 
have taken on a very hefty responsibility that has huge 
consequences. The chairman of the full committee is fond of 
giving committee members reading assignments. And a few years 
ago, I was given the reading assignment of reading about 
Guadalcanal. There is a famous book about Guadalcanal that is 
very voluminous. And the lesson that I learned from reading the 
book--two lessons. One was that if the chairman gives you a 
book to read, read it. And the second was that in many ways, 
the battle of Guadalcanal was won obviously through the 
incredible heroism and performance of American warfighters, 
Marines and others.
    The second was logistics really won that battle, that the 
Americans were better prepared logistically than the Japanese 
enemy and were able to withstand huge assaults by many, many 
more warfighters, because they could outlast them, because they 
had the logistics to do it. Happily, there aren't as many of 
those dramatic circumstances very often. We don't want those 
kind of circumstances if we can avoid them. But every day there 
is the challenge of accounting for and moving around, taking 
proper care of $42 million worth of items. Now, we come to this 
morning's discussion frankly in a context of some challenges 
and difficulties that have been raised in that context. The 
Government Accountability Office (GAO) has looked at this issue 
over a number of years and identified some of those challenges.
    Some of the more difficult examples that have come up in 
the past I want to stress, in the past really jump out at you. 
Between 2004 and 2007, it was concluded that the Army had $3.6 
billion more of spare parts than it needed. In the same fiscal 
year as the conclusion was that the Navy had $7.5 billion more 
of various parts than needed, which was 40 percent of its 
inventory. At the other end of the spectrum, around the time of 
the Iraq buildup--fully understanding that this was a very 
stressful time for everyone involved in the Department of 
Defense--for example, the demand for lithium batteries was 18 
times greater than the supply that we had of lithium batteries. 
So for every 18 lithium batteries that we needed to accomplish 
a task in the field, we only had one. There are other sort of 
eye-catching facts that come out of some of the work the GAO 
has done. In March of 2002, the price of a refrigerator which 
would go on an aircraft was about $13,800. But in September of 
2004, not much later than that, the price jumped to $32,600 for 
the same product.
    This indicates that the challenges are substantial. The 
purpose of our hearing this morning is to hear about the 
progress that has been made in meeting those challenges. There 
have been efforts to reorder the way our relevant DOD agencies 
work to identify these challenges and work with them. We are 
interested in hearing this morning about the progress of that 
work. Suffice it to say that it is easy to Monday morning 
quarterback this, to say ``my goodness,'' you paid $32,000 for 
a refrigerator you paid $13,000 for a few months earlier.
    That is not our intention. We understand the monstrous 
scale of the job that our agencies have here in purchasing $42 
billion a year worth of items. But we do want to take a serious 
look at how we can improve the way we look at that, so we can 
get better value for those who serve our country and better 
value for those who pay the bills for our taxpayers. That is 
our approach this morning and we look forward to the witnesses. 
And at this time, I would ask the senior Republican on the 
panel, my friend, Mr. Conaway for his statement.

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

    Mr. Conaway. Thank you, Mr. Chairman. And witnesses, 
welcome. Thank you for setting aside time in your schedules to 
come visit with us this morning. Last week's panel looked at 
the DOD's role in tackling the challenges facing the industrial 
base in the global market. Today we are here to receive expert 
testimony about another major component in the acquisition 
process, which is the purchase of commodities, the suppliers of 
those commodities which are a significant part of the 
industrial base. There is no question that our Nation's ability 
to project and sustain military power depends on effective 
logistics.
    It was General Eisenhower who said you will not find it 
difficult to prove that battles, campaigns and even wars have 
been won or lost primarily because of logistics. The challenge, 
of course, is how does the government--how does the Department 
manage the supply chain more effectively and efficiently. 
Clearly the Defense Logistics Agency (DLA), which, by the way, 
supplies almost every consumable item America's military 
services need to operate, has learned a lot in the last eight 
years. DLA has made many improvements in the last eight years 
such as placing senior executives at each of the four major 
buying activities to serve as the head of the contracting 
activity which ensures the efficacy and the integrity of the 
acquisition process. When you get it right, a scant thank you 
is offered up. When you get it wrong, people get hurt and die 
and it is a wreck.
    So thank you for all the good things that you do do 
unnoticed. Because like I say when you get it right, they just 
keep going. When you get it wrong, then things get out of 
whack. I look forward to hearing our testimony from our 
witnesses today. And with that I yield back, Mr. Chairman.
    Mr. Andrews. Thank you very much. The staff has assembled 
an outstanding panel of witnesses this morning. We are very 
glad these three individuals are with us. I want to take a few 
minutes to read their respective biographies. I think all three 
of you are experienced Capitol Hill witnesses, so you know 
without objection your written testimony will be entered into 
the record of the hearing in its entirety. And we will ask you 
to provide a five-minute or so oral synopsis of your testimony. 
When each of you has done that, we will turn to the panel for 
questioning so that we can maximize the amount of time that we 
can interact with the witnesses. Mr. William Solis is on his 
second appearance before our panel, I believe. He serves as the 
Director of the Defense Capabilities and Management team at the 
GAO.
    Prior to this appointment, he worked in a variety of 
engagements that covered topics such as military readiness, 
training, weapon system effectiveness, housing and military 
doctrine. Much of his work involves close interaction with 
Congress and key national security experts. For example, he 
works with the congressional authorization as we know, 
appropriation oversight committees that have jurisdiction over 
DOD agencies.
    Throughout his over 30 years at the GAO, Mr. Solis has 
served in a wide variety of positions and has become the 
recipient of numerous honors and awards. Most recently he was 
selected to receive the 2008 GAO Award for Distinguished 
Service. And we so much appreciate your work. The work that you 
and your colleagues did on the Weapons Systems Acquisition 
Reform Act of 2009 (WASTE-TKO) bill that was signed by the 
President in May was invaluable. You continue to demonstrate 
each time you are here the professionalism and quality of the 
GAO's work. We thank you very much for it.
    Nancy M. Heimbaugh. Did I pronounce your name correctly, 
Ms. Heimbaugh? Okay. Currently serves as the Director of 
Acquisition Management, the Defense Logistics Agency at Fort 
Belvoir. In this capacity, she is responsible for the 
development, application and oversight of DLA acquisition 
policies, plans, programs, functional systems and operations. 
Her past assignments include Executive Director for Contracting 
and Acquisition Management at the Defense Supply Center in 
Philadelphia. Did you live in New Jersey or Philadelphia when 
you had that job?
    Ms. Heimbaugh. Philadelphia.
    Mr. Andrews. That is the wrong answer. But a lot of my 
constituents work there and it was a pleasure to have you 
there. The Director of Field Contracting Management, Director 
for Naval Supply Systems Command and frankly a long list. She 
then served as Chief of Contracting Operations in the 
Acquisition Directorate at DLA where she was responsible for 
overseeing procurement operations at all DLA field contracting 
activities in support of the DLA Senior Procurement Executive 
Component Acquisition Executive.
    She has a Bachelor's of Science, magna cum laude from 
Strayer University, a Master's in National Resource Strategy 
from the National Defense University, a Certificate of 
Completion from the Defense Acquisition University Senior 
Acquisition Course. In 1996, Ms. Heimbaugh received Vice 
President Gore's National Performance Review's Heroes of 
Reinvention Hammer Award for electronic commerce. 
Congratulations on that and welcome to the committee, Ms. 
Heimbaugh.
    Major General Gary T. McCoy is the commander of the Air 
Force Global Logistics Support Center (AFGLSC), located at 
Scott Air Base in Illinois, an Air Force Materiel Command 
Sustainment Center. The AFGLSC executes the Air Force supply 
chain by integrating enterprise-wide planning and strategy with 
global command and control serving as the single focal point 
for the warfighter. The command manages an $8.5 billion budget. 
It has over 4,200 personnel.
    General McCoy is a South Carolina native, was commissioned 
through Officer Training School in July 1976. He has his 
Bachelor of Arts degree from Culver-Stockton College in 
Missouri, as the chairman instructed us to pronounce it that 
way. His military career has been very distinguished. Prior to 
his current assignment, General McCoy was the Director of 
Logistics Readiness Office of the Deputy Chief of Staff for 
Logistics Installations and Mission Support Headquarters, U.S. 
Air Force, Washington, DC.
    Thank you, General, for your service and welcome to the 
panel.
    Mr. Solis, we are going to start with you this morning. As 
I say, we would ask you to summarize orally in about five 
minutes. We will not rigidly hold to that rule. We had a chance 
to review the written testimony of each of you. It is very well 
prepared and you are on.

 STATEMENT OF WILLIAM M. SOLIS, DIRECTOR, DEFENSE CAPABILITIES 
     AND MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Solis. Thank you. And good morning again. Chairman 
Andrews, Ranking Member Conaway and members of the panel, I am 
pleased to be here today to discuss DOD supply chain management 
and more specifically the challenges DLA faces in ensuring it 
provides good value and adequate oversight for goods and 
services bought from contractors with taxpayer dollars. 
Effective and efficient supply chain management is important 
because the availability of spare parts, commodities and other 
critical supply items affects the readiness and operational 
capabilities of U.S. military forces.
    Moreover, the investment of resources in the supply chain 
is substantial, amounting to approximately $178 billion in 
Fiscal Year 2007 according to DOD. As a result of weaknesses in 
DOD's management of supply inventories and responsiveness to 
warfighter requirements, supply chain management has been on 
our list of high risk government programs and operations since 
1990. To execute its support missions and supply troops with 
the goods and services they need, DOD relies to a great extent 
on contractors; however, the Department faces many long-
standing contracting challenges which are especially important 
to address as the Department's use of contractors has grown.
    As DOD's largest combat support agency, DLA provides over 
$42 billion in goods and services to our military serving 
domestically and around the world, including the ongoing 
campaigns in Iraq and Afghanistan in Fiscal Year 2008. This 
crucial logistical support to our military makes it vital that 
DLA along with the rest of DOD employ sound contracting 
practices in order to ensure that goods and services are 
attained in a cost efficient and effective manner.
    As we have continued to report, however, the Department 
struggles to implement sound contracting policies such as 
clearly defining requirements using appropriate contract type 
and exercising effective contract management. In absence of 
these, DOD exposes itself to unnecessary risk and may not be 
able to ensure that tax dollars are spent on goods and services 
that provide the best value. There are several contracting 
practices we continue to review as most vital in order to 
mitigate this risk. First, when making a contract decision, a 
prerequisite to good outcomes is a match between well-defined 
requirements and available resources. This requires accurate 
demand and supply forecasting and realistic timeframes among 
other things. Our previous reports and testimonies have 
highlighted several cases where poorly defined and changing 
requirements have contributed to increased costs as well as 
services that did not meet DOD's needs.
    For instance, because DLA could not produce an accurate 
demand forecast for ``Meals Ready to Eat'' in Iraq in early 
2003, some combat units came within a day of running out of 
MREs. Also the difficulty of military services had with 
forecasting demand for spare parts is among several reasons we 
have placed DOD supply chain management on our high-risk list.
    Second, when the correct contract type is selected, the 
government's risk is minimized. Due to the volume and value of 
contracting arrangements made by DLA, it is critical that the 
agency choose the most appropriate contract vehicle. DLA has 
taken steps to mitigate the risk of choosing the wrong contract 
type for the situation, such as reexamining programs to decide 
whether a prime vendor, for example, is the best acquisition 
strategy. Third, DOD has long had significant issues providing 
adequate management and assessment of contractor performance, 
making it difficult for DOD to identify and correct poor 
contractor performance in a timely manner. Proper contract 
management requires an adequate number of personnel who are 
suitably trained or in place to perform oversight. We have 
previously reported DLA officials had not conducted the 
required price reviews for prime vendor contracts for food and 
service equipment and construction equipment and commodities. 
DLA officials acknowledge that part of what led to the problem 
was poorly trained contracting personnel and the agency has 
since implemented additional training for its contracting 
officers and managers.
    Over the last several years, we have made numerous 
recommendations for DOD to improve contract management and the 
use of contractors to support deployed forces and Congress has 
enacted legislation requiring DOD to improve its management and 
oversight of contracts. To improve outcomes on a whole, DOD and 
its components, such as DLA, must ensure that these changes and 
other efforts are consistently put into practice and reflected 
in decisions made on individual acquisitions. This will take 
sustained commitment by senior DOD leadership to translate 
policy into practice and to hold decisionmakers accountable.
    Finally, the recent surge of forces in Afghanistan make it 
critical that contract oversight is adequately performed to 
minimize the risk of fraud, waste and abuse experienced in 
Iraq. To better ensure that DLA has minimized the risk for 
government in fulfilling its combat support mission in the most 
effective and efficient manner, DLA will need continued 
vigilance with regard to its contract administration and 
oversight. Mr. Chairman, this concludes my oral statement. I 
would be happy to take any questions.
    [The prepared statement of Mr. Solis can be found in the 
Appendix on page 25.]
    Mr. Andrews. Thank you very much. I want to apologize, 
General, for my breach of protocol in not recognizing you 
first. This hearing is so much later in the day than we usually 
start. We are usually a 7:30, 8:00 a.m. deal. I apologize for 
the breach of protocol. And, Ms. Heimbaugh, if it is okay with 
you, I am going to recognize the General next for his 
testimony.

  STATEMENT OF MAJ. GEN. GARY T. MCCOY, USAF, COMMANDER, AIR 
             FORCE GLOBAL LOGISTICS SUPPORT CENTER

    General McCoy. Chairman Andrews, Congressman Conaway and 
distinguished members of the Defense Acquisition Reform Panel, 
I thank you for this opportunity to address the mission of the 
Air Force Global Logistics Support Center which I will refer to 
as the AFGLSC and how it links with the Defense Logistics 
Agency. The AFGLSC has rapidly evolved since the standup in 
March of 2008 at Scott Air Force Base, Illinois, as a new 
center in Air Force Materiel Command. The AFGLSC was born out 
of a compelling need for change in the 2005 and 2006 timeframe. 
The Air Force was challenged with increased operational tempo, 
manpower cuts, increased deployments, aging aircraft and budget 
constraints. In addition to these pressures, we were 
transforming into a highly expeditionary Air Force. A more 
efficient, streamlined and effective supply chain was required 
to sustain and improve our performance in such challenging 
times.
    I took command of the Air Force GLSC in November of 2008 
and I am honored and delighted to lead this great organization 
as we transform supply chain management in the Air Force to 
improve our combat capability. As a career logistician, I look 
forward to discussing how the professional men and women of the 
AFGLSC are executing our challenging global mission, how we are 
improving our enterprise operations through the implementation 
of a comprehensive and forward thinking strategic campaign plan 
and how we are working closer with DLA to ensure we can 
successfully support our Air Force and other worldwide 
customers.
    To execute the service function of organize, train and 
equipment and provide forces to combatant commanders, we are 
heavily reliant on our logistics and supply chain capabilities. 
The formation of the AFGLSC enabled the establishment of a one 
supply chain process owner who provides a single point of entry 
and contact for our Air Force warfighters and customers 
throughout the supply chain. Employing lessons learned from 
commercial industry, from academia and government, we are 
eliminating duplication and focusing on standardization of our 
critical processes. We are just getting started and are 
extremely proud of our progress to date.
    As a total force organization consisting of active duty, 
Guard, Reserve and civilian personnel, the AFGLSC has three 
primary functions. Enterprise supply chain planning execution, 
operations and strategy and integration. Our total team 
simplifies the complexities of the Air Force supply chain for 
our warfighters, providing the most logical, expedient and cost 
effective solution. Our warfighters and other worldwide 
customers don't have to worry anymore about chasing information 
or chasing parts because AFGLSC assumes that role for them.
    Now, I would like to turn your attention to our partnership 
and collaboration with DLA to improve and drive improvements to 
the Air Force supply chain. We have three primary initiatives 
at work. First, we are developing a set of joint customer 
metrics with the intent of presenting one picture of the supply 
chain health to the warfighter.
    Secondly, the AFGLSC has established an organization 
devoted to the consolidation and submittal of the Air Force 
requirements to DLA. This initiative is called Planning for DLA 
Managed Consumables or PDMC and is a means for the Air Force to 
more accurately project supply plans to DLA that are based on 
information that would not otherwise be anticipated through 
historically based forecasting techniques. And third, we are 
working closer with DLA to improve the support we provide to 
Air Force depot maintenance operations. We have created a depot 
supply chain management team that uses predictive analysis and 
identifies and solves supply chain constraints well ahead of 
the need for the item to support that operation.
    The AFGLSC and DLA have also been working on a number of 
joint sourcing initiatives to commit resources for joint 
collaboration opportunities for long-term strategic contracts. 
The purpose is to apply our combined buying power where 
appropriate to leverage tactical and strategic relationships 
with our commercial buyers, the collaborative sourcing 
opportunities that govern through a joint service board that 
meets quarterly.
    In closing our mission, our role, our responsibilities and 
vision are clearly defined for the Air Force Global Logistics 
Support Center. We are a relatively new organization that has 
stepped out quickly to achieve the results the Air Force 
envisioned when they established the center in March of 2008. 
Our early success has motivated us to bring even better support 
to the warfighter. I am equally proud and pleased with our 
strong relationship with DLA and I am encouraged by the 
collaborative initiatives we have developed together. Global 
logistics with a warfighter focus, that is what the Air Force 
Global Logistics Support Center is all about. I look forward to 
your questions.
    Mr. Andrews. General, thank you very much.
    [The prepared statement of General McCoy can be found in 
the Appendix on page 42.]
    Mr. Andrews. And, Ms. Heimbaugh, it is my understanding it 
is your first time testifying on the Hill. We are honored that 
we would be your maiden voyage here. This is a very aggressive, 
hard edge committee here, so you should be on guard. No. You 
are very welcome. We appreciate your service to your country 
and look forward to your testimony this morning. Welcome.

STATEMENT OF NANCY HEIMBAUGH, SENIOR PROCUREMENT EXECUTIVE AND 
  DIRECTOR OF ACQUISITION MANAGEMENT, DEFENSE LOGISTICS AGENCY

    Ms. Heimbaugh. Thank you. Chairman Andrews----
    Mr. Andrews. Ma'am, would you turn your microphone on? It 
would be better if we could hear you that way. Okay. Thank you.
    Ms. Heimbaugh. Chairman Andrews, Congressman Conaway and 
distinguished panel members, thank you for the opportunity to 
appear today and discuss the Defense Logistics Agency's mission 
as a supply chain manager responsible for providing the best 
available supplies and services to the warfighter at the best 
value to the taxpayer. The Defense Logistics Agency, or DLA, is 
the Department's combat logistics support agency. It manages 
4.8 million items and supports nearly 1,600 weapons systems. It 
is the end-to-end supply chain manager for 8 supply chains and 
it provides approximately 84 percent of the repair parts and 
nearly all of the subsistence, fuels, medical, clothing and 
textiles and construction material required by the military 
services.
    DLA has a global distribution capability, including 26 
distribution centers around the world. DLA is an integral part 
of the end-to-end supply chain it works closely with the 
services to ensure support for their requirements. For example, 
DLA is partnering with the Air Force Global Logistics Support 
Center to execute the base realignment and closure decision to 
realign depot level reparable acquisition, as well as supply, 
storage and distribution responsibilities to DLA. DLA provides 
storage and warehouse management for service required items and 
coordinates movement of items directly with vendors or with the 
U.S. Transportation Command to ensure on-time delivery. DLA's 
responsibilities also include stock positioning at forward 
locations for faster delivery.
    DLA uses demand planning and forecasting to reflect usage 
factors accurately and leverages distribution to complete the 
supply chain. And DLA now uses the Northern Distribution 
Network to move supplies and equipment to the U.S. forces 
deployed in support of operations Enduring Freedom and Iraqi 
Freedom. DLA provides support to the warfighter no matter where 
located.
    Acquisition is a core DLA competency and essential to its 
success as a supply chain manager. As requirements are 
identified by the service, DLA develops the supporting 
acquisitions, drawing upon a portfolio of tailored acquisition 
solutions. For example, DLA's prime vendors distribute 
commercial products to assigned customers in a designated 
region, accelerating deliveries, eliminating inventory and 
reducing costs. They provide the same high quality support to 
deployed warfighters as to military service members in the 
continental United States. DLA is aware of its responsibility 
to maintain its industrial base of which small businesses are a 
critical component.
    DLA invests approximately $50 million of congressional 
funding annually to maintain production capacity for go-to-war 
items such as nerve agent antidote auto-injectors. In addition, 
DLA supports the Department's socioeconomic programs, having 
awarded approximately $7.9 billion to small businesses in 
Fiscal Year 2008. In executing its stewardship 
responsibilities, DLA has established a separate acquisition 
management directorate and has placed senior acquisition 
executives at its major activities to enhance management and 
oversight.
    DLA also has a sound oversight program in place to ensure 
effective stewardship. A performance-based agreement with the 
Defense Contract Management Agency (DCMA) emphasizes contract 
administration. In addition, a new Center of Excellence for 
Pricing identifies contract pricing issues and supports 
improved management decisions. And it has already generated 
significant savings. DLA's workforce is a key to its mission. 
And DLA ensures that these professionals are fully trained and 
job ready. DLA is also planning for the future with 399 
contracting interns in its 2-year intern program. DLA monitors 
acquisition performance using metrics that relate directly to 
success.
    Analyzing these metrics allows DLA to assess performance 
and identify effective solutions if performance lags, a key 
capability of DLA's recently implemented Enterprise Resource 
Planning System. Given the size of its program, DLA is prepared 
to face major challenges. For example, the pending rollout of a 
single agency-wide contract writing system is a major 
undertaking; however, DLA is confident that it will meet its 
challenges and that it will continue to provide effective 
support to the warfighter while being an efficient steward of 
the taxpayer dollar.
    Mr. Chairman and distinguished members of the panel, this 
concludes my statement. I will be pleased to answer your 
questions.
    Mr. Andrews. Thank you very much, Ms. Heimbaugh, and 
welcome to the committee. We hope you are here many times.
    [The prepared statement of Ms. Heimbaugh can be found in 
the Appendix on page 52.]
    Mr. Andrews. I thank all three of the witnesses. And we 
begin with Mr.--is it ``Solis'' or ``Solees''? I am sorry. 
Which do you prefer.
    Mr. Solis. ``Solis'' is fine.
    Mr. Andrews. Mr. Solis, I notice in your written testimony 
there was the discussion of one of the prior reports about this 
refrigeration unit and this is on page 10 of the written 
statement that--the price was $13,825 in March of 2002 and 
apparently in September of 2004, we paid $32,642. Was it the 
same unit? Was it the same product?
    Mr. Solis. That is my understanding.
    Mr. Andrews. And the report goes on to say that there was 
an acknowledgement by senior officials that there wasn't proper 
supervision. But I would like to try to get into the weeds of 
that one a little bit more. How did the person who bought the 
second refrigerator not know that the price was so much higher 
than the one for the first?
    Mr. Solis. I think a couple of things in terms of the 
history. At the time when we went back--and this actually was 
at the behest of the Armed Services Committee that we did this 
work--some of these things had been occurring in terms of the 
lack of pricing reviews and the lack of emphasis on price going 
back several years prior to this even happening within DLA. 
This had been brought to senior management attention. We are 
not sure why things--I mean, within--the DLA internal review 
brought this up. There were other internal studies that were 
brought forward in terms of the problem. But there was not an 
emphasis as much as it could be on doing pricing reviews. The 
metrics were more towards how much sales volume do you have. So 
I think there was a disconnect between the emphasis on----
    Mr. Andrews. So the person who was doing that job 
understood his or her responsibility, prime responsibility is 
buying ``X'' number of refrigerators by some deadline?
    Mr. Solis. That is correct.
    Mr. Andrews. And there wasn't an emphasis on how much they 
cost?
    Mr. Solis. There wasn't the emphasis on cost or pricing 
reviews at the time.
    Mr. Andrews. Do you recall under what kind of contract the 
refrigerator was purchased under?
    Mr. Solis. I am not sure.
    Mr. Andrews. If you could supplement for the record how 
that happened. How about the personnel involved? I don't mean 
the specific people. Was it the same subunit of the DLA that 
made the two purchases or was it two different subunits?
    [The information referred to can be found in the Appendix 
on page 69.]
    Mr. Solis. It was the same unit. I don't know if it was the 
same individual who made the decisions.
    Mr. Andrews. Did they have access at the time to a database 
that would show what had been paid in March of 2002? Or would 
they not have known that?
    Mr. Solis. If it was, I don't believe that they accessed 
that database.
    Mr. Andrews. What I hear you saying is it wouldn't be a 
part of the sort of regular routine of the person doing the 
job.
    Mr. Solis. That is why I mentioned in my oral statement, I 
think as well as in testimony, there was a lack of emphasis on 
that kind of training to do the pricing reviews as we 
indicated.
    Mr. Andrews. We certainly can't fault the person if their 
job is to purchase quantity and not price. You follow orders. 
But I guess the question that I would raise is--this is more of 
a rhetorical question. Are we orienting people properly not to 
look at--let me put it to you this way. I would bet you 
anything that the person or the people responsible for making 
that decision, if they had bought a refrigerator for their home 
in March of 2002 and paid $900 for it, they would have been 
shocked to go pay $2,000 for one 2 years later. They wouldn't 
do that. They would say wait a minute, what is different about 
this refrigerator, why does it cost more. Does that not happen 
because we are not expecting people to think that way? Or does 
that not happen because they don't have the information? Why do 
you think that happens?
    Mr. Solis. I think that happened before because there 
wasn't an emphasis on it. Maybe Nancy can probably answer this 
better where they are at.
    Mr. Andrews. I was coming to that. Yeah, I want to ask Ms. 
Heimbaugh----
    Mr. Solis. The orientation has changed. I know there is a 
unit that is doing that right now.
    Mr. Andrews. Let us ask it in terms of that specific 
example, Ms. Heimbaugh. Let us say that I work for you, I am 
part of the Agency and it is my job this morning to go buy a 
refrigeration unit. What would be different today than occurred 
in 2004? And let us say hypothetically that the unit that comes 
across my desk for approval is $40,000. What would be different 
today about the way I would approach that problem than when 
this situation arose the first time?
    Ms. Heimbaugh. I can assure you that there would be a big 
difference. A lot of corrective actions have been put in place 
since the time that that issue became identified. And actually 
folks, there were personnel that were either removed or 
specific action was taken because to answer your question, 
there was a need for more focus not only from a pricing 
standpoint, but from a training standpoint as well.
    Mr. Andrews. Let me ask you this way. If I signed off on 
the $40,000 refrigerator and we should be paying $17,000 for 
it, what would happen to me?
    Ms. Heimbaugh. Well, first of all, we have measures in 
place that precludes one individual from making that sole 
decision.
    Mr. Andrews. What if myself and my superiors had access to 
information that told us that it could be gotten for 17, and we 
signed off on it anyway for 40. What would happen to us?
    Ms. Heimbaugh. There would be specific action taken. We 
also have processes in place that monitor even after the awards 
are made to ensure through various internal reviews and 
external reviews to ensure that we are reviewing these actions 
very closely.
    Mr. Andrews. How would I know--do I have access to the data 
that would tell me it would cost 17 instead of 40? Is there a 
database that would let me know that information?
    Ms. Heimbaugh. Yes, in some cases we have a database that 
every order is recorded in this database that has the item that 
was bought, how much it was bought for and the description. It 
also requires contracting officers to clearly document the 
source of the information that they receive----
    Mr. Andrews. So I would know--I would have easy access to 
data that would tell me in March of 2002, we paid $13,000 for 
this refrigerator?
    Ms. Heimbaugh. I have a group of folks that are focused 
strictly on pricing. They go in and they have access to this 
database and they review the specific items in this database. 
And if they saw something questionable, they would bring that 
to our attention.
    Mr. Andrews. Would that be after it was purchased, though?
    Ms. Heimbaugh. It would be after it is purchased.
    Mr. Andrews. What about the person that makes the 
purchasing decision, are they expected to know this and do they 
have the availability of the information to know it?
    Ms. Heimbaugh. Yes, they are expected to know this. They 
are trained. They have been since this event. They have been 
put through numerous training programs and so they know how to 
properly determine a price is fair and reasonable. In addition 
to that, we have process reviews prior to making these types of 
awards.
    Mr. Andrews. Thank you very much. I appreciate it. I am 
going to turn to Mr. Conaway for his questions.
    Mr. Conaway. Thank you, Mr. Chairman. Witnesses, thank you 
very much for being here. I appreciate that. My professional 
background gives me a keen appreciation of how hard your job 
is. And it is mind boggling the reach that what you do--I think 
it is around the world. So I appreciate your efforts on--Mr. 
Solis, the--you said that you made numerous--GAO has made 
numerous recommendations. I would really rather focus not on 
the ones that have been done and implemented, but on the 
recommendations that have been made and not implemented. Where 
should the focus for purchasing be or acquisitions be in your 
mind?
    Mr. Solis. Well, a couple of things come to mind and this 
refers back to some of the inventory reports, for example, that 
we just did with the Army and the Navy and going back to the 
Air Force. I think one of the things that we would suggest is 
that there needs to be a better emphasis on demand forecasting. 
We understand the nature of the beast. Things are going to 
change in terms of what the services are going to need and DLA 
is going to order. We understand that. But we also understand 
that in terms of our reports, what you end up with is a lot of 
excess inventory on hand or on order. And we view that also as 
an opportunity cost, that better demand forecasting be used and 
you can also use that money elsewhere.
    Mr. Conaway. Are the just-in-time inventory management 
systems being used throughout the system in your mind where 
they are supposed to be used?
    Mr. Solis. I am not sure that they are, just-in-time. I 
think--and if you go back, a lot of times it is a just-in-case 
scenario. Again, I understand that the military has to have the 
parts that they need. But at the other hand, there is $82 
billion worth of inventory total that the Department has and 
yet we still have shortages as well. So again----
    Mr. Conaway. Shortages of stuff that is in inventory or 
shortages of----
    Mr. Solis. Of things that they need to order. Things that 
are--deficits, as they call them.
    Mr. Conaway. Nancy or General McCoy, do you want to visit 
with us about this idea? We have got obviously inventory 
management. If you are in the commercial business it is 
important, because there are carrying costs associated with 
that inventory and the less you have to spend on stuff in 
inventory, the better. But at the same time, you have got to 
have it available. Are there ways of knowing that you have got 
excess inventory in one part of the world or one part versus 
buying new stuff in another one when you can swap it around? 
How do you manage that inventory in your mind appropriately?
    General McCoy. Yes, sir. In fact, one of the reasons we 
established the agency that I have the honor of commanding 
today is so that we could have a single face to the customer 
but also an agency whose responsibility is to look across the 
enterprise. You are absolutely right. In an expeditionary world 
in which we live, we have inventory scattered around the world. 
What we don't want to do is buy more or place more in locations 
where the need is not there in that location.
    So we spend a tremendous amount of our analysis capability 
trying to make sure that we can identify where the need will 
occur and to put the right amount of inventory in those 
locations. In the event that a need arises greater than we 
anticipated at another location, then our first objective is to 
try to move that inventory rather than buying new inventory. 
The precious dollars that we have, we know that we have to 
spend them wisely. In fact, to your earlier question, one of 
the principles that we operate by is to treat resources as 
though they were our own. So if we are buying components to go 
on aircraft or buying refrigerators, we want to treat those as 
though they are our own resources and therefore not buy one 
more than we have to.
    In an expeditionary environment, however, we also want to 
make sure we can consider contingencies. But we also want to 
make sure that we don't exceed that requirement even preparing 
for contingencies even with old airplanes that often break 
today and it becomes even more difficult to find those parts. 
But the answer is, yes, sir, we move resources around. We have 
visibility of those around the world. And we would rather move 
them rather than replace them with new inventory when they have 
that opportunity.
    Mr. Conaway. Ms. Heimbaugh, we are doing the Defense 
Reauthorization Act right now. I am getting significant 
pushback on whether or not the Department of Defense should be 
audited or within what timeframe. And part of the issue is 
resource allocation to that deal. Back office work, which is a 
lot of what you do, is sometimes resource-starved to make sure 
you get the right resources on the front end of the deal. Do 
you have the right number of people to do the contract 
management? Do you have the right resources to train? Or are 
there gaps--General McCoy, you can pitch in on this one as 
well. What do you need to do your job better than you are 
currently able to do it?
    Ms. Heimbaugh. Yes. The way that we are--the way that DLA 
is established is that we are a working capital fund 
environment, and what that means is that we have the ability 
based upon the funds that generate our business through our 
sales is how we fund our resources. And today what we are 
looking at in the contracting arena is to ensure that the 
contracting resources that we have today is the right balance 
to meet the mission that we have. So what that means is that--
although we have a very strong intern program, we also want to 
ensure that we have the right mix at the journeyman level as 
well as the senior level and so we are looking at recruiting 
plans, marketing and recruiting plans to ensure that as we hire 
new people into the workforce, that we have a sufficient level 
of experience in order to meet those requirements.
    Mr. Conaway. But are you constrained as to actually hiring 
those folks? It is one thing to know you need somebody, but to 
not have the resources to be able to hire those folks, you are 
telling me that you have got the resources you need if you 
could just find the right people to plug into the jobs you have 
got available?
    Ms. Heimbaugh. I would say right now our focus is being on 
very efficient. So we want to take a look at the resources that 
we have and focus on being more efficient and then determining 
after that if there is additional resources that are needed. 
But I would say we are not as concerned as perhaps the military 
services are in how they obtain their resources.
    Mr. Conaway. Okay. General McCoy, any thought?
    General McCoy. Often when we look at our acquisition 
process or our supply chain, the first conclusion if you see 
problems is to simply assume that if I can just add more people 
to this, I can do it better. In many cases, that is not the 
answer. The first thing we try to look at is ``what is the 
process?'' And we find that in many cases that is where we find 
our greatest opportunity to make things better. We have 
antiquated processes that we need to change, we need to 
streamline, and we need to make sure that the people that are 
in that chain have the authority to make the decisions at the 
right level.
    I think the other thing is--and I will--is with DLA, we 
also need to make the right investment in our workforce, to 
make sure that they are properly trained and that we are 
acquiring the people with the right skill sets and that we are 
investing in the right kind of information technology (IT). You 
just cannot do this business at the dollar amount and the 
number of items we are talking about on the back of an 
envelope.
    So we want to make sure that we are continually looking at 
upgrading and bringing in the right IT. So the visibility is 
there. We have talked a little bit about pricing. So you have 
that information and you don't have to search for it. It is 
there available to your buyers. It is there available to those 
in the supply chain. And it is there for those who want to 
challenge it if they see things not going properly in their 
mindset.
    Mr. Conaway. One final thought. Ms. Heimbaugh, is the Air 
Force's efforts with its Global Logistics Command, are there 
similar commands in each of the other services or is this the 
prototype that you are going to use to see whether or not to 
set these same processes up at other services?
    Ms. Heimbaugh. Well, I would say that the Global Logistics 
Support Center is something that we view as something very 
beneficial to DLA in supporting our supply chain management 
functions. Of course, we look across all of the services and 
having a particular or a specific service be able to look and 
standardize its processes within the supply chain really does 
make our job much better. Now, I certainly think that that is 
something that will reap benefits into the future and probably 
serve as a model.
    Mr. Conaway. So you are telling me that the Air Force is 
far enough along that you are going to recommend this to the 
Army and the Navy as well?
    Ms. Heimbaugh. No. I think right now in terms of working 
with the Air Force and their concept, I think we are just 
beginning to see the improvements. But I cannot really speak 
for the other services in how they choose to structure.
    Mr. Conaway. Okay. Thank you, Mr. Chairman.
    Mr. Andrews. The Chair recognizes Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman. First, thanks to the 
Defense Logistic Agency. As a former consumer of those MREs, I 
want to say that they have improved over time. I can recall in 
the first Gulf War where my Marines referred to them as ``Meals 
Rejected in Ethiopia,'' to being in Iraq in 2005 and 2006 in 
some forward operating bases where we relied on those. They are 
much improved today. There was an article recently in The Army 
Times that talked about the camouflage pattern for the Army 
utility uniform that it was inadequate. And how does that--how 
does the Army interface with DLA to make decisions like that? 
Does DLA have input on those issues or was that strictly an 
Army decision?
    Ms. Heimbaugh. The requirements are developed by the 
services, and in this case, it would be the Army. They 
determined what the wear policy was, they determined what the 
design of the uniform is and then we do work closely with them 
to provide them with information in terms of the impact that 
that would have, for example, in the industrial base or from a 
logistics standpoint. So they really make those requirement 
decisions and then we take that and we develop an acquisition 
strategy.
    Mr. Coffman. What would be the cost of--or is there an 
estimate in what it would cost to correct that issue as it has 
been raised?
    Ms. Heimbaugh. I don't have that number with me. I can get 
it for you if we have it. But I do know that any time that they 
develop a requirement, we do sit down and we take that into 
consideration.
    [The information referred to can be found in the Appendix 
beginning on page 69.]
    Mr. Coffman. Who makes--but it is the Army that ultimately 
makes the decision?
    Ms. Heimbaugh. Yes, sir.
    Mr. Coffman. For all of you, there has been talk in 
acquisition reform about the need to in-source expertise within 
your respective agencies. To what extent have you all had to do 
that or have you had to do that, bring technical skills in 
house that were once contracted on for doing--for acquisition 
purposes? Anybody--can anybody respond to that?
    Ms. Heimbaugh. I can tell you that we are in the process of 
evaluating and developing an in-sourcing plan in accordance 
with the requirements. But in addition to that and aside from 
that, we have also, again, because we want to look for those 
efficiencies where we can, we are looking across the contractor 
support where we have contractor support to see where we can be 
more efficient. But from a very structured in-sourcing 
standpoint, we want to do what is best. And so we are looking 
at developing a business case analysis which will allow us to 
make those decisions because we do want to ensure that we are--
that the positions that we are looking for will be the correct 
positions to either in-source or remain as contractor support.
    Mr. Coffman. So you have been given no requirements by the 
Department of Defense in terms of--it is basically on a case-
by-case basis? There is no quantitative requirements on your 
agency then?
    Ms. Heimbaugh. What we have--what the Department has asked 
us to do is develop a plan, an in-sourcing plan and then we 
provide that plan and then as we start to go through our 
inventory of contracts, we will prepare a business case 
analysis and then determine whether or not that is the 
appropriate mix to either bring back or retain this 
contractor's support.
    Mr. Coffman. Anyone else? Mr. Chairman, I yield back then.
    Mr. Andrews. I thank the gentleman. With the indulgence of 
my colleagues, I will go a second round. The difficulty of 
requirements seems to be a recurring theme in this panel's 
deliberations. And the GAO testimony this morning reflects on 
that as one of the challenge areas. I would like to follow up 
on Mr. Coffman's questions about the camouflage for the Army 
and ask you this hypothetical: Let us say that the Army comes 
up with a certain design of a camouflage and let us further say 
that there is a commercial design out there that looks almost 
exactly like it, with some minor modifications that that design 
could fit the Army's requirements quite well.
    Number one, is there a mechanism, Ms. Heimbaugh, where 
someone in your agency would ask that question in the first 
place, would say is there a clothing manufacturer making 
something that looks a lot like this now? And number two, if 
there were, how would he or she go about reporting that back to 
the Army's requirement people so you could talk about this? In 
other words, the overall question I am asking is do we reinvent 
the wheel each time we go to buy a wheel?
    Ms. Heimbaugh. I would say that one of the things that we 
do is we do work very closely, for example, with the Army as 
they are beginning to design either a new item or a new design 
of an item. What we can bring to the table and I am sure the 
Army does this as well, is look at the market and determine 
what is available in the market. In addition to that, they 
prepare a package that provides us with the right information 
and we work together to ensure that at the point that 
requirement is finalized, that we then work with industry to 
ensure that there is a capability in industry and most times we 
find that it is something that the industry is looking at in 
terms of having to manufacture a particular clothing item or 
uniform.
    Mr. Andrews. How about outside the clothing area? What if 
one of the services is looking for, I don't know, a certain 
kind of copier machine that can handle a heavier load of 
copies? What is the process? Do you begin to look in the 
commercial sector and then only if the commercial sector 
doesn't provide it, look to ask someone to manufacture it or 
how do you do that?
    Ms. Heimbaugh. As soon as we get the requirement, we 
conduct market research so that market research will lead us to 
whether that particular product is available on the commercial 
market or not.
    Mr. Andrews. If you had to guess and you can supplement the 
record later if you can, what percentage of the time does the 
market already supply the product that you need and what 
percentage of the time do you have to turn to a manufacturer to 
have it made for you?
    [The information referred to can be found in the Appendix 
on page 69.]
    Ms. Heimbaugh. I would have to----
    Mr. Andrews. Okay. If you can supplement the record, we 
would be interested in that. General McCoy, I note with 
optimism on page three of your testimony, you say that in the 
very early days of your organization, you have been able to 
achieve, according to a memo from the Central Command area of 
responsibility, a reduction in daily aircraft grounding 
conditions from 150 groundings a year ago to about 30 today. 
Two questions. One is how much money does that save? Or how 
much economic value does that create, number one? And number 
two, how did you do it?
    General McCoy. I would have to get the exact number in 
terms of dollars for the record, but I will tell you that when 
we are talking about expensive components that go in our 
airframes, that dollar amount is significant and I will get the 
exact amount.
    [The information referred to can be found in the Appendix 
on page 69.]
    Mr. Andrews. By the way, the savings I assume would be 
generated because there would be less wear and tear on the 
planes that could fly, you would fly them less frequently if--
how does the savings occur there?
    General McCoy. The savings would be, in many regards, one 
is if you need fewer parts because of increased reliability, 
for example, that lessens the amount of inventory you have to 
carry. The administrative overhead, the amount of people that 
have to manage the assets. And equally important are the amount 
of people you have got to have on the ground to maintain those 
systems.
    So the more you can keep a system operational, in other 
words not ground it for any problem, the less cost and manpower 
you need devoted to that system. To your second question on how 
do we do it. We focus what we call weapon system teams today in 
the AFGLSC on a specific weapon system. For example, I have a 
team that works the F-15. I have a team that works the B-52. I 
have a team that works the C-130 and on and on. And those teams 
are entrusted with the responsibility of looking at how they 
can ensure that we don't have grounded systems and when we do, 
we can respond very quickly. So the first point would be we are 
very focused.
    Mr. Andrews. So they diagnosed what used to cause the 
groundings and they fixed it?
    General McCoy. We are proactive rather than reactive. And 
that has probably been one of the underpinnings of----
    Mr. Andrews. Can you give us an example of one of the 
ways--what did they diagnose and start to do or stop doing?
    General McCoy. What they look at is, first of all, is what 
is causing those grounding activities and then how do we put 
solutions in place. An example in the case of the Central 
Command area of responsibility (AOR), it is a matter of looking 
at demand patterns. If you are strictly looking at historical 
commands, that may give you a piece of the information. But 
what we want to get is day-to-day information on the ground.
    And we have our logisticians on the ground that are 
providing that information. Then we can look forward and see 
what changes can we make, and in some cases, even modifying the 
component that may be failing or bringing that airplane in for 
some form of modification or maintenance to get ahead of the 
problem. But the other point is to make sure that we have 
properly calculated and anticipated demand and have those parts 
on the ground so that you can reduce the number of airplanes 
that break and can't fly the next day.
    Mr. Andrews. That is an answer which does not surprise me 
and sounds really very viable and valid, which leads to my 
final question for Mr. Solis. One hypothesis that I would offer 
is that the more data you have and the more you know how to 
manipulate it, the better job you are going to do at diagnosing 
problems and preventing them. I think I am paraphrasing what 
the general just said, but his teams got on the ground, 
analyzed what used to cause 150 groundings a year ago, took 
some preventive measures and knocked it all the way back to 30. 
So they created a database. They understood it and they used 
it. How typical are such databases throughout our acquisition 
system? In other words, if I was responsible for buying bottles 
of water, how much data would be available for me about 
patterns of how much water we used, when, and how much we paid 
for?
    Mr. Solis. I will talk about in terms of the Army, in terms 
of some of the experience we have had. There are models that 
the Army can run for example, to look at war reserve 
requirements to look at higher operational tempo (optempo), 
particularly at the beginning or the outset of an operation. 
Some of the things that you mentioned in your opening statement 
with regards to some of the problems or shortfalls they had, 
there were war reserve models that I mentioned that are out 
there. Had they run those models prior to the operation, I 
believe that some of those shortfalls would have been 
alleviated.
    Mr. Andrews. Have you gone back and actually run the 
models? Let us take the lithium--or whatever kind of battery, 
but lithium battery, whatever it was. Let us use the battery 
example. Is there a model that would have forecast how many 
batteries would be needed for an operation the size of the one 
in Iraq?
    Mr. Solis. It would have not only for that, but for things 
like tank tread, tires. I mean, you get into modeling what your 
potential----
    Mr. Andrews. Did anybody use it before the operation?
    Mr. Solis. At the time when we looked at it, the answer was 
no.
    Mr. Andrews. Why not? Do you know?
    Mr. Solis. There were--one reason was that the information 
did not get to the logisticians, although there was some 
disagreement about that. It is not clear to us why that did not 
occur.
    Mr. Andrews. I say this coming full circle as I said at the 
beginning of the hearing. I would assume part of the answer to 
the question ``why not'' is because they had to move 160,000 
people 5,000 miles away in a hurry. And I understand that is a 
huge job. And sometimes you can't do it as perfectly as you 
would like. But I would hope that one of our goals--and I see 
you moving in this direction--would be to institutionalize on a 
macro level what General McCoy just talked about on a micro 
level, that people responsible for those airplanes in Central 
Command had data in front of them about why we had 150 
groundings a day, understood how to manipulate and use the 
data, drew some conclusions about why we had the situation and 
did something about it, right? And saved money. It increased 
our use of our resources, and I would hope that we could 
institutionalize that. That is the idea. Mr. Conaway, do you 
have any follow-up questions?
    Mr. Conaway. Just one. Using the refrigerator as an 
example, folks work better with incentives and rewards and is 
there any system within your system, are there ways to reward 
or incentivize people to do the kinds of things that you are 
talking about? It is music to my ears to hear you say you have 
a focus on spending money as if it were your own money, because 
we all make better decisions in that regard. Are there 
incentive programs or reward programs that reward folks who go 
a little bit beyond just the normal deal to save taxpayer 
money? Which leads to the other point, the other semantics 
issue, Ms. Heimbaugh. You mentioned congressional funding. 
Congress doesn't have any money. We take it away from 
taxpayers. So it is taxpayer funding. But are there ways to 
reward it within your system that makes sense? Are there ways 
that you like to set up that are currently in place?
    Ms. Heimbaugh. Yes. From the acquisition standpoint, we do 
have and have recently established an award program that does 
recognize the acquisition folks that do step up and make 
different improvements and processes and also that do excel in 
some of the things that they are responsible for. So we have 
recently put in several acquisition programs and I think that 
is--will help address some of the issues.
    Mr. Conaway. General McCoy, are there dollar incentives or 
savings that result from doing things better than you were 
doing them before?
    General McCoy. Absolutely, sir. Not only on the acquisition 
side, but the customer side. We encourage our customers, our 
airmen on the ground who receive the products and use the 
products to challenge particularly pricing. If for some reason 
they feel that an item is overpriced, we give them a challenge 
to bring that to the attention of their leadership. And we have 
had everything from zero overpricing award systems to making 
sure through suggestion programs or what have you that we can 
even give some kind of cash incentive or some kind of award to 
people to do that. And trust me, that is one way to make sure 
that people are looking very carefully. Because they know that 
they can not only save the taxpayer dollars, but they can also 
be recognized for that kind of effort. And we applaud that and 
we encourage it.
    Mr. Conaway. Thank you, Mr. Chairman. Witnesses, thank you 
very much. Very informative today.
    Mr. Andrews. Could I just ask the general, does that apply 
to uniform personnel or civilian or simply uniform?
    General McCoy. It applies to both, yes, sir. We have a 
tremendous number of civilian and military uniform at every 
point of our supply chain and so we do apply that. And then, in 
fact, many of the incentives and cash rewards that we can give 
are those that we give to civilians, in many cases decorations 
to our military if over a period of time, they have shown that 
as a part of their job they are saving money, make things more 
efficient and putting more capability in the hands of the 
warfighter.
    Mr. Andrews. Sound goods to us. Mr. Coffman, do you have 
any follow-up?
    Mr. Coffman. Mr. Chairman, I have no further questions.
    Mr. Andrews. I would like to thank my colleagues and this 
outstanding panel. You have prepared thoroughly and I think you 
enlightened the panel. Where we are going from here is that we 
will be considering your written testimony. And I would 
appreciate you supplementing the record with the requests we 
made this morning.
    In the first quarter of 2010, the panel is going to meet 
and discuss among ourselves recommendations that we think would 
respond to some of the issues raised in our hearings, we would 
certainly solicit your input as to those recommendations as to 
what you think could be done. The panel will be issuing a 
report in the first quarter of calendar 2010 with the goal of 
presenting to the chairman and the ranking member of the full 
committee some legislative ideas for inclusion in next year's 
defense authorization bill.
    So we welcome your continued participation, not just in 
this morning's hearing, we thank you for the job that you did. 
And the hearing is adjourned.
    [Whereupon, at 10:36 a.m., the panel was adjourned.]


      
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                            A P P E N D I X

                           September 24, 2009

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                           September 24, 2009

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    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                           September 24, 2009

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            RESPONSES TO QUESTIONS SUBMITTED BY MR. ANDREWS

    Mr. Solis. As noted in the testimony, GAO previously reported that 
DLA acquired an aircraft refrigerator under its prime vendor program 
that was almost twice the amount paid two years earlier. The type of 
contract used for this purchase was an Indefinite Delivery, Indefinite 
Quantity contract. It was purchased under a prime vendor contract for 
food service equipment under DLA's Subsistence Directorate. The same 
contracting officer was responsible for both purchases. According to 
DLA, the problem occurred because the contracting officer was not 
conducting price reasonable determinations. In order to correct the 
problem, DLA now required that contracting officers conduct price 
reasonable determinations up-front. [See page 10.]
    Ms. Heimbaugh. Based on FY 08 data, we use market supplied products 
for 48 percent of the Defense Logistics Agency's total contract actions 
representing 40 percent of award dollars. Products for the remainder of 
our customers' requirements are manufactured to meet those 
requirements. [See page 17.]
    General McCoy. The primary goal of the AFGLSC is to streamline our 
supply chain management processes and improve support to the 
warfighters. A measurable outcome of our effort is increasing the 
number aircraft available to fly required missions each day. By 
reducing the grounded aircraft from 150 to 30, we are able to realize a 
reduction in the use of premium transportation to expedite parts 
shipments by approximately $252,000 per month for 1 year.
    The AFGLSC has implemented a number of initiatives that have 
resulted in the reduction in aircraft grounding incidents. Some 
examples include: 1) Implementation of a demand forecasting tool to 
measure forecast effectiveness; 2) Collaboration with maintenance 
organizations throughout the Air Force enterprise to improve component 
repairs; 3) Implementation of new and streamlined contracting 
strategies that have reduced purchasing lead times; and 4) 
Implementation of ``proactive leveling'', whereby likely critical 
stockouts are identified and stock levels are established to mitigate 
the risk. Using a global, enterprise approach to supply chain 
management, we have been able to improve aircraft availability while 
reducing operating cost. [See page 17.]
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             RESPONSE TO QUESTION SUBMITTED BY MR. COFFMAN
    Ms. Heimbaugh. There would be a one-time cost for a cloth 
manufacturer to change the camouflage pattern of the existing Army 
Combat Uniform (ACU). That cost would be determined by the amount of 
work required by the cloth manufacturer to convert to the new cloth. In 
discussions with our cloth manufacturers, they are unable to quantify 
that exact cost without specifics on the fabric involved; however, at a 
minimum, for the same basic fabric, the cost to change a pattern would 
be between $400.00 and $1000.00 per loom. The cost to then field that 
uniform for the entire Army, Active, Guard and Reserve, would range 
from $360,498,600 to $699,383,160. This cost range is based on the new 
uniform being issued in an all Fire Resistant (FR) fabric with and 
without permethrin, half FR with and without permethrin and half non FR 
or all non FR fabric.
    The following assumptions were made in developing this cost.

    1.  All soldiers would be issued four uniform coats and four 
trousers, one patrol cap and one sun hat.

    2.  Every Active duty, Guard and Reserve Soldier would get the 
uniform. If the new uniform distribution is limited to those soldiers 
deploying to Afghanistan, the total cost would be considerably less.

         a.  562,000 authorized active duty

         b.  572,000 Guard and Reserve

    3.  The only difference in the new uniform would be the camouflage 
pattern. No changes in material or construction from the current Army 
Combat Uniform (ACU).

    4.  Prices used to determine this cost are based on the current 
Standard Prices for these items.

    5.  This estimate does not include the potential cost of issuing 
other equipment type items in a new pattern. This includes such items 
as the Extreme Cold Weather Clothing System (ECWCS), Improved Outer 
Tactical Vests (IOTV), Modular Lightweight Load bearing Equipment 
(MOLLE), various coveralls, and any other equipment item that may have 
the ACU camouflage pattern.

    6.  This estimate does not include the cost of disposal for any 
residual items in the old camouflage pattern.

    [See page 15.]

                                  
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