[Senate Hearing 111-251]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 111-251
 
                 ALLEGATIONS OF WASTE, FRAUD, AND ABUSE 
                      IN SECURITY CONTRACTS AT THE 
                         U.S. EMBASSY IN KABUL 

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

                                HEARING

                               before the

              AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 10, 2009

                               __________

       Available via http://www.gpoaccess.gov/congress/index.html

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           JOHN McCAIN, Arizona
MARK L. PRYOR, Arkansas              GEORGE V. VOINOVICH, Ohio
MARY L. LANDRIEU, Louisiana          JOHN ENSIGN, Nevada
CLAIRE McCASKILL, Missouri           LINDSEY GRAHAM, South Carolina
JON TESTER, Montana
ROLAND W. BURRIS, Illinois
MICHAEL F. BENNET, Colorado

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


              AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT

                       CLAIRE McCASKILL, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
THOMAS R. CARPER, Delaware           TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
JON TESTER, Montana                  LINDSEY GRAHAM, South Carolina
MICHAEL F. BENNET, Colorado
                     Margaret Daum, Staff Director
                Molly Wilkinson, Minority Staff Director
                       Kelsey Stroud, Chief Clerk



















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator McCaskill............................................     1
    Senator Collins..............................................     3
Prepared statement:
    Senator Collins..............................................    29

                               WITNESSES
                        Wednesday, June 10, 2009

William H. Moser, Deputy Assistant Secretary, Logistics 
  Management, U.S. Department of State...........................     4
Samuel Brinkley, Vice President, Homeland and International 
  Security Services, Wackenhut Services, Inc.....................    19

                     Alphabetical List of Witnesses

Brinkley, Samuel:
    Testimony....................................................    19
    Prepared statement with an attachment........................    35
Moser, William H.:
    Testimony....................................................     4
    Prepared statement...........................................    31

                                APPENDIX

Eleven documents submitted for the Record from Senator McCaskill.    42
``New Information About the Guard Force Contract at the U.S. 
  Embassy in Kabul,'' Majority Staff Analysis, prepared by 
  Chairman McCaskill.............................................    83
National Security Archive, prepared statement with attachments...    95
Questions and responses submitted for the Record from:
    Mr. Moser....................................................   106
    Mr. Brinkley.................................................   110


                 ALLEGATIONS OF WASTE, FRAUD, AND ABUSE
                      IN SECURITY CONTRACTS AT THE
                         U.S. EMBASSY IN KABUL

                              ----------                              


                        WEDNESDAY, JUNE 10, 2009

                                   U.S. Senate,    
          Ad Hoc Subcommittee on Contracting Oversight,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:34 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Claire 
McCaskill, Chairman of the Subcommittee, presiding.
    Present: Senators McCaskill and Collins.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Welcome to the hearing of the 
Subcommittee on Contracting Oversight of the Homeland Security 
and Governmental Affairs Committee.
    I am really glad that our Ranking Member is here. She has a 
long record of oversight on all issues relating to 
accountability in the government and has been a great mentor 
for me in this area and it is great to have her here this 
afternoon.
    As we bring this hearing to order, I just want to briefly 
talk about why we are here today. This is an effort to look at 
one contract out of tens upon thousands of contracts that has 
had a difficult record in terms of being compliant with 
contract provisions and see if by looking at this contract we 
cannot learn some lessons about contract oversight.
    I think it is particularly important because this 
particular contract deals with the security of our embassy in 
theater. We are in a conflict in Afghanistan and so there is 
extreme pressure on the State Department to make sure that the 
embassy is secure. That is why I think this particular contract 
should get extra scrutiny and oversight as it relates to how 
the contractor has performed under the provisions of the 
contract.
    This is about a $190 million contract to provide the guard 
force at the U.S. Embassy in Kabul. It is a unique contract. At 
most U.S. embassies around the world, the State Department 
hires local nationals if they need guard force assistance. In 
Iraq and Afghanistan, however, the State Department has decided 
to contract out the embassy's security to a mix of Americans, 
expatriates, and third-country nationals. In Kabul, our embassy 
security force is largely comprised of individuals from Nepal.
    The Kabul Embassy contract can be viewed as a case study on 
how mismanagement and lack of oversight can result in poor 
performance. AGNA is the contractor and their performance on 
this contract has been deficient since the contract began in 
July 2007. The result is that at times, the security of the 
U.S. Embassy in Kabul may have been placed at risk.
    In July 2007, the State Department contracting officer 
issued a cure notice, a formal letter saying the contractor had 
failed to meet major contract requirements. The contracting 
officer told AGNA, ``I consider the contract deficiencies 
addressed below to endanger performance of the contract to such 
a degree that the security of the U.S. Embassy in Kabul is in 
jeopardy.''
    The State Department also told ArmorGroup North America 
(AGNA) that it questioned the contractor's ability to provide 
security for the embassy in the hostile environment of 
Afghanistan. According to the State Department, ``The 
government has serious concerns regarding AGNA's ability to 
respond in the aftermath of a mass casualty incident or extreme 
loss of personnel due to mass resignation, hostile fire, or 
loss of manpower due to illness. Therefore, AGNA needs to come 
quickly to terms with contract requirements, especially in 
light of the current incidents occurring in and around Kabul 
and the corresponding threat environment they pose.''
    In September 2008, AGNA's performance problems had grown so 
severe that the State Department advised AGNA that the State 
Department was considering terminating the contract. According 
to the State Department, AGNA's failure to provide sufficient 
guards has ``negatively impacted the security posture of the 
local guard program for the U.S. mission to Kabul. The staffing 
situation has further deteriorated to a level that gravely 
endangers performance of guard services in a high-threat 
environment such as Afghanistan.''
    In March 2009, in inspections of the guard force 
operations, the State Department observed that at least 18 
guards were absent from their posts at the embassy. In 
response, AGNA stated that the guards' absences were due to 
supervisory personnel negligence.
    Documents produced to the Subcommittee also show that AGNA 
officials responsible for buying winter clothing and boots for 
the guard force acquired over $130,000 of counterfeit goods 
from a company owned and managed by this same official's wife. 
In total, the AGNA official purchased $380,000 worth of 
equipment from his wife's company.
    Instead of letting the contract end after the first year, 
the State Department chose to exercise the first option year. 
We have also learned the Department intends to exercise the 
second option year, which begins July 1. If they do, the Kabul 
embassy will be guarded by this contractor at least until next 
June.
    In testimony to be delivered today, the witness from the 
State Department has said that at no time was the security of 
the American personnel at the U.S. embassy compromised. I hope 
that is the case. I have been told that it is. But the State 
Department's own prior statements indicate that we have a 
problem and that, in fact, the U.S. embassy could have been at 
risk, and this is something we need to examine closely.
    The State Department and AGNA have also advised the 
contractor is now fully compliant with requirements relating to 
staffing. I am satisfied the Department and AGNA have made 
major progress and there are no remaining glaring deficiencies 
which endanger the security of the embassy. But I am not 
satisfied with the record of mismanagement that is before us 
today and the oversight that this contract had.
    So my question for the hearing today is: Is this the best 
we can do?
    There are lessons to be learned from this embassy contract. 
By examining how the State Department and the contractor 
allowed so much to go wrong, we can begin the process of 
ensuring that mismanagement of a contract doesn't ever 
jeopardize any of our U.S. embassies.
    My staff has prepared an analysis of the evidence that the 
Subcommittee has received and also there are 11 documents that 
I would like to put in the hearing record. By unanimous 
consent, I would like to place the staff analysis and the 11 
documents that we have received in support of this hearing 
information in the record.\1\
---------------------------------------------------------------------------
    \1\ The 11 documents and the staff analysis submitted by Senator 
McCaskill appears in the Appendix on page 42 and 83 respectively.
---------------------------------------------------------------------------
    Senator Collins. I have no objection.
    Senator McCaskill. Thank you very much.
    I will then turn to Senator Collins for any opening remarks 
she has.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Madam Chairman, and I want to 
commend your leadership in this area. I would ask unanimous 
consent that my entire statement be placed in the record and I 
am just going to make a few comments.\2\
---------------------------------------------------------------------------
    \2\ The prepared statement of Senator Collins appears in the 
Appendix on page 29.
---------------------------------------------------------------------------
    Senator McCaskill. So ordered.
    Senator Collins. In government procurement, ensuring the 
best value for the American taxpayer is important under the 
best of circumstances, but it is crucial when our Nation is at 
war and our fellow citizens are serving in harm's way in Iraq, 
Afghanistan, and in other overseas locations.
    Federal employees and contractors working in these hostile 
environments should feel secure within the walls of our 
embassies. While safety cannot be guaranteed, our Nation owes 
its citizens as well as the foreign nationals that serve by 
their sides a reasonably secure safe haven from those who would 
do them harm.
    Our embassies depend on private security contractors to 
supplement the Marine security detachments or other Federal 
security officials. The vast number of these security 
contractors perform admirably for the U.S. Government. 
Unfortunately, however, the Government Accountability Office, 
the Inspectors General, and other investigative bodies have 
found numerous examples where private security contractors have 
failed to uphold their contractual obligations and have left 
their government partners vulnerable to failure or attack.
    To improve private security contractors and to protect 
Federal interests, the Federal Government needs to have 
explicit expectations, precise contract requirements, and 
diligent program management and oversight by all agencies. 
Today's hearing will examine this very issue in the specific 
context of security at the American Embassy in Kabul.
    We will examine the State Department's role in writing a 
clear, performable contract and its ability to provide 
consistent and responsible contract management and oversight. 
We will examine the steps that the State Department took to 
identify the deficiencies in performance by the contractor and 
whether the State Department held the contractor accountable 
for poor and declining performance.
    In the end, we hope that the lessons learned from this 
hearing will improve contract administration and lead to better 
security for our embassy's dedicated staff.
    Thank you, Madam Chairman.
    Senator McCaskill. Thank you.
    Our first witness is William Moser, who is the Deputy 
Assistant Secretary of State for Logistics Management at the 
U.S. Department of State.
    It is the custom of the Subcommittee to swear all witnesses 
that appear before us, so if you don't mind, I would ask you to 
stand.
    Do you swear that the testimony that you will give before 
this Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Moser. So help me, God.
    Senator McCaskill. Thank you.
    We will be using a timing system today. We would ask that 
your oral testimony be no more than 5 minutes and your written 
testimony will be printed in the record in its entirety.
    Thank you, Mr. Moser, for being here and we welcome your 
testimony.

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

    Mr. Moser. Thank you very much, Chairman McCaskill, Ranking 
Member Collins, for the opportunity to appear today before you 
to discuss the State Department's management of contracts to 
provide security services at the U.S. Embassy in Kabul.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Moser appears in the Appendix on 
page 31.
---------------------------------------------------------------------------
    The Department of State has extensive experience with 
procuring services to protect our overseas diplomats and 
facilities. Diplomatic activity is ever-changing to meet the 
needs of our country amid evolving world events. In today's 
testimony, I will address the performance of ArmorGroup North 
America, as the provider of static guard services for our 
embassy as well as the State Department's oversight of this 
contract.
    Because of the dangerous and unique environment, acquiring 
guard services for our mission in Kabul is challenging. 
However, by staying focused on the No. 1 priority, the security 
of the embassy, complemented by effective contract management, 
the Department of State has successfully balanced its security 
requirements and contract compliance. Indeed, improving the 
worldwide program for procuring guard services is a Department 
priority.
    The Department of State established an Embassy Guard Branch 
in the Office of Logistics Management to consolidate, 
streamline, and regionalize these contracts previously 
administered individually by post. We believe that these 
complicated contracts should be centralized so that they 
receive the attention from procurement professionals that they 
deserve. We have grown to administer 53 contracts worldwide.
    This transition, however, has not been without growing 
pains, including a backlog of price adjustments and change 
management with the individual posts. However, we already see 
that the centralizing of the guard contract program has 
achieved results that individual posts could not achieve.
    I would like to go into a little bit more detail about the 
security services in Kabul. We have met with your staff three 
times in the past 3 weeks. We believe that these meetings have 
been extremely productive. The Department presented historical 
background, described the on-the-ground conditions in Kabul, 
and outlined the many steps taken to ensure appropriate 
oversight of ArmorGroup North America. Prior to the award of 
the ArmorGroup North America contract, the Department had 
terminated a contract with MVM due to the contractor's failure 
to meet contract requirements.
    In March 2007, a new guard contract was awarded to 
ArmorGroup North America. As required by law, this contract was 
awarded based on the lowest price, technically acceptable 
offer. This award was for one base year and four option years. 
The Department is currently in the first option year.
    As with all guard contracts, there is constant 
communication with and collaborative efforts by the contracting 
officer and Diplomatic Security in Washington and the Regional 
Security Officers on the ground in Kabul. For the ArmorGroup 
North America contract, weekly meetings, and at times daily 
meetings, are held on contract performance.
    At the end of the first contract year, Diplomatic Security 
and the contracting officer completed a thorough evaluation. In 
addition, the Bureau of Diplomatic Security has conducted 14 
program management reviews since contract award. Through this 
constant oversight, the Department identified several issues 
and deficiencies and worked to correct them with ArmorGroup. 
However, at no time was the security of American personnel at 
the U.S. Embassy compromised. Indeed, one of my priorities in 
traveling to Afghanistan last week was to have discussions with 
the Regional Security Officer and senior post management to 
confirm this fact.
    During the 2007 transition to ArmorGroup North America, the 
Department identified deficiencies in personnel, training, 
equipment, and performance. The contracting officer and the 
program manager issued several deficiency letters, a cure 
notice, a show cause notice, and carefully monitored ArmorGroup 
North America's corrective action plans. During this 
monitoring, we discovered other deficiencies concerning 
reporting, invoicing, and weapons for training. The most 
serious of our concerns were manning deficiencies that the 
contractor covered by the use of overtime hours.
    The Department always took appropriate deductions from its 
payments to ArmorGroup North America to ensure that the U.S. 
Government was compensated for less than full compliance with 
contractual terms. At the same time, we worked with ArmorGroup 
North America to correct these problems.
    Through this difficult period of contract administration, 
we have always remained focused on what counts the most, the 
security of our personnel and facilities in Kabul. The Regional 
Security Officer in Afghanistan has always reported that 
despite the contractual deficiencies, the performance on the 
ground by ArmorGroup North America has been and is sound. The 
Regional Security Officer and the senior officials of the Kabul 
Embassy reaffirmed this to me last week.
    Effective contract administration in a war zone is 
challenging. However, in this case, we feel we found the right 
balance of enforcing contract compliance without losing sight 
of protecting our people and facilities in Kabul.
    I look forward to discussing these issues with the 
Subcommittee and look forward to your questions.
    Senator McCaskill. Thank you, Mr. Moser.
    Let me start by bringing your attention to a couple of 
documents which don't seem to reconcile completely with your 
testimony today. On June 19, 2007--and if we can put this 
document up \1\--this was after the contract had begun, and I 
am quoting the document, ``I consider the contract deficiencies 
addressed below to endanger performance of the contract to such 
a degree that the security of the U.S. Embassy in Kabul is in 
jeopardy.''
---------------------------------------------------------------------------
    \1\ The letter referred to by Senator McCaskill appears in the 
Appendix on page 42.
---------------------------------------------------------------------------
    And then a year later, a letter to AGNA,\2\ once again in a 
document from the State Department, AGNA's inability to 
permanently correct personnel staffing shortages has negatively 
impacted the security posture of the local guard program for 
the U.S. mission to Kabul. The staffing situation has further 
deteriorated to a level that gravely endangers performance of 
guard services in a high-threat environment, such as 
Afghanistan.
---------------------------------------------------------------------------
    \2\ The letter referred to by Senator McCaskill appears in the 
Appendix on page 52.
---------------------------------------------------------------------------
    These are two documents that were generated by the State 
Department that has this language in them. I am trying to 
reconcile your testimony today with those documents and want to 
give you a chance to do just that.
    Mr. Moser. Senator McCaskill, thank you very much for the 
question. And I really do want to start, first of all, to put 
this in the context of where we were in the contract 
administration, particularly with the first one.
    The first letter was actually after we looked at the 
transition from our previous guard contract with the P.A. 
Berger bridge contract to ArmorGroup North America. Well, to be 
frank about it, this transition was not easy, and I will say 
this based on my 25 years in the Foreign Service. If you have 
ever been in a post where the guard contract transitions from 
one contract to another, it is a very difficult situation. 
There is usually a turnover in guards. They have to understand 
their responsibilities. The management changes. It is a very 
difficult situation. And, to magnify this, we have never done 
so many transitions in a place as dangerous as Kabul, 
Afghanistan.
    So, really, what I think that you see in the first letter 
and really in the subsequent one, too, is what I have actually 
encouraged all the contracting officers that work in my section 
to do, which is to be tough with the contractor at the very 
beginning and make sure that they know that we are serious 
about these things.
    Now, I am not going to say that these were necessarily 
exaggerations, but what we want to emphasize here, that if they 
did not correct these deficiencies with the things that were 
left out that were not done properly. Yes, this could end up to 
be a serious deficiency in the security posture of the embassy. 
But I didn't want them to go out and say to the contractors, 
well, you need to correct these because they don't comply with 
dotting the ``i''s and crossing the ``t''s in the contract. We 
want to tell them that these things really do have real 
consequences, but at the same time, the people on the ground 
said, for now, this is OK.
    Now, Senator McCaskill, I do want to make one point more on 
that. One of the reasons why the RSOs on the ground, and I 
talked both to the previous RSO who was there in 2007 and to 
the one that is currently on the ground in Afghanistan, and one 
of the things that they both--or the one that was previously in 
Afghanistan emphasized to me is that the previous contract, the 
bridge contract, was so bad and security was so poor under that 
contract that the transition to ArmorGroup was still a major 
improvement in the security posture of the embassy. And, to the 
extent that the guard posts could be covered, the requirements 
of the contract were met in terms of the actual security, they 
didn't want to go through transitioning to yet another 
contractor.
    And I can be a little bit more specific with your 
question----
    Senator McCaskill. OK. So you are anticipating my next 
question.
    Mr. Moser. Sure.
    Senator McCaskill. And I don't mean to put words in your 
mouth--
    Mr. Moser. OK.
    Senator McCaskill. I am good at doing that, so stop me if I 
do it. But what you are saying is that the first letter was 
meant to be serious with them, but it probably wasn't quite as 
serious as it sounded? Is that what you are saying?
    Mr. Moser. Well, Senator McCaskill, I think maybe to put it 
this way, the previous bridge contract was terrible and we 
really were concerned about the security at the embassy under 
the previous bridge----
    Senator McCaskill. I understand that.
    Mr. Moser. I have a new contractor, and frankly, Senator 
McCaskill, I think that you want the contracting officers in 
the Federal Government to be tough on contractors, particularly 
when they are starting into a new contract----
    Senator McCaskill. OK. So let us, just for purposes of this 
discussion, take that first letter and say, this is the new 
sheriff, the new contractor----
    Mr. Moser. That is right.
    Senator McCaskill. You are going to be tough.
    Mr. Moser. Yes.
    Senator McCaskill. But a year later, you use the language 
``gravely endangers performance of guard services in a high-
threat environment such as Afghanistan.''
    Now, this is a full 12 months later, Mr. Moser. I mean, are 
we still exaggerating to get their attention or were we not 
saying what was accurate at that point in time?
    Mr. Moser. I think it is fair to say that because we want 
this to be a thoroughly documented and tough stance toward 
contractors, we are going to continue to emphasize that what we 
are talking about here is security. But this is a tough 
balancing act.
    A year later, yes, we were right there on that borderline 
where we were thinking about, continue with them, terminate 
them. What are we going to do? And we had lots of discussions 
in the Department about what to do. So we knew that there were 
problems, but that said, and as I said in my testimony, the 
day-to-day tasks on the ground were still adequate and the 
security was sound.
    Senator McCaskill. OK.
    Mr. Moser. So it is a really hard balancing act, and just 
to put this in the right context, Senator McCaskill, is that, 
yes, we want the contract, every part of it to be complied 
with, and we do feel that all of the parts of the contract are 
important for the security of the mission. But we have got to 
think about what is going to be better for our people on the 
ground in Afghanistan, because at the end of the day, we manage 
first of all toward their security, and second, in terms of 
thorough contract compliance.
    Senator McCaskill. I want to make sure I give Senator 
Collins a chance to question now, but I do want to come back 
and ask you a few more questions. But I think it is important 
to put on the record right now that the first letter, you have 
made an effort to explain. The second letter, you have made an 
effort to explain. But I think it is very important to point 
out that on the initiative of the Department of State, in March 
of this year, you did a check and inspected the guards----
    Mr. Moser. Yes.
    Senator McCaskill [continuing]. And found 18 posts had been 
left empty by the guards on duty at the embassy, and that was 
March of this year.
    Mr. Moser. No, March of last year. Wasn't that 2008? Or was 
that 2009?
    Senator McCaskill. No. This is 2009. That is this year.
    Mr. Moser. OK.
    Senator McCaskill. The third year of the contract, or 
coming up upon the third year of the contract. I have taken my 
initial time allotment and let me defer to Senator Collins for 
questions.
    Senator Collins. Thank you. Mr. Moser, I have to tell you 
that in reviewing these documents, I, too, find them to be very 
conflicting and confusing. It troubles me if you are telling a 
contractor--and by you, I mean the Department of State----
    Mr. Moser. Yes, I am sure. I understand.
    Senator Collins [continuing]. Not you personally--if the 
Department of State is telling a contractor that the 
deficiencies address below to endanger performance of the 
contract to such a degree that the security of the embassy is 
in jeopardy, if that is not a true statement, then the 
Department of State should not be saying it. If that is an 
exaggeration, then it is unfair to the contractor that that is 
being said. If it is accurate, then it is an alarming situation 
that demands action by the State Department. So clarify that 
for me.
    Mr. Moser. OK. Well, I am not a contracting officer.
    Senator Collins. Right.
    Mr. Moser. I am a Foreign Service Officer, and one of the 
things that we are very much aware of in the contracting 
activity is that there is--the actual service being delivered 
is to provide security services for the U.S. Embassy in Kabul. 
That is, the principal security service. But there are a lot of 
other contract terms that have an impact on the delivery of 
that service that are reflected.
    Now, deficiency letters and cure notices are things that if 
you work with the parties involved can be corrected over time. 
In other words, we never said that you are not providing the 
security services. We are saying that these deficiencies, which 
they call them cure notices because they are curable, that we 
could work with these and correct them, but they are going to 
have to be corrected to maintain the long-term posture of 
security at the embassy.
    And those are the things--it is a difficult--I don't want 
to say that the contracting officers have exaggerated. No. But 
I think that they have given them a tough enough posture to 
say, look, if you don't correct these problems, then over time, 
this could lead to a serious degradation in the security in the 
embassy and its posture.
    Senator Collins. Well, let us look at another measure. The 
Defense Security Service does an annual security review of the 
contractor. Now, initially, in June 2006, the ArmorGroup 
received a superior rating. So that seems inconsistent to start 
with as far as your statement that when there is a change in 
the contractor, that the contracting officer is very tough up 
front. But here is the other unit, the Defense Security 
Service, giving the contractor a superior rating.
    Then what happened over the 3-year period is the 
contractor's rating declines each year. It doesn't go all the 
way to unsatisfactory, which is what you would expect based on 
the cure notice, but it does decline from superior to 
satisfactory.
    Now, it is my understanding that the Defense Security 
Service notifies the sponsoring agency, in this case the State 
Department, merely whether or not the contractor is still 
satisfactory, correct?
    Mr. Moser. That is correct. That is my understanding, too, 
Senator Collins.
    Senator Collins. But does the Defense Security Service 
share the actual performance reviews of the contractor with the 
Department of State?
    Mr. Moser. They do not share them with the contracting 
authority who holds the actual contract.
    Senator Collins. Shouldn't that information be shared?
    Mr. Moser. Absolutely. But that is not something that, if I 
can say this, we would be happy to have external information on 
the contractor and what the contractor has done in the past. In 
fact, one of the things in previous contracts that I have 
actually discussed with the Congress in the past, my 
contracting officers will trace down blog posts and see--if 
there is an allegation of blog posts, they will go chase after 
it to see if it is right. I would really think it would be 
beneficial for us to get official information. I fully agree.
    Senator Collins. It seems to me that it should be an 
automatic requirement.
    Let me go to another issue, and that is the nature of the 
deficiencies that were identified. You have testified here this 
morning that at no time during the performance of this contract 
have you felt that the security of the perimeter was breached 
or that the embassy personnel were, in fact, endangered, is 
that correct?
    Mr. Moser. Yes, ma'am, that is correct. And it is not what 
I think. It is my discussions with the security officials who 
were on the ground. It means the people who--I talked about 
this with the people whose lives were at risk.
    Senator Collins. What concerns me about that assessment is 
the nature of some of the deficiencies. Some of the 
deficiencies to me could not possibly have an impact on 
security. For example, there was a failure to provide adequate 
gym equipment. Now, that is not complying with the contract and 
that means potentially we are paying for services that weren't 
rendered and that is important, but that is a whole different 
issue and does not speak to security.
    But some of the issues seem to speak to security. For 
example, there is a charge that there was a late submission of 
ammunition.
    Mr. Moser. Yes.
    Senator Collins. So why wouldn't that have an impact on 
security?
    Mr. Moser. Well, the ammunition issue was one of the ones 
that we were most disturbed about, and this is the reason why. 
At one time in the early days of the contract, in 2007, in the 
first 6 months, the State Department had to loan ArmorGroup 
North America ammunition, not with which to stand post, but 
with which to train. In other words--and the contract actually 
requires the ammunition in three forms. The contractor is 
supposed to supply ammunition for its personnel to stand at 
post, to train with, and then a reserve storage.
    Now, we were disturbed that ArmorGroup North America did 
not have sufficient reserve storage, and the reason why this is 
such a disturbing thing to us is that it is Afghanistan and 
supply chain can be very difficult. So this was one of the ones 
we really were kind of jumping up and down about. In actual 
circumstances, the guards were still on post. They had enough 
ammunition to shoot with. They didn't have to shoot anybody. 
But we were disturbed that if we had an incident, then we could 
actually get pressed, and that was where we were really 
disturbed. But ArmorGroup North America did make up that 
deficiency and currently have sufficient ammunition supplies.
    Senator Collins. I see my time has expired.
    Senator McCaskill. In the deficiencies, following up on 
Senator Collins' questions, in the contract, we have personnel, 
we have training, we have equipment, we have performance, we 
have reporting, and we have invoicing. My understanding, they 
still don't have the weapons they are required to have under 
the contract for training, is that correct?
    Mr. Moser. That is true.
    Senator McCaskill. And we are not talking about office 
supplies on that list. We are talking about missing guards, 
counterfeit goods, insufficient relief guards, manning posts 
with people who lack English language training and weapons 
training required under the contract. Now, maybe the question 
that needs to be asked, Mr. Moser, is when we are in theater, 
when we are sending thousands of Americans to risk their lives 
in a country that we have deemed such a risk to our country 
that we are putting men and women's lives on the line every 
day, is it maybe time to say that we should not be guarding 
embassies in theater with private security contracts?
    Mr. Moser. Senator McCaskill, that is an excellent 
question. I can't really give you an official Department 
position, but I can give you some of my personal views on this.
    Basically, we have had local guards or contract guards at 
our embassies for many years, as long as I have been in the 
Foreign Service, I think. I have been in the Foreign Service 25 
years and the first embassy I went to in Bamako, Mali, had 
contract guards, and going back much further than that.
    It is a good question and one that I would encourage this 
body to really examine and in a dialogue with the State 
Department about whether, in certain situations, it is a good 
idea. But let me give you a couple perspectives on this.
    One reason that it is an advantage to use contractors is 
that it allows us flexibility. As our requirements go up, we 
can hire more guards or we can ask the contractor to hire more 
guards. We can decrease as our requirements go down.
    And one of the things that is something that the 
Legislative Branch will have to contemplate if we do change our 
current arrangements in this is that we actually look at the 
possibility--that we actually remember that if we would 
Federalize this workforce, then we also have to increase the 
amount of embassy staff on the ground in order to supervise 
that force and to handle things like personnel transactions and 
financial transactions.
    Senator McCaskill. Well, couldn't they be military?
    Mr. Moser. No. Well, that----
    Senator McCaskill. Why couldn't it be military?
    Mr. Moser. I think you will need to talk to my colleagues 
in DOD about that, because that----
    Senator McCaskill. Well, here is what I am trying to figure 
out. I mean, the reason we have these unusual situations in 
Iraq and Afghanistan is because there was a decision made that 
nationals were too dangerous. We couldn't hire nationals 
because of the nature of the threat. So what do we do? We hire 
people from Nepal who can't speak English for $800 a month.
    Now, I have got to tell you, if this is about the locals 
being not sufficient to guard our embassy in theater because of 
the threat, it seems to me that we are not going up the food 
chain, we are going down the food chain. I mean, these people 
still--they have told you they can speak English, but you still 
have not made any verification that the people that are 
standing guard at this embassy can communicate in English, 
isn't that correct?
    Mr. Moser. Senator McCaskill, we are currently evaluating 
the information that we have from ArmorGroup North America and 
they have actually attested to us that the English 
certifications are now correct for all of the Gurkha guards.
    Senator McCaskill. And they also told you they are going to 
have weapons a year ago.
    Mr. Moser. Yes, but, Senator, with all due respect----
    Senator McCaskill. Didn't they?
    Mr. Moser. I am somewhat sympathetic with them about the 
weapons based on my other experience in procurement. We try to 
get radios for our embassy in Baghdad or for our other 
embassies around the world. We can't get them anymore. The 
reason we can't get them is because the DOD is sucking up all 
these resources, and particularly for the weapons that we 
procure for this, we are really in competition with a much 
bigger buyer, and ArmorGroup North America and the other 
security companies are, too. There is a real shortage in terms 
of the supply chain side that really keeps them from getting to 
them.
    And so this is one of the reasons why, even though I am not 
happy about their shortage of the weapons, I actually am 
somewhat sympathetic based on my own personal experience in 
trying to supply equipment for our embassy and our offices.
    Senator McCaskill. I understand the point you are making 
about the supply chain on the weapons, but Mr. Moser, this is a 
contract that anybody with a cold, cruel eye looking at the 
oversight of this contract would say that there have been 
serious performance issues. And I guess at this point, the idea 
that you would trust and not verify when literally just a few 
months ago when you did try to verify you found 18 posts 
empty--now either those posts were empty because they didn't 
have sufficient staff, which they have told you they have now, 
or they were empty because they were negligent in covering 
those posts.
    Now, we are going to renew this contract again and I guess 
I am a little worried that at this juncture, with this kind of 
record on contract performance, that them just telling you that 
they are now in compliance seems to be sufficient for you.
    Mr. Moser. Well, Senator McCaskill, one of the things is I 
have worked with local guard contracts or guard contracts for a 
long time as management officer overseas, and in fact, at one 
of my small posts, I was actually the post security officer and 
had to run the guard contract myself. There are two RSOs on the 
ground out of 16, I think, total, and with that total to grow, 
that spend most of their time working on this. In terms of the 
language skills, those are things that we look at the data that 
they have presented but they go out and verify that, as well. 
In fact, our attitude with contractors in general is not trust, 
but verify. Our attitude is more like we don't believe what you 
are saying, we are going to check it out, and we really do try 
to do that in this contract, as well.
    That is the reason why I have to have those eyes and ears 
on the ground in Kabul to go out and check with the Gurkhas and 
see if they can come out with a complete sentence of English. 
And I have to have them go and check the guard posts to make 
sure that they are manned.
    Senator McCaskill. Well, when you checked the last time, 
could they come out with a sentence in English when you 
checked?
    Mr. Moser. Well, from what the indications that we had from 
the RSO, yes, they have made a lot of progress and that things 
are better. We are going to go over the data. We think that it 
may be resolved, but we are not entirely certain.
    Senator McCaskill. OK. Go ahead, Senator Collins.
    Senator Collins. Thank you.
    Mr. Moser, just so we don't leave the wrong impression 
here, it is my understanding that the Gurkhas are extremely 
well regarded----
    Mr. Moser. Yes, they are.
    Senator Collins [continuing]. In security circles, that 
they are well known for staying at their posts regardless of 
the threat, is that correct?
    Mr. Moser. That is my understanding, too, Senator Collins. 
I have seen them at posts, but I have never been in a country 
where we have had them full time.
    Senator Collins. And they are, in fact, used at several 
embassies?
    Mr. Moser. Yes, they are. And in fact, the U.K. uses them 
quite extensively in various dangerous places around the world.
    Senator Collins. I just wanted to clarify that point.
    Senator McCaskill. Thank you. I probably got carried away 
about the food chain.
    Senator Collins. Even though, I was just going to say, I am 
sympathetic with the Chairman's point, that even if you have 
exceptional guards, they have got to be able to communicate----
    Mr. Moser. Yes.
    Senator Collins [continuing]. To the English-speaking 
embassy personnel.
    Mr. Moser. Well, this is something that we do care about. I 
mean, this is what the RSOs have to go out and determine, that 
they can actually run the workforce.
    Senator Collins. Let me talk about the award of this 
contract. It is my understanding that prior to the award of the 
AGNA's contract, the State Department had terminated the 
previous contract with MVM, is that correct?
    Mr. Moser. Senator Collins, if I can give you one point of 
clarification on that----
    Senator Collins. Yes.
    Mr. Moser [continuing]. We did terminate it, but they 
actually never performed.
    Senator Collins. I guess that would be extremely poor 
performance.
    Mr. Moser. Well, let us say that, to use a polite phrase, 
they just couldn't get their act together and it was very 
obvious in the transition period that they weren't going to be 
able to perform. And that is the reason why we had to terminate 
that one rather precipitously.
    Senator Collins. So let us talk about the contract that was 
awarded to AGNA. That was awarded in March 2007 and I am 
informed that it was based on an evaluation technique that is 
called lowest price, technically acceptable.
    Mr. Moser. Yes, ma'am.
    Senator Collins. And it is my understanding that in such 
circumstances, the lowest price bid is selected regardless of 
the relevant strength of the bidder's qualifications, is that 
correct?
    Mr. Moser. Senator Collins, if I could put that--just one 
more finer point on it----
    Senator Collins. Yes.
    Mr. Moser [continuing]. Is the lowest price, technically 
acceptable. It is in the State Department legislation passed by 
Congress. It is actually in our authorizing legislation, is my 
understanding. I have seen the legislation, but I don't 
remember the exact passage. And it is technically acceptable.
    In other words, to get the specifics on this, there were 
eight bidders on this contract. Two were found to be 
technically acceptable. We had discussions with both of those 
who were found technically acceptable and AGNA was the winner 
after that based on a price that was lower than the other 
technically acceptable bidder.
    Senator Collins. Now tell me how that differs from a best 
value approach to awarding the contract.
    Mr. Moser. Well, in a best value approach, we would weigh 
the cost versus the quality of the proposals or what we think 
that the contractor could bring to the table. You have to make 
trade-offs between cost and what is being offered. And it is a 
much more complicated technical evaluation. In other words, at 
the program office--and this is true in any contract, not 
necessarily--not only security services, but in any contract--
you are trying to make a decision of what is the best value to 
the U.S. Government given both cost and technical 
qualifications.
    Senator Collins. Now, it is my understanding that the 
current contractor, Wackenhut, bought the company AGNA.
    Mr. Moser. Yes, ma'am.
    Senator Collins. They had been one of the bidders but lost 
out because their bid was considerably higher, is that correct?
    Mr. Moser. Their bid was not judged to be technically 
acceptable.
    Senator Collins. It was not technically acceptable. Was it 
also higher?
    Mr. Moser. That, I don't know.
    Senator Collins. Is there a process when a company is 
acquired for reevaluation of the contract?
    Mr. Moser. Normally, we do not do that. Companies do get 
traded, and usually if one goes to another, as long as the 
other security parts are met in terms of the acquisition about 
foreign ownership or other things, we don't really go in and 
change because our contract is still valid.
    Senator Collins. Do you know why Wackenhut was viewed as 
not being technically qualified?
    Mr. Moser. No, ma'am, I do not.
    Senator Collins. It is my understanding that the contractor 
is currently operating at a loss of $1 million a month, 
according to the testimony. This has raised the question in my 
mind of whether, given the lack of compliance with the contract 
requirements, the requirement that you essentially take the 
lowest acceptable bidder--which sounds great, we want 
competition and we want the lowest bidder--but we also want 
quality performance. Do you believe that the bid price was too 
low to be feasible for a security contract under these 
constraints or is this just a--the contractor agreed to it, so 
obviously that is not the government's fault, but what is your 
assessment?
    Mr. Moser. Well, maybe if I can answer the question this 
way. As I have said, I have been in the State Department, 
overseas mostly, for the last 25 years and seen a lot of 
contracts, overseas contracts, and our biggest contract at any 
normal post is always the guard services contract. Lowest 
price, technically acceptable gets us the best value product 
but usually at the least cost, but it gets us an acceptable 
product at a least cost.
    If you have best value, you would have the chance to get 
perhaps at a higher cost a better product. And this is the 
reason why, particularly for these very difficult security 
situations, like Afghanistan and Iraq and Pakistan, I think 
that we really should look at a change in legislation that 
would give us a best value way of appraising this.
    Now, I say this partly because I am a big believer in 
contracting officers, and contracting officers and program 
officers, and I really think that if they have--if you give the 
employees at the Federal Government enough flexibility or the 
employees at the State Department enough flexibility to make 
good decisions, they will try to make a decision that is in the 
U.S. Government's best interest, because I think you both share 
with me that our first priority is making sure that we have 
good security for our embassy personnel in the most dangerous 
of situations.
    Senator Collins. Thank you.
    Senator McCaskill. In January 2008, AGNA informed the State 
Department that the logistics manager, the official responsible 
for AGNA's contracting for embassy guard force, may have been 
buying counterfeit goods and had purchased over $380,000 worth 
of equipment from a company owned and managed by his wife. What 
actions did the State Department take at the point in time that 
it learned that information?
    Mr. Moser. At the point in time when we learned that 
information, we told AGNA to continue its investigation, report 
back to us, and once we learned that this was true, we asked 
for the individual to be removed from the contract, the person 
that was their employee.
    Senator McCaskill. And what about the wife's company? Was 
there any investigation? Was there any thought to having a 
fraud investigation, because clearly when you have that kind of 
arrangement, speaking as a former auditor, that is generally 
when you have kickbacks going on. That is generally when you 
have money being exchanged under the table. Was there any 
thought at the State Department that this would be a time that 
you would want your fraud investigators to look at what was 
going on in this contract in case taxpayer money had been 
stolen?
    Mr. Moser. Well, one of the things is, Senator McCaskill, I 
am a big believer in audits. Actually, I am a big believer in 
them. But this is a firm fixed-price contract. That is part of 
the nature of lowest price, technically acceptable, that it is 
at a given price. In other words, we pay them for the guard 
hours that we ask for. So there isn't really--the fraud isn't 
really committed against us. In other words, let me give you an 
example.
    Senator McCaskill. Wait a minute.
    Mr. Moser. Well, let me explain. I lived in Central Asia 
for 3 years. I was assigned to our embassy in Kazakhstan. The 
counterfeit goods were all over the local markets, but I 
couldn't always tell whether they were or were not counterfeit. 
And I know that this happens, particularly in these Asian 
countries with close proximity to China. This is very common.
    In our contract, we say, you will give the guard a coat. We 
don't say what kind of coat, quality of coat, anything like 
that. So to us, the fraud wasn't really committed against us. 
The contractor was giving the guard a coat. We didn't know what 
the coat was. So there wasn't really any fraud against us.
    Now, we are more than happy to call our own Inspector 
General when we think there is something untoward in our 
contract, but we didn't ask the contractor to provide a certain 
brand or a certain quality. We just specified the item.
    Senator McCaskill. OK. So I want to make sure that I 
understand this. If the U.S. Government is not seen as the 
victim of a financial crime, there is no interest in looking at 
for fraud purposes activity of a contractor that could, in 
fact, be criminal? Is that what you are testifying, Mr. Moser?
    Mr. Moser. Now, Senator McCaskill, I am not sure if I can 
really answer that question. All I can do is talk about what we 
did in this case, and what we did was the person was removed 
from the contract. We weren't really affected by the 
counterfeit goods and we didn't do anything further on this.
    Senator McCaskill. Well, I have to tell you, I am 
surprised. I think most people would be surprised that if you 
knew that someone that was a contractor for the U.S. 
Government, that someone who was a major acquisitions personnel 
within that contract, if you found out that they were buying 
counterfeit goods from their wife and it was $380,000 worth of 
goods, even if it was a fixed-price contract, it would seem to 
me that somebody would go, we need to ask some questions here 
because it may be that we have got criminals working for us.
    Mr. Moser. Well, we did take appropriate action in terms of 
having that individual removed from the contract.
    Senator McCaskill. Are you confident that this particular 
company was no longer used in terms of buying things from this 
company as the contract moved forward? Did you make inquiry in 
that regard?
    Mr. Moser. We felt that the problem was resolved after the 
person involved was removed. And we also felt that they gave us 
an adequate explanation of what was going on. But I will be 
honest with you, Senator McCaskill. The RSOs, looking at the 
goods that the guards have, are not going to know whether they 
are counterfeit or not. That is just realistic.
    Senator McCaskill. I am more worried about the relationship 
between the procurement official in this contract and the 
person they bought the stuff from. I mean, do we have no 
responsibility to make sure that the people who are working for 
us are following basic guidelines in terms of following the 
law?
    Mr. Moser. Senator McCaskill, this is what I would say, is 
that the person that my contracting officer has a relationship 
with is the company. The company informed us that this activity 
was going on and that they needed to investigate it. They took 
appropriate action by dismissing the employee involved in this.
    Senator McCaskill. Well, I guess what I am saying is----
    Mr. Moser. We felt that our interest in it----
    Senator McCaskill [continuing]. Maybe appropriate action 
was sending that person to prison. How do we know they took 
appropriate action if you never asked the question?
    Mr. Moser. Well, I can't answer that.
    Senator McCaskill. All right. Finally, Mr. Moser, this 
contract is going to be renewed, correct?
    Mr. Moser. Our intention is to renew this contract.
    Senator McCaskill. OK.
    Mr. Moser. Or not actually to renew. What it is is actually 
exercise the second option year.
    Senator McCaskill. And was this a close call?
    Mr. Moser. Senator McCaskill, it wasn't really a close call 
this year and this is the reason why. The contractor has, as I 
have said today, done a reasonable job in providing security 
for the embassy and we have been satisfied with that 
performance. When there haven't been enough men at posts, and 
we do have, let us say, redundant coverage to make sure that 
the manning never endangers the security of our personnel on 
the ground in Kabul, that we have been able to make up for that 
through using our redundancy to make sure that the manning was 
covered. The security has been sound.
    The things that we have asked for them to correct, the 
deficiencies that are outlined voluminously in our contract 
files, have for the most part been corrected except for the one 
deficiency regarding the training weapons and we feel that will 
be resolved going into the next year.
    Now, weighing that against the risk that we would undertake 
for our employees in Afghanistan if we went to another 
contractor, we think that exercising the next option year is 
really the best alternative.
    Senator McCaskill. Would it change your opinion as to 
whether or not you would want to renew an option year if you 
knew the contractor didn't want to work under this contract 
anymore?
    Mr. Moser. Well, Senator McCaskill, if the contractor 
doesn't want to work under the contract anymore, he should give 
us a formal notice that he doesn't.
    Senator McCaskill. OK. Thank you, Mr. Moser.
    Mr. Moser. Sure.
    Senator McCaskill. Senator Collins is no longer here.
    Thank you very much for being here today. I also want to 
just briefly mention that I think that you have tried 
diligently to provide us with documents. I know that you didn't 
have months to prepare. But I would just put on the record that 
I think there is still some work to be done in terms of how 
responsive the State Department is to requests for information 
because it has been a little bit of an arm wrestle.
    Mr. Moser. Senator McCaskill, if I can say one thing on 
that, the document release or the process of document release 
is not something that I am responsible for in the State 
Department, but I will say that in the contracting authority, 
there is virtually no document that we are unwilling to share 
because the contracting officer's best friend is transparency. 
And, in fact, we think an honest dialogue with the members of 
the Legislative Branch is to our benefit and we are more than 
happy to share the documentation with you. But we do have a 
process in the State Department.
    Senator McCaskill. And I think that is a question for 
another time and it is something I would like to get into with 
the State Department----
    Mr. Moser. Yes, ma'am.
    Senator McCaskill [continuing]. Because it is my 
understanding that based on an independent analysis, there are 
FOIA requests that are a decade old at the State Department, 
and that, for somebody who has just used the word 
``transparency,'' I am proud of our State Department, but for 
anybody who works there, I can't imagine an excuse that could 
be valid for FOIA requests languishing as long as they do in 
many instances. And unfortunately, for purposes of most members 
of the Senate, if you are not the Chairman of a Subcommittee or 
a Committee, your request for information at the State 
Department is treated the same as any person off the street. 
Now, I am not sure that is a bad thing as long as the person 
off the street is getting the service they deserve.
    But I would certainly send you back to the State Department 
with encouragement that we are going to continue to look very 
closely at how easy it is to get information and how quickly we 
can get information out of the State Department and ask you to 
send the word out that that needs some work over there.
    Mr. Moser. Senator McCaskill, the person that is in charge 
of that function is another one of the deputy assistant 
secretaries in the bureau I work in, in the Bureau of 
Administration, and I am sure she would be happy to talk to you 
about this issue at any time.
    Senator McCaskill. We will do that.
    Mr. Moser. It is something she is very passionately 
concerned about.
    Senator McCaskill. Thank you for being here today.
    I want to put on the record that Mr. Moser has indicated 
that he will come back to the table, if necessary, for follow-
up questions after the testimony of Mr. Brinkley. I haven't 
been here a long time. I am not really sure about this, not 
being at the same table at the same time and where that comes 
from. I don't get it. But it is what it is.
    So welcome, Mr. Brinkley. You are the Vice President for 
Homeland and International Security Services of Wackenhut 
Services, Incorporated. As I indicated to Mr. Moser, it is the 
custom of this Subcommittee to swear in all witnesses and would 
ask if you would stand.
    Do you swear that the testimony that you are about to give 
before this Subcommittee will be the truth, the whole truth, 
and nothing but the truth, so help you, God?
    Mr. Brinkley. I do.
    Senator McCaskill. We welcome your testimony. Your entire 
testimony will be put in the record. We ask that you try to 
limit your testimony to 5 minutes. Thank you.

 TESTIMONY OF SAMUEL BRINKLEY,\1\ VICE PRESIDENT, HOMELAND AND 
    INTERNATIONAL SECURITY SERVICES, WACKENHUT SERVICES, INC

    Mr. Brinkley. Thank you, Madam Chairman. I know that 
Ranking Member Collins has left, but----
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    \1\ The prepared statement of Mr. Brinkley with an attachment 
appears in the Appendix on page 35.
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    Senator McCaskill. She will be back.
    Mr. Brinkley. I am looking forward to seeing her return.
    I am here at the request of the Subcommittee to discuss the 
U.S. Government's contract to provide the protective force for 
the U.S. Embassy in Kabul.
    As background, I am the Vice President for Homeland and 
International Security Services. I have previously served as a 
Marine infantry officer for 20 years. I have commanded from 
platoon through battalion levels. I was the WMD policy advisor 
in the Office of Counterterrorism in the Department of State 
for over 3 years, including on September 11, 2001, and I have 
been a professional staff member on the 9/11 Commission. I have 
over 35 years of experience in security, special operations, 
and force protection.
    This past year, Wackenhut Services, Inc. (WSI) came to own 
ArmorGroup North America, often called AGNA, the prime 
contractor for the Kabul Embassy contract. Now, the events that 
led to this acquisition are somewhat circuitous, so let me go 
through that.
    In May 2008, our parent, G4S, purchased the parent of AGNA, 
ArmorGroup International, in a friendly take-over on the London 
Stock Exchange. G4S purchased ArmorGroup International for the 
purpose of acquiring ArmorGroup's profitable operations in 
other parts of the world, not for any reason having to do with 
AGNA. AGNA was a troubled part of the broader ArmorGroup 
enterprise and they came along with the acquisition of 
ArmorGroup International.
    At the time of G4S's acquisition of ArmorGroup in May 2008, 
ArmorGroup North America was subject to a notice to cure 16 
deficiencies and weaknesses that had been issued by the 
Department of State on April 30, 2008. WSI has a strong 
reputation for effective performance of guard service contracts 
at U.S. Government facilities and our parent, G4S, asked WSI if 
we would take responsibility for assessing ArmorGroup North 
America's problems at the Kabul Embassy contract and for 
ensuring that whatever needed to be done was done to come into 
full compliance with contract requirements.
    With the concurrence of appropriate U.S. Government 
officials, ownership of the stock of ArmorGroup North America 
was transferred to WSI in November 2008.
    Now, within WSI, I was given the responsibility of 
overseeing ArmorGroup North America's corrective action and 
bringing AGNA into contract compliance starting in May 2008 and 
I have total responsibility operationally for AGNA's 
performance of the Kabul Embassy contract. During the past 
year, we have, one, worked very hard to correct the inherited 
deficiencies in AGNA's performance of the contract.
    Two, we have brought to bear the extensive experience of 
WSI acquired over many years of successful performance of guard 
services contracts for the U.S. Government.
    Three, I personally worked with the forces on the ground at 
the Kabul Embassy and with the responsible parties at State 
Department to address each deficiency and weakness.
    Four, WSI has made appropriate personnel changes and has 
thoroughly redone AGNA's internal processes and procedures to 
attain and sustain contract compliance.
    We are proud to say that now we have addressed each 
weakness and deficiency in the performance of the contract and 
that today, AGNA is in full compliance with staffing and major 
requirements of the contract. The Kabul contract has been fully 
staffed since January 2009.
    There are only two issues that we see remain open. We are 
awaiting the manufacture of certain training weapons, and that 
has been discussed with the previous panel member; however, I 
would like to point out that no training has been missed 
because we were using government-furnished training weapons 
versus the ones the contract required.
    We also have a requirement for a relief or a back-up 
armorer. That armorer completed training yesterday and we will 
be deploying that person to Kabul. However, the contract 
requirement of having an on-scene armorer at post is filled.
    I have submitted my written testimony. In that written 
testimony is a chart that shows the timing of our acquisition 
of ArmorGroup and the ownership chain and some of the key 
contract events since May, and you have that as an attachment 
to the written testimony.\1\
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    \1\ The chart referred to by Mr. Brinkley appears in the Appendix 
on page 41.
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    I would like to emphasize four areas. Upon arrival, we 
immediately took steps to assess the situation, both on the 
ground and here in the United States. We sent a senior 
management team into Afghanistan to get a firsthand view of the 
situation. We were most concerned that the security of the 
embassy was impaired. While there, we walked the ground with 
our leadership, talked with the Department of State customer to 
get their view of the operational status. Back here, we brought 
in staff expertise to examine export control compliance, 
finance, and contract administration.
    What we found was, first, the protective force operations 
on the ground were executed well and in good standing, 
according to the RSO. There were significant contract 
compliance and administrative issues. The Department had issued 
a cure notice with 16 deficiencies on April 30. The Department 
did not believe that AGNA's contract noncompliance rose to the 
level to impair the security of the embassy. We agreed with the 
Department's perspective that the embassy was secure.
    Second, we moved to quickly develop a comprehensive 
corrective action plan that would bring the contract into 
compliance. We submitted a new comprehensive plan to address 
each deficiency and weakness on June 12, 2008. We implemented 
within AGNA and onto the contract proven WSI processes to staff 
the project with talented, reliable U.S./ex-pat and Gurkha 
guard force. Staffing, of course, was the major weakness of 
contract compliance. We changed and strengthened the ArmorGroup 
North America headquarters and in-country leadership.
    Third, while we take the contract deficiencies seriously, 
we still see the embassy secure. The contract has been fully 
staffed since January 2009. There are several items left to be 
closed on the original 16 deficiencies. We found nothing 
inconsistent with DOS's views that the embassy is secure.
    Finally, to attain and sustain contract compliance, 
financial resources have been spent. WSI and G4S are losing 
about $1 million a month in the execution of this contract. In 
2006, which has been discussed with the previous panel member, 
Assistant Secretary Moser, we bid on this contract. We lost to 
AGNA. The Department did determine that our bid was not 
technically correct, but I will tell you that our proposal 
price was significantly higher than ArmorGroup's.
    Ironically, we now own AGNA and are having to execute this 
contract with what we believe is an unreasonably low price. 
After a year, I have become convinced that the services within 
the statement of work cannot be provided with ArmorGroup North 
America's proposed price. Let there be no doubt. Regardless of 
the negative financial impact that WSI has had, WSI is 
dedicated to mission one, the security of the U.S. Embassy.
    In conclusion, I am most proud of the AGNA and the WSI 
employees who have worked so hard over the past year, both here 
and in Kabul, to make this contract right and to keep this 
embassy secure. They, in fact, are true professionals.
    With that, I will be glad to answer your questions.
    Senator McCaskill. Thank you, Mr. Brinkley.
    Let me start with what is obvious here. Did you send a 
notice to the State Department that you did not wish to 
participate in the third year of the contract?
    Mr. Brinkley. We have not.
    Senator McCaskill. And why have you not done that?
    Mr. Brinkley. Well, I look at this in two ways. We are a 
guard company that prides itself in doing missions well. We 
have worked very hard over the last year to make this contract 
compliant. We are very proud of that. We can do this job. So 
from that perspective, operationally, we are proud to do that 
and proud to make it right.
    On the other hand, there is the financial business side. I 
would prefer to do it and not lose money. So that is where we 
are at this point in time.
    Senator McCaskill. Well, I am confused. If you are losing 
$1 million--did you say $1 million a month, you are losing?
    Mr. Brinkley. That is correct.
    Senator McCaskill. Well, if you are losing $1 million a 
month, why wouldn't you tell them you don't want the contract 
again and they would have to rebid it?
    Mr. Brinkley. Well, it is my understanding that it is the 
government's decision to execute the option and I just heard 
Assistant Secretary Moser's testimony that we have the option 
and we will take that under advisement.
    Senator McCaskill. OK. You have testified that in January 
of this year, the contract was fully staffed and even over-
staffed according to the requirements of the contract. But yet 
a few months ago when the State Department did a verification 
of that, there was, in fact--it was determined there were 18 
posts vacant. If you were fully staffed, was that just 
negligence?
    Mr. Brinkley. It was an issue associated, Senator, with 
break time with the guard force. The guard force has a 
requirement that on several times a day--in the morning, at 
lunch, and in the afternoon--to break personnel on post. The 
personnel on post were improperly relieved. They were actually 
on embassy property and were in the break room. Were the posts 
open? Yes. Were the personnel on the embassy grounds and able 
to respond? Yes. The deficiency was based upon the supervisors 
that were immediately over them and that they did not ensure 
that break occurred properly.
    Senator McCaskill. Could you shed any light on the 
situation with the counterfeit purchases and the procurement 
officer buying almost $400,000 worth of goods from his wife?
    Mr. Brinkley. Madam Chairman, that happened before our 
acquisition of the company. I have the same knowledge of the 
documents that the Committee has and I don't have any----
    Senator McCaskill. Is that individual working for you?
    Mr. Brinkley. No.
    Senator McCaskill. And do you buy anything from his wife's 
company?
    Mr. Brinkley. No.
    Senator McCaskill. Let us talk about the language issue. 
You are now representing that you have all of your folks in 
compliance with the language requirement of the contract?
    Mr. Brinkley. That is correct. And if I might, let me 
explain the process that--what we inherited and the process we 
are doing to ensure that the personnel that are at the embassy 
have their language requirements and maintain, if you would let 
me.
    One, there were a number of personnel prior to our 
acquisition that did not have the language capability in which 
the contract mandates. As we acquired the company, there at 
that time was a full-time English instructor in Kabul on the 
contract teaching English to fill that gap. That instructor 
certified all the personnel at that time at the level two 
English, in accordance with the requirement.
    Now, we noticed that this is obviously a problem for the 
long-term, so as we go now to recruit Gurkhas as replacements, 
we give them full language tests in Kathmandu to even qualify 
them to be a part of this guard force. And so we certify that 
with an independent instructor in Kathmandu outside of those 
that would do the actual recruiting. So we have an independent 
assessment of their capability and then we have that 
documentation.
    Additionally, we currently have a full-time English teacher 
in Kabul in Camp Sullivan that has language classes every week 
with the current force. Additionally to that, we are in the 
process of hiring a second language instructor to go in to 
augment that current instructor to increase the number of hours 
that we have capable. So all the current guard force have 
certifications of which they are level two or level three, as 
required, and we are going to increase the capability to 
sustain that with language instructors on the contract.
    Senator McCaskill. And finally, before I defer to Senator 
Collins, you are receiving around $37 million a year on this 
contract?
    Mr. Brinkley. I would have to look at the exact numbers. It 
is whatever $190 million is divided by five, I guess, whatever 
one-fifth of that might be.
    Senator McCaskill. And the third-country nationals are 
making about $5.35 an hour?
    Mr. Brinkley. They have a set rate of about $800 a month, 
yes.
    Senator McCaskill. And the local nationals, which you have 
some working on this contract, make $2 an hour?
    Mr. Brinkley. That is correct.
    Senator McCaskill. Thank you. Senator Collins.
    Senator Collins. Thank you.
    Mr. Brinkley, I want to go back to the letter that the 
Chairman mentioned that was sent on March 30 of this year, so 
this is when the obligations are at this point firmly under 
WSI's control, talking about the Kabul staffing issues and 
listing the areas where there appeared to be vacant guard posts 
over a period of, I guess it is just 2 days. Now, it is evident 
that the 19 posts that were identified were not vacant all at 
the same time, correct?
    Mr. Brinkley. That is correct.
    Senator Collins. But what is disturbing to me is this was a 
spot check over 2 days and it found so many vacancies. So to 
me, what you have here is a pattern that is disturbing and it 
isn't as if these guard posts were vacant just for a few 
moments. They were vacant for long periods of time. For 
example, in one case, they are vacant from 11 p.m. to 2:30 
a.m., 210 minutes. In another case, they are vacant for 76 
minutes. So it is not as if just for a few minutes these were 
vacant. And while I understand that not all 19 were vacant at 
the same time, to me, it is more troubling that there was a 
pattern each day of vacancies. Has this problem been remedied?
    Mr. Brinkley. Senator Collins, the answer to that is yes. 
We were disturbed with that, as you would think we would be. We 
obviously debriefed and have talked to the actual inspector. We 
have made sure we understood clearly how it was done and the 
problems, and where we needed to take corrective action with 
supervisors that was necessary, they have been removed from 
their post and different supervisors have been placed. I have 
personally talked to the program manager about that issue and 
we know that they have taken corrective actions and we believe 
that that will not be a reoccurring theme.
    Senator Collins. I discussed with Mr. Moser the initial 
award of the contract to AGNA and he told me that WSI had bid 
on the contract but that you had not been found to be 
technically acceptable. Is that accurate?
    Mr. Brinkley. I was not in the debrief of WSI from the 
selection. I was part of the operations advisors on building 
the contract, or on our submittal. So I believe from my 
perspective I was most focused on the price difference. If 
there was a technical part of the proposal in which WSI was 
found not technically acceptable, I am unaware of what exactly 
what that might be.
    Senator Collins. I would like you to get back to me on that 
issue because your testimony says that it was a matter of cost, 
not technical qualifications. Mr. Moser says that it wasn't a 
difference in the price but rather that WSI was not found to be 
technically acceptable. So I am going to ask both of you to get 
back to me on that issue.
    Mr. Brinkley. Yes, ma'am. We will take that for the record 
and we will get back.
    Senator Collins. You have mentioned in your testimony and 
confirmed to Senator McCaskill that you are losing $1 million a 
month on this contract, which does raise the issue of why you 
would want to continue the contract in the next option year. 
That seems very odd to me. Could you expand on your answer on 
that?
    Mr. Brinkley. Yes, Senator. As I described to the Chairman, 
it falls into two areas. Operationally, we take great pride in 
being able to perform very complex, complicated contracts and 
doing them very well, and we have a long history of being able 
to do that in WSI. We bid on this contract because we knew we 
could do this contract and we knew we could do it well. We now 
have assumed this contract and it has been difficult, not 
without a lot of work by some very hard-working professionals, 
we have become contract compliant. And so from that 
perspective, it would be very difficult for me to sit here, 
knowing how hard everyone has worked to get here, to say we 
would not want to continue to do it and do it well.
    On the other side, from the business side, of course, we 
would like to get paid for what it costs us to do it well. And 
as my testimony indicates, I am convinced after a year that we 
cannot do it contractually compliant and meet the statement of 
work requirements with the initial bid.
    Senator Collins. Which I guess gets me back to the issue I 
raised with Mr. Moser about the statutory requirement that is 
clearly well intended--I hope I don't find out later that I 
actually wrote it---- [Laughter.]
    That says that it ought to be the lowest bid of the 
technically acceptable contractors. That makes perfect sense. 
We want competition. We want the lowest price. But it looks to 
me like there was a pattern here of underbidding to try to 
secure the contract in the first place and then a failure to 
perform.
    Is WSI financially secure enough to fulfill the contractual 
obligations, such as providing all of the necessary, legally 
obligated equipment, staffing, supplies, training, for the 
employees who are working on this contract and continue to lose 
$1 million a month?
    Mr. Brinkley. Senator, I can assure you that we are 
financially capable of fulfilling all of the requirements of 
this contract.
    Senator Collins. Thank you.
    Senator McCaskill. Well, let me just step back and take a 
broad view. We have thousands and thousands of men and women in 
uniform in Afghanistan. We all know the challenges Afghanistan 
represents in terms of our military mission. We know that the 
option of hiring local nationals was not an option because of 
the issues of security surrounding local nationals.
    You are a former Marine, and thank you for your service. I 
am looking at a security contract where we are paying some 
people as little as $2 an hour to guard the embassy. The 
majority of the people guarding the embassy are making a little 
over $5 an hour. And the company that is providing this is 
telling the U.S. Congress that they are losing $1 million a 
month on the deal. I don't want to impugn in any way your 
company's integrity. I am sure you have every intention of 
complying with this contract over the year, but losing $1 
million a month is pressure.
    I am asking you now, should we be hiring private contract 
firms such as yourself to guard embassies in this situation or 
should we as a Nation begin to contemplate the notion that when 
we are in theater, the embassy in theater should, in fact, be 
guarded by our own military?
    Mr. Brinkley. I will defer the answer on the latter to the 
force capabilities for the Department of Defense to determine 
whether or not they have the resources to do that or not and 
their view of that. Can we as private security do this job? Oh, 
yes, absolutely. There is not an issue here. I mean, we are 
doing it now and we are doing it well. Some of the issues 
associated with the cost issues are really based upon how the 
proposal itself was structured.
    There are two issues, as you would know, in a firm-fixed 
price--let me put it this way. In some competitive markets, the 
requirements that people think are necessary to get the work 
can drive people to do things that are unreasonable in the 
price and they will lose money on it. People make bad business 
decisions. In this case, we know that it takes more than this 
proposal was initially bid for, not necessarily because of the 
price for the salaries, but how it was structured--the manning 
factors, the number of people that it takes to actually meet 
the contract requirements. So the structure of the contract or 
the bid itself is significant in what the losses are.
    We have applied all the resources necessary to ensure that 
we are fully contractually compliant, can handle people on 
emergency leave, can handle people that are delayed coming back 
from R&R. That takes additional manning on the ground. Many of 
those cases that financially drive are the U.S. personnel that 
are required on this contract because they are not $800 a month 
people.
    Let me go to the $800 or the $2 an hour person. The local 
nationals, as anyone would know, and I am sure even on the 
ground at the embassy, are getting paid prevalent wages that 
are for that particular area. I will tell you, because I have 
been on the ground and I have talked to the senior local 
national that is our interpreter and works with all the local 
nationals, the pay that we give them makes some of those local 
nationals some of the higher-paid people in Afghanistan. They 
are loyal. They have been with this contract for a long time. 
They come to work every day and they are very dedicated to 
doing this well.
    The $800 that we pay the Gurkhas, and that is the minimum 
level for a guard. That is not the leadership. That number is 
significantly different for the senior guy who is a retired 
sergeant major of British Army Gurkha experience. This is a 
prevalent wage. It is competitive. That wage itself is higher 
than we pay for the guards, the Gurkha guards, that are in the 
embassy in Bahrain. It is higher than the Gurkha guards that 
are standing duty on the Naval Support Activity in Bahrain. And 
it is competitive with the salaries according to the Gurkhas 
that are protecting the British Embassy in Kabul. And many of 
those Gurkhas have been out there for any number of years. It 
is competitive. They are very talented, dedicated people who 
come to work every day and do their jobs very well.
    So it is difficult for me to, at times, make you think that 
it is the cost per hour versus it is the problem that we are 
not getting value for the people that we pay those wages to, 
because that is not correct. And in that, we should not be, in 
my view, using as the standard from which we judge the security 
of the embassy.
    Senator McCaskill. OK. The contracts you just referred to, 
does your company have all those contracts?
    Mr. Brinkley. I have oversight of the security for the 
Naval Support Activity in Bahrain.
    Senator McCaskill. And for the British Embassy in----
    Mr. Brinkley. The British Embassy does not fall under my 
responsibility, but it does fall under a part of Group 4 
Securicor (G4S).
    Senator McCaskill. So it is your company?
    Mr. Brinkley. The parent company on the latter.
    Senator McCaskill. OK. So are those contracts profitable?
    Mr. Brinkley. I am not clear. I don't know the answer to 
that. The Naval Support Activity in Bahrain, the answer is yes. 
I have that contract, so I know that contract is profitable.
    Senator McCaskill. Well, I would be interested--and you can 
take this question for the record--I would be interested in 
your answer as to why the contract that you have in Bahrain, 
why it is profitable and why this one isn't and what are the 
differences between the two contracts that make one profitable 
and one not.
    I am going to continue to be troubled by the notion that 
you can be fully compliant on a contract that you are losing 
significant money on. I think we have got to figure out a way 
to resolve that because there are two more years of options on 
this contract. So are you signing up to lose $12 million a year 
for the next 3 years? And if so, I just think that defies 
common sense, and generally when we are defying common sense, 
something happens that shouldn't happen.
    So I would like you, Mr. Brinkley, to go back and take a 
look at that proposition and give us some information for the 
record comparing these contracts that your company has where 
you are essentially providing third-country national guards for 
the U.S. Government for security purposes so that we can try to 
get to the bottom of it from an oversight perspective.
    Mr. Brinkley. We will be glad to do that, Senator.
    Senator McCaskill. Thank you very much.
    Senator Collins. I have no further questions.
    Senator McCaskill. I thank you and Mr. Moser and the State 
Department for the hearing today. I think we have learned some 
things about contract oversight as it relates to guarding our 
embassy in theater. I think we have some issues that we need to 
talk about in terms of going forward. I greatly appreciate the 
cooperation that was shown to the Subcommittee and I look 
forward to even greater cooperation, and maybe I can talk you 
guys into sitting at the same table next time.
    Thank you all very much. This hearing is adjourned.
    [Whereupon, at 4:02 p.m., the Subcommittee was adjourned.]

























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